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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------- ---------
COMMISSION FILE NUMBER: 0-11355
BINDLEY WESTERN INDUSTRIES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
INDIANA 84-0601662
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8909 Purdue Road, Indianapolis, Indiana 46268
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 704-4000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock ($.01 par value) New York Stock Exchange
(Title of class) (Name of 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. [ ]
$480,838,913
Aggregate market value of the voting stock held by nonaffiliates of the
registrant based on the last sale price for such stock on March 19, 1999
(assuming solely for the purposes of this calculation that all Directors and
Officers of the Registrant are "affiliates")
22,658,577
Number of shares of Common Stock outstanding as of March 19, 1999
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document have been incorporated by reference into this
annual report on Form 10-K:
IDENTITY OF DOCUMENT PARTS OF FORM 10-K INTO WHICH
DOCUMENT IS INCORPORATED
PART III
Proxy Statement to be filed for the
1999Annual Meeting of Common
Shareholders of Registrant
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BINDLEY WESTERN INDUSTRIES, INC.
Indianapolis, Indiana
Annual Report to Securities and Exchange Commission
December 31, 1998
Part I
Item 1. BUSINESS.
General
Bindley Western Industries, Inc., an Indiana corporation, together with its
subsidiaries ("BWI" or the "Company"), is the country's fifth largest (in terms
of annual sales) wholesale distributor of pharmaceuticals and related health
care products. The Company has two reportable segments, BWI and Priority
Healthcare Corporation ("Priority"), which conduct substantially all of their
business within the United States. These segments have separate management teams
and infrastructures to facilitate their specific customer needs and marketing
strategies. See Note 3 - Operating Segments in the Company's consolidated
financial statements.
The BWI segment product lines include ethical pharmaceuticals (prescription
drugs), dialysis supplies, health and beauty care products and home health care
merchandise. The segment's wholesale drug customer base includes chain drug
companies which operate their own warehouses, individual drug stores, both chain
and independent supermarkets and mass retailers with their own pharmacies,
hospitals, clinics, HMOs, state and federal government agencies and other health
care providers. During 1998, the BWI segment serviced customers in approximately
37 states plus Puerto Rico from its 14 distribution centers located in 13
states. By using the Company as a primary source of pharmaceuticals, these
customers can centralize purchasing functions, exercise better inventory
control, maintain better security and reduce handling costs.
The Company has historically specialized in the distribution of ethical
pharmaceuticals to chain drug companies which maintain their own warehouses.
During 1998, the BWI segment serviced four of the top 10 chain drug companies,
based on sales and number of stores, in the United States. The Company believes
that its technological innovation and emphasis on customer service has enabled
it to better serve these customers.
Since 1987, the BWI segment has focused its marketing efforts on direct store
delivery customers and has increased sales to these customers from $171 million
in 1987 to $3,878 million in 1998. To further this growth and strengthen the
Company's position in the northeastern and southeastern United States, the BWI
segment purchased J.E. Goold in 1992, Kendall Drug in 1994 and Tennessee
Wholesale Drug in 1997.
Priority was formed by BWI on June 23, 1994 as a wholly owned subsidiary to
focus on the distribution of products and provision of services to the alternate
site component of the healthcare industry. Priority conducts the business
activities of alternate site healthcare companies acquired by BWI or Priority in
five transactions since February 1993. These companies makeup the Priority
segment of the Company. The principal executive offices of Priority, an Indiana
corporation, are located at 285 West Central Parkway, Altamonte Springs, Florida
32714 and its telephone number at that address is (407) 869-7001.
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On October 29, 1997, Priority consummated an initial public offering of
2,300,000 shares of its Class B Common Stock. On December 31, 1998, BWI
distributed to the holders of BWI Common Stock all of the 10,214,286 shares of
Priority Class A Common Stock owned by BWI on the basis of .448 shares of
Priority Class A Common Stock for each share of BWI Common Stock outstanding on
the record date, December 15, 1998. The two classes of Priority Common Stock
entitle holders to the same rights and privileges, except that holders of shares
of Priority Class A Common Stock are entitled to three votes per share on all
matters submitted to a vote of holders of Priority Common Stock and holders of
shares of Priority Class B Common Stock are entitled to one vote per share on
such matters. As a result of the distribution, Priority ceased to be a
subsidiary of BWI. Priority is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission. Additional information about Priority is contained in Priority's
Annual Report on Form 10-K for the year ended December 31, 1998, which has been
filed with, and is available from, the Securities and Exchange Commission.
The Priority segment is a national distributor of specialty pharmaceuticals and
related medical supplies to the alternate site healthcare market and is a
provider of patient-specific, self-injectable biopharmaceuticals and disease
treatment programs to individuals with chronic diseases. Through its Priority
Healthcare Distribution division ("Priority Distribution"), the Priority segment
sells over 3,500 SKUs of specialty pharmaceuticals and medical supplies to
outpatient renal care centers and office-based physicians in the oncology and
other physician specialty markets. Priority Distribution offers value-added
services to meet the specific needs of these markets by shipping refrigerated
pharmaceuticals overnight in special packaging to maintain appropriate
temperatures, offering automated order entry services and offering customized
distribution for group accounts. From distribution centers in Grove City, Ohio
and Tustin, California, Priority Distribution services over 2,000 customers in
all 50 states and Puerto Rico, including approximately 600 office-based
oncologists and 800 renal dialysis clinics.
Through its Priority Healthcare Pharmacy division ("Priority Pharmacy"), the
Priority segment fills individual patient prescriptions for self-injectable
biopharmaceuticals. These patient-specific prescriptions are filled in a
licensed pharmacy in Altamonte Springs, Florida, and shipped directly to the
patient overnight in specialized packages. Priority Pharmacy also provides
disease treatment programs for hepatitis, melanoma, cancer, human growth
deficiency and the complications of HIV.
The Company's sales of $7.6 billion for 1998 represented the 30th consecutive
year of record sales, equating to a compound growth rate of approximately 20%
since its inception in 1968. This growth is the result of market share gains in
existing markets, expansion into new markets and overall growth in the health
care delivery industry.
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Suppliers
BWI
During each of the last five fiscal years, approximately 85% (based on sales
volume) of the Company's sales were ethical pharmaceutical products. Of the
thousands of ethical pharmaceutical products carried in inventory, a
comparatively small number account for a disproportionately large share of the
total dollar volume of products sold. The Company's five largest suppliers in
1998 were Astra Pharmaceutical, Bristol-Myers Squibb Company, Pfizer, Eli Lilly
and Company and SmithKline Beecham. While none of these vendors account for over
10% of net sales, as a group, they are significant. The Company maintains many
competing products in inventory and is not dependent upon any single supplier,
although the loss of a major supplier could adversely affect the business of the
Company if alternate sources of supply were unavailable. The Company's
arrangements with its suppliers typically may be canceled by either party,
without cause, on one month's notice, although many of these arrangements are
not governed by formal agreements. The Company believes its relationships with
its suppliers are generally good. See, also, Industry Overview --Manufacturers'
Pricing and Distribution Policies in Part I, Item 1.
Priority
In 1996, 1997 and 1998, Priority's single largest supplier, Amgen, Inc.
("Amgen"), accounted for approximately 42%, 40% and 32%, respectively, of
Priority's revenues. During 1998, approximately 27% of Priority's revenues were
attributable to sales of erythropoietin ("EPO") to the renal care market. EPO is
available only from Amgen. Priority continually evaluates its purchase
requirements and likely increases in manufacturer prices in order to obtain
products at the most advantageous cost. It has negotiated several partnership
relationships with manufacturers that offer favorable pricing, volume-based
incentives and opportunities to reduce supply chain costs for both parties.
Customers and Markets
BWI
The Company differentiates sales as either brokerage type sales ("brokerage
sales") or sales from the Company's inventory ("from stock sales"). Brokerage
sales are made to the chain warehouse market, whereas from stock sales are made
to both the chain warehouse and direct store delivery markets. See Item 6 -
Selected Financial Data for revenues from stock sales and from brokerage sales.
Direct Store Delivery Market.
BWI provides direct store delivery service to customers from its 16 distribution
centers. Independent drug stores, non-warehouse chain drug stores, hospitals,
clinics, HMOs, state and federal agencies and other health care providers
comprise the primary types of customers. Purchases by these customers generally
consist of less than full-case lots which are generated on a daily basis when a
customer needs a particular item. While smaller in quantity, these sales
typically generate higher margins than sales to warehouse customers. Shipments
to direct store customers are delivered on a daily basis by the Company's
vehicles or by a for-hire carrier.
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While much less concentrated than chain warehouse sales, the direct store
delivery business has experienced significant growth as the Company has
successfully expanded its business scope. Since 1987, direct store sales have
increased from $171 million to $3,878 million, demonstrating a compound annual
growth rate of 33%. During 1998, direct store delivery sales were comprised of
approximately 44% to chain drug stores, 17% to independent pharmacies and 39% to
managed care institutions. Direct store delivery sales have increased from
approximately 16% of net sales in 1987 to approximately 51% in 1998. During
1998, no single direct store delivery customer exceeded 10% of the Company's
total net sales and the loss of any one of these customers should not have a
material adverse effect on the Company's operations.
The Company's "Profit Partners" and the "1st Choice for Value" programs are
competitive, PC-based, marketing support and merchandising programs which
include a generic pharmaceutical source program, a home health care program, a
private label over the counter program and the Rx Vector and Global Vector
purchasing and inventory management systems. Designed to enhance the
competitiveness of retail, small chain and managed care pharmacies, these
programs reflect the Company's commitment to adding value to the services
provided to its customers. The Company believes that it would not be feasible
for these customers to independently develop and maintain these services on
their own.
The Company believes that the opportunities for growth for this market of the
business should continue through expansion into new geographical areas and
increasing market share in existing markets. The Company is focused on the
development of new services and programs through interaction and cooperation
with both customers and suppliers, all of which are designed to enhance
profitability, provide added value to the customer and strengthen the Company's
role in the distribution channel. These programs include computerized ordering
systems, inventory management programs, generic pharmaceutical source programs,
repack programs, innovative advertising and marketing campaigns and
merchandising programs, including private label product lines.
Chain Warehouse Market.
Chain warehouse customers purchase in full-case lots for redistribution to
individual retail outlets. Approximately 49% of the Company's 1998 net sales are
attributable to chain drug warehouse customers. At December 31, 1998, the
Company's largest chain drug customers and the approximate period of time they
had done business with the Company were: Eckerd Corporation (26 years); Peyton
(9 years); and CVS (29 years). The following chain drug warehouse customers each
accounted for over 10% of the Company's net sales during the years shown: Eckerd
Corporation (18%) and CVS (17%) in 1998; CVS (22%), Rite Aid Corporation (18%)
and Eckerd Corporation (16%) in 1997; and Eckerd Corporation (17%), Rite Aid
Corporation (14%) and Revco D.S., Inc. (12%) in 1996. Net sales to these
customers aggregated 35%, 56% and 43% of net sales for the past three years,
respectively.
By using the Company as a primary source of pharmaceuticals, the Company
believes that a chain drug customer can centralize purchasing functions,
exercise better inventory control, maintain better security and reduce handling
costs. Inventory control and security are particularly important to these
customers because of the relatively high dollar value of pharmaceuticals in
relation to their physical size. In addition, the Company has developed systems
and procedures which the Company believes facilitate customer compliance with
the recordkeeping and physical security requirements of the Controlled
Substances Act of 1970 and the Prescription Drug Marketing Act of 1987.
Additionally, the Company also offers these
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customers software to permit direct communication with the ordering computers,
thus avoiding the need to change the customers' existing software.
The Company, from time to time, has entered into written understandings with
certain of its major chain warehouse customers setting forth various terms and
conditions of sale. The Company generally, however, does not have any long-term
contracts with its major customers and all relationships with such customers are
terminable at will by either party. The loss of any one of the Company's chain
warehouse customers could have a material adverse effect on the Company's
operations. Although the Company believes that the effect could be minimized
through increasing sales to existing customers, securing additional customers
within current distribution areas and by expanding into new markets, there can
be no assurance thereof. During the second quarter of 1998, Rite Aid informed
the Company that Rite Aid signed a supply agreement with another wholesaler that
began in May 1998. In 1997, Rite Aid comprised 18% of the Company's sales. Sales
to Rite Aid were predominantly to their warehouses. The loss of this customer
did not have a material adverse impact on the Company's results of operations.
See, also, Note 14 - Major Customers in the Company's financial statements.
Priority
Priority Distribution serves over 2,000 customers located in all 50 states and
Puerto Rico, including approximately 600 office-based oncologists and 800 renal
dialysis clinics.
During 1998, Priority's largest 20 customers accounted for approximately 38% of
Priority's revenues and one customer, Everest Healthcare Services Corporation,
accounted for approximately 12% of Priority's revenues. Significant declines in
the level of purchases by one or more of Priority's largest customers could have
a material adverse effect on Priority's business and results of operations. As
is customary in its industry, Priority generally does not have long-term
contracts with its customers. Management of Priority believes that the retention
rate for Priority's customers is very favorable. Although Priority has not to
date experienced any failure to collect accounts receivable from its largest
customers, an adverse change in the financial condition of any of these
customers, including an adverse change as a result of a change in governmental
or private reimbursement programs, could have a material adverse effect on
Priority.
Priority sells the majority of its products and services into three large and
growing markets--oncology, gastroenterology and chronic renal dialysis. Priority
also operates in certain components of the vaccine market. The common
characteristics of these markets is that most products are administered in an
alternate site setting by physicians or the patients themselves and require
specialized shipping and support services.
The alternate site supply market is fragmented with many public and private
companies focusing on different product or customer niches. Few companies offer
a wide range of pharmaceuticals and related supplies targeted to multiple
customer groups, specifically renal dialysis clinics and office-based
physicians. Historically, cancer therapy, renal dialysis and most other
treatments for chronic and life-threatening medical conditions were administered
almost exclusively in a hospital inpatient setting. During the 1990s, the
frequency with which these treatments have been administered outside the
hospital has increased dramatically in response to cost containment efforts and
the introduction of new biopharmaceutical products, such as interferon,
ribavirin-Intron A combination therapy ("Rebetron"), erythropoientin ("EPO") and
certain cancer drugs.
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The service needs of office-based physicians and clinics differ markedly from
those of the hospital market, creating logistical challenges and increasing
administrative costs for those offices. Office-based physicians and clinics
generally order relatively small quantities of drugs at irregular intervals and
do not have inventory management systems or sufficient pharmacy staffing.
Challenges facing these caregivers include providing necessary administrative
and financial resources, managing relationships with multiple suppliers,
managing inventories, billing patients and third-party payers, and monitoring
new clinical developments. Management of Priority believes that the shift from
hospital-based to office-based or home-based care delivery has created a
significant opportunity, particularly in the oncology, gastroenterology, renal
dialysis, vaccine and homecare markets.
Internal Systems Development and Year 2000 Project
The Company has developed and continues to improve its specialized internal
operating and management systems. Inventories and accounts receivable are
controlled through the use of company developed data processing and management
information systems. These assets are monitored by distribution center
management using on-site data processing equipment. At present, many operational
functions, including accounting, cash management, accounts receivable and
inventory control are conducted through data processing operations at the
Indianapolis, Indiana, and Portland, Maine facilities. Data is transmitted to
and from on-site data processing equipment at the distribution centers.
The year 2000 will pose a unique set of challenges to those industries reliant
on information technology. As a result of the methods employed by early
programmers, many software applications and operational programs may be unable
to distinguish the year 2000 from the year 1900. If not effectively addressed,
this problem could result in the production of inaccurate data, or in the worst
cases, the inability of the systems to continue to function altogether. The
Company and other companies in the same business are vulnerable to the
dependence on distribution and communications systems.
The Company's Daily Sales System, which controls ordering, pricing, inventory
control, and shipping for the Company and which accounts for 70% of the
Company's total investment in software, was initially designed and programmed to
comply with the Year 2000 challenge. The Company anticipates that its remaining
systems will be fully Year 2000 compliant by the end of the second quarter of
1999. Furthermore, all software purchases within the past three years have been
guaranteed to be compliant by the vendor. The Company has upgraded and replaced
its hardware and network systems for reasons other than Year 2000 compliance,
however, and such new hardware and network systems will be fully tested during
1999 to ensure that they are also Year 2000 compliant. Management estimates that
the total cumulative costs relating to its efforts to make its systems compliant
for the year 2000 will be approximately $1 million, of which approximately
$340,000 had been incurred as of December 31, 1998.
Management believes that the expenditures required to bring the Company's
systems into compliance will not have a materially adverse effect on the
Company's performance. However, the Year 2000 problem is pervasive and complex
and can potentially affect any computer process. Accordingly, no assurance can
be given that the Year 2000 compliance can be achieved without additional
unanticipated expenditures and uncertainities that might affect future financial
results.
Moreover, to operate its business, the Company relies on governmental agencies,
utility
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companies, telecommunications companies, shipping companies, suppliers
and other third party service providers over which it can assert little control.
The Company's ability to conduct its business is dependent upon the ability of
these third parties to avoid Year 2000-related disruptions. The Company is in
the process of contacting its third party service providers about their Year
2000 readiness, but the Company has not yet received any assurances from any
such third parties about their Year 2000 compliance. If the Company's key third
party service providers do not adequately address their Year 2000 issues, the
Company's business may be materially affected, which could result in a
materially adverse effect on the Company's results of operations and financial
condition.
The Company has not to date developed any contingency plans, as such plans will
depend on the responses from its third party service providers, in the event the
Company or any key third party providers should fail to become Year 2000
compliant. If required, critical functions could be handled on a manual basis
until such time that the Year 2000 malfunction was identified and resolved.
Expansion/Acquisitions
BWI
The Company continues to seek opportunities to expand its operations
geographically through the development of new distribution centers or the
acquisition of existing wholesale drug distributors. Presented below is a brief
discussion of acquisitions by the Company since 1992. All of the acquisitions
have been accounted for under the purchase method and, accordingly, the results
of operations of the acquired companies have been included in the Company's
financial statements from the effective date of acquisition. The purchase price
has been allocated based on a determination of the fair value of the assets
acquired and liabilities assumed. The goodwill associated with these
acquisitions is being amortized on a straight line basis not exceeding 40 years.
See, also, Note 15 - Statement of Cash Flows in the Company's financial
statements.
J.E. Goold
On March 25, 1992, the Company effected a merger with J.E. Goold, a full-line,
full-service distributor of pharmaceutical, health and beauty care and home
health care products based in Portland, Maine.
Kendall Drug Company
Effective July 1, 1994, the Company acquired the net assets of Kendall Drug
Company, a wholesale distributor of pharmaceutical products and health and
beauty care products based in Shelby, North Carolina.
Priority Healthcare Services Corporation
On February 7, 1996, the Company acquired all of the assets of the infusion
services division of Infectious Disease of Indiana, P.S.C. Through February 7,
1997, this business was operated as National Infusion Services, Inc., a
physician managed provider of infusion services programs to patients in a
variety of settings, including the home, extended care facilities and its
outpatient center in Indianapolis, Indiana. On that date, the corporate name was
changed to Priority
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Healthcare Services Corporation. The Company expended approximately $9.0 million
and incurred a long-term obligation of approximately $1.5 million, resulting in
approximately $9.8 million in intangible assets. See Note 6 - Intangibles and
Note 9 - Long Term Debt in the Company's consolidated financial statements.
Tennessee Wholesale Drug Company
Effective July 31, 1997, the Company purchased substantially all of the
operating assets and assumed most of the liabilities and contractual obligations
of Tennessee Wholesale Drug Company, Inc. ("TWD"), is a full-line, full-service
wholesale drug company with a distribution facility in Nashville, Tennessee. The
Company expended approximately $27 million which approximated the net book value
of the assets and liabilities acquired. While the acquisition was not material
to the Company as a whole, it provided further opportunities for the Company to
expand its presence in the direct store delivery and managed care markets.
Priority
Effective as of February 28, 1993, the Company acquired substantially all of the
assets of Charise Charles, Ltd., Inc. ("Charise Charles") a specialty wholesale
distributor of oncology and renal care biopharmaceuticals located in Altamonte
Springs, Florida. On October 6, 1993, the Company acquired substantially all of
the assets of PRN Medical, Inc. ("PRN"), a specialty wholesale distributor of
renal care supplies and dialysis equipment located in Orlando, Florida. In
August 1994, PRN was combined with Charise Charles as part of the formation of
Priority. On October 31, 1994, Priority acquired the stock of 3C Medical Inc.
("3C"), a specialty distributor of acute dialysis products located in Santa Ana,
California. Effective January 1, 1995, Priority acquired all of the outstanding
stock of the IV One Companies, three related companies located in Altamonte
Springs, Florida that provided specialty pharmacy and other related healthcare
services. On August 6, 1997, Priority acquired substantially all of the assets
of Grove Way Pharmacy, a specialty distributor of vaccines located in Castro
Valley, California. Priority expended approximately $250,000, which approximated
the fair value of the assets acquired. Additionally, a three-year non-compete
was obtained from the prior owner for $100,000 due in four equal installments in
1998.
Employees
As of February 28, 1999, BWI employed 1,254 persons, of which approximately 3%
are covered by a single collective bargaining agreement. BWI believes that its
relationships with its employees is good.
Competition
BWI
The markets in which BWI competes are highly competitive. Not only does BWI
compete with national full-line, full-service wholesale drug distributors, some
of which are larger and have substantially greater financial resources, but
additional competition is provided by local and regional drug distributors,
direct selling manufacturers and specialty distributors. While competition is
primarily price oriented, it can also be affected by delivery requirements,
credit terms, depth of product line and other customer service requirements.
There can be no assurance that BWI will not encounter increased competition in
the future that could adversely affect BWI's business. In recent years there has
been a trend toward consolidation in the
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wholesale drug industry, as evidenced by the purchase of a number of
distributors by national wholesalers. BWI estimates that there are currently
around 40 full-line, full-service wholesale drug distributors in the United
States.
Priority
The alternate site specialty pharmaceutical and medical supply industry is
highly competitive and is experiencing both horizontal and vertical
consolidation. The industry is fragmented, with many public and private
companies focusing on different product or customer niches. Some of Priority's
current and potential competitors include regional and national full-line,
full-service medical supply distributors; independent specialty distributors;
national full-line, full-service wholesale drug distributors, such as Bergen
Brunswig Corporation and Cardinal Health, Inc., that operate their own specialty
distribution businesses; institutional pharmacies; hospital-based pharmacies;
home healthcare agencies; mail order distributors that distribute medical
supplies on a regional or national basis; and certain manufacturers, such as
Bristol-Myers Squibb, that own distributors or that sell their products both to
distributors and directly to users, including clinics and physician offices.
Some of Priority's competitors have greater financial, technical, marketing and
managerial resources than Priority. While competition is primarily price and
service oriented, it can also be affected by depth of product line, technical
support systems, specific patient requirements and reputation. There can be no
assurance that competitive pressures will not have a material adverse effect on
Priority.
Government Regulation
The Company and Priority are subject to regulation by federal, state and local
government agencies. As a result, the Company is required to register for
permits and/or licenses with, and comply with certain operating and security
standards, of the United States Drug Enforcement Administration, the Food and
Drug Administration (the "FDA"), and appropriate state agencies. Each of the
Company's full-line, full-service distribution centers is licensed to distribute
ethical pharmaceutical products and certain controlled substances in accordance
with the requirements of the Prescription Drug Marketing Act of 1987 and the
Controlled Substances Act of 1970. Similarly, the health care provider
businesses of Priority are licensed by the appropriate state board of pharmacy,
department of health, home health agency or related governmental agency. In
addition, certain of Priority's customers are subject to significant federal and
state regulations, including the so called fraud and abuse laws. The fraud and
abuse laws impose criminal and civil sanctions on (a) persons who solicit,
offer, receive or pay any remuneration in return for inducing the referral of a
patient for treatment or the ordering or purchasing of items or services that
are in any way paid for by Medicare, Medicaid or similar state programs and (b)
physicians who make referrals for clinical laboratory or certain designated
health services to entities with which the physician has a financial
relationship. The fraud and abuse laws and regulations are broad in scope, are
subject to frequent modification and varied interpretation and were expanded by
the Health Insurance Portability and Accountability Act of 1996.
Failure to comply with these laws and regulations could subject the Company or
Priority to significant civil sanctions, especially under the strict liability
standards imposed by the Controlled Substances Act and the broad scope of
coverage imposed by the fraud and abuse laws. The Company has hired a full-time
Regulatory Compliance Manager, conducted compliance reviews at its locations by
outside advisors and implemented a company wide ethics and corporate compliance
program. As a result, the Company and Priority believe they comply in all
material respects with applicable laws and regulations. Because the health care
industry will continue to be subject to substantial regulations, however,
neither the Company nor Priority
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can give assurance that their activities will not be reviewed or challenged by
regulatory agencies in the future.
Industry Overview
The wholesale drug industry in the United States continues to experience
significant growth. As reported by the National Wholesale Druggists'
Association, industry sales have grown from $30 billion in 1990 to approximately
$83.0 billion in 1998, a compound annual growth rate of 14%. Today, industry
analysts estimate approximately 80% of pharmaceutical sales are distributed
through wholesalers compared to less than 47% in 1970. Order processing,
inventory management and product delivery by wholesale distributors allow
manufacturers to better allocate their resources to research and development,
manufacturing and marketing their products. Customers benefit from wholesale
distribution by having access to a single supply source for a full line of
pharmaceutical and health care products from hundreds of individual
manufacturers. Further, inventory costs are lower, delivery is more timely and
efficient and purchasing and inventory information are improved. Customers
additionally benefit from the range of value added programs developed by
wholesale drug distributors that are targeted to their specific needs which, in
turn, reduce their costs and increase their operating efficiencies.
The alternate care/alternate site industry is comprised of health care
distributors and providers serving health care facilities outside the hospital
environment, including physicians' offices, clinics and patients' homes. The
shift from the hospital has occurred primarily as a result of cost containment
pressures exerted by payers and the improvement in the treatment of various
types of diseases in alternate care/alternate site facilities. These facilities
administer pharmaceutical drugs and related medical supplies to patients who
generally require dialysis therapy for treatment of kidney failure, chemotherapy
for treatment of cancer or infusion therapy for treatment of a number of
conditions, including infectious diseases such as HIV and hepatitis. The
combined market for alternate care/alternate site distributors and providers
serving dialysis, cancer and infusion therapy facilities is much smaller than
the market being served by the wholesale drug industry. These three markets are
expected to continue to grow, however, as more health care services are shifted
from the hospital to the alternate care/alternate site facility. At the same
time, the consolidation exhibited within each market the past few years is also
expected to continue. See also, Competition and Customers and Markets in Part I,
Item 1.
The Company believes the pharmaceutical industry, including drug wholesalers and
related health care distributors and providers, will continue to grow as a
result of the following trends:
Aging Population.
The number of individuals over 65 in the United States is expected to grow 25%
from approximately 28 million in 1985 to approximately 35 million by the year
2000. This age group suffers from a greater incidence of chronic illnesses and
disabilities than the rest of the population and is estimated to account for
approximately two-thirds of total health care expenditures by the end of the
decade.
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Introduction of New Pharmaceuticals.
Traditional research and development as well as the advent of new research and
production methods, such as biotechnology, continue to generate new compounds
that are more effective in treating diseases. The Company believes that ongoing
research and development expenditures by the leading pharmaceutical
manufacturers will contribute to the continued growth of the industry. Drug
therapy has had a beneficial impact on the overall increase in aggregate health
care costs, by reducing expensive surgeries and prolonged hospital stays.
Industry observers expect the overall sales of pharmaceuticals to continue
averaging double-digit increases through the year 2000, as was the case from
1990 to 1998.
Managed Care.
To remain competitive, pharmaceutical manufacturers are required to sell their
products to the managed care market, wherein employers negotiate discounts from
health care providers by committing to long-term contracts involving thousands
of patients. Health care costs are linked more tightly to the provision of
managed health care services, especially with hospitals and doctors, than under
traditional medical insurance plans. Managed care organizations generally
provide full coverage for prescription drugs to lower health care costs by
improving access to medical treatment rather than delaying treatment until more
expensive services are required. The costs associated with the prescription drug
benefit are monitored by the managed care organization primarily through the
establishment of tightly controlled formularies of approved prescription drugs,
including generic substitutes, and by drug utilization review procedures wherein
physicians' prescribing practices and patients' usage are closely scrutinized.
Even though there has been a recent trend to increase co-payments, implement
tighter drug formularies and cap annual pharmaceutical costs per patient,
analysts have determined that these efforts have done little thus far to
decrease demand for pharmaceutical drugs as part of a general healthcare
delivery strategy.
Increased Use of Generic Drugs.
The growth of managed care's influence on pharmacy along with the introduction
of generic equivalent products for many top selling brand name drugs has caused
the generic market to grow substantially. A number of branded drugs are expected
to come off patent in the next three to five years, thus expanding the generic
marketing opportunity. In the next five years, analysts estimate that the size
of the market is expected to nearly double from $8.8 billion in 1998 to $16.6
billion in 2003.
Pharmaceutical Price Increases.
As a result of competitive market-driven cost containment measures implemented
by both the private and public sectors during the past five years,
pharmaceutical price increases are less than in prior years. Nevertheless, the
Company believes that price increases by pharmaceutical manufacturers will
continue to equal or exceed the overall Consumer Price Index which is due in
large part to relatively inelastic demand in the face of higher prices charged
for patented drugs as manufacturers have attempted to recoup costs associated
with the research and development, clinical testing and FDA approval of new
products.
12
<PAGE> 13
Continued Industry Consolidation.
In response to cost containment pressure from private and governmental payers
and the focus on health care reform in the United States during the 1990's,
there has been significant consolidation within the industry during the past
five years at the manufacturer, wholesaler and customer levels. Pharmaceutical
manufacturers have consolidated to reduce operating expenses, gain access to new
drugs in the pipeline and enhance marketing efforts in a managed care
environment. Likewise, chain drug stores are continuing to purchase independent
drug stores and, in some cases, other drug chains as demonstrated by
consolidations during the past few years involving Revco, Eckerd, Thrifty
Payless, Thrift, Medicine Shoppe, Big B, American Stores and Arbor. Independent
drug stores are also consolidating into regional and national affiliations. At
the same time that sales through the wholesale drug industry have increased, the
number of pharmaceutical wholesalers in the United States has decreased from 139
in 1980 to around 40 full-line, full-service at the end of 1998. During 1998, it
is estimated that the five largest national wholesalers had a combined market
share of 80% for the distribution of prescription drugs in the United States.
Manufacturers' Pricing and Distribution Policies.
Some manufacturers distribute their products solely through franchised
wholesalers, while others also sell directly to retailers. Functional price
discounts to wholesalers are offered by many manufacturers. A limited number of
manufacturers have a one-price system of distribution and sell directly to
wholesalers and retailers at the same price. The Company does not transact as
much business with direct selling manufacturers that have adopted a one-price
system. In recent years, certain manufacturers have adopted wholesaler only
policies, while certain other manufacturers have adopted one-price systems for
wholesalers and retailers. Although pharmaceutical manufacturers may adopt
one-price systems in the future, or may be required to pursuant to federal or
state legislation or through litigation, such developments have not had a
material adverse effect on the Company's business in the past. See, also, Note
16 - Legal Proceedings in the Company's financial statements.
In response to the above trends, the Company has focused its efforts on higher
margin direct store delivery sales, alternate care/alternate site sales, managed
care sales, better asset and cash flow management, and containment of selling,
general and administrative expenses through improved technology, consolidation
of distribution centers and increased sales through market expansion and
acquisitions.
Item 2. PROPERTIES.
The Company's BWI segment currently has 16 distribution centers located in 13
states. The Priority segment properties are not listed as a result of the
spin-off of Priority.
Each center has been constructed or adapted to the Company's specifications for
climate control, alarm systems and segregated security areas for controlled
substances. The Company utilizes modern warehousing techniques and equipment
designed to accommodate both the wholesale drug and alternate care/alternate
site customers. At each location, a manager supervises warehouse, delivery and
local sales functions. The Company utilizes owned vans and trucks, contract
carriers, common carriers and couriers to deliver its products. The Company
believes that its properties are adequate to serve the Company's current and
anticipated needs without making capital expenditures materially higher than
historical levels.
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<PAGE> 14
These distribution centers are listed below:
<TABLE>
<CAPTION>
SQUARE OWNED OR
LOCATION FOOTAGE LEASED
- -------- ------- ------
<S> <C> <C>
Austell, Georgia 56,160 Leased
Dallas, Texas 44,000 Owned
Grapevine, Texas 70,000 Leased
Houston, Texas 39,000 Owned
Indianapolis, Indiana 57,200 Owned
Kansas City, Missouri 45,696 Leased
Middletown, Pennsylvania 120,000 Owned
Milwaukee, Wisconsin 40,040 Leased
Nashville, Tennessee 112,000 Owned
Orange, Connecticut 185,000 Owned
Orlando, Florida 94,600 Owned
Portland, Maine 60,000 Owned
Portland, Oregon 46,000 Leased
San Dimas, California 65,400 Leased
Shelby, North Carolina 103,500 Owned
Woodland, California 47,000 Leased
</TABLE>
In 1998, the Company (a) began operations from new distribution centers in
Woodland, California and Grapevine, Texas; (b) closed the leased facilities in
Baltimore, Maryland and Tampa, Florida; and (c) completed construction of a new
180,000 square foot office building in Indianapolis, Indiana. This building
provides space for the accounting, human resources, information systems,
purchasing and sales and marketing departments, along with the Company's
executive offices and related staff. During 1999, and subject to favorable
market conditions the Company (a) through its wholly-owned subsidiary, College
Park Plaza Associates, Inc., intends to sell the corporate offices building to a
third party and then lease back the top two floors of the five-story building;
(b) plans to sell its existing distribution center in Portland, Maine after
moving into a new, owned 112,400 square feet distribution center in Westbrook,
Maine; and (c) plans to begin operations at leased facilities in Kansas City,
Missouri and Milwaukee, Wisconsin during the first half of the year. The Company
also leases at a separate location 7,600 square feet of office and medical
building space in Indianapolis, Indiana for its Priority Healthcare Services
Corporation subsidiary, and 1,300 square feet of office space in Salem, New
Hampshire for its BW Food Distributors, Inc. subsidiary. See, also, Note
13-Commitments in the Company's financial statements and Properties, contained
in Part I, Item 2 of Priority's Annual Report on Form 10-K for the year ended
December 31, 1998, which has been filed with, and is available from, the
Securities and Exchange Commission.
Item 3. LEGAL PROCEEDINGS.
The Company is subject to ordinary and routine lawsuits and governmental
inspections, investigations and proceedings incidental to its business, none of
which is material to the Company's results of operations or financial condition.
See, also, Note 16 - Legal Proceedings in the Company's financial statements.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of 1998 to a vote of
security holders of the Company, through the solicitation of proxies or
otherwise.
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<PAGE> 15
Executive Officers of the Company.
The following is a list of the Company's executive officers, the ages and the
positions held by the named individuals. These positions may exclude other
positions held with subsidiaries of the Company. These executive officers serve
at the discretion of the Board. There is no family relationship between any of
the executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William E. Bindley 58 Chairman of the Board, Chief
Executive Officer, and President
Keith W. Burks 41 Executive Vice President
Michael D. McCormick 51 Executive Vice President,
General Counsel, and Secretary
Thomas J. Salentine 59 Executive Vice President, Chief
Financial Officer
Gregory S. Beyerl 41 Vice President and Controller
Michael L. Shinn 44 Treasurer
</TABLE>
Gregory S. Beyerl, who is a certified public accountant, joined
the Company's Bindley Western Drug Company Division in 1986 as Assistant
Controller and was promoted to division Controller in 1987, division Vice
President in 1990, and corporate Vice President and Controller in 1992. He was
previously with the accounting firm of Price Waterhouse. Mr. Beyerl also holds
an MBA degree.
Michael L. Shinn joined the Company as Treasurer in May 1992. Mr.
Shinn is a certified public accountant and was previously the Director of
Corporate Taxation for the Indianapolis office of the accounting firm of Price
Waterhouse. His duties include responsibility for the Company's entire tax
function, including those of its subsidiaries and divisions.
(Pursuant to General Instruction (G)(3) of Form 10-K, the
foregoing information pertaining to executive officers who are not standing for
election as members of the Board of Directors is included as an un-numbered Item
in Part I of this Annual Report in lieu of being included in the Company's Proxy
Statement for its 1999 Annual Meeting of Shareholders.)
15
<PAGE> 16
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock, $.01 par value, is traded on the New York Stock
Exchange under the symbol "BDY". Prior to listing on the New York Stock
Exchange, the common stock was quoted on the NASDAQ National Market System under
the symbol "BIND". On June 3, 1998, a 4-for-3 stock split of the Company's
Common Stock was effected in the form of a stock dividend to shareholders of
record at the close of business on May 21, 1998. The following table, adjusted
to reflect retroactively the June 3, 1998 stock split, reflects the range of the
reported high and low prices for the Company's common stock as reported on the
New York Stock Exchange for the years ended December 31, 1998 and December 31,
1997.
<TABLE>
<CAPTION>
1998 HIGH LOW
<S> <C> <C>
January 1 - March 31 $28.45 $20.25
April 1 - June 30 $33.00 $25.50
July 1 - September 30 $34.75 $25.94
October 1 - December 31 $49.25 $25.06
<CAPTION>
1997 HIGH LOW
<S> <C> <C>
January 1 - March 31 $14.54 $13.04
April 1 - June 30 $17.21 $13.79
July 1 - September 30 $21.29 $16.04
October 1 - December 31 $24.33 $19.27
</TABLE>
At March 19, 1999 there were outstanding 22,658,577 shares of the Company's
common stock, which were held by approximately 1,082 holders of record.
The Company paid cash dividends on its common stock of 2 cents per share on
eight different quarterly dates for the period beginning March 25, 1997 and
ending March 23, 1999. The 2 cents per share dividend remained unchanged
subsequent to the June 3, 1998 stock split. In addition, on December 31, 1998,
BWI distributed to the holders of BWI common stock all of the 10,214,286 shares
of Priority Class A Common Stock owned by BWI on the basis of .448 shares of
Priority Class A Common Stock for each share of BWI common stock outstanding on
the record date, December 15, 1998. The two classes of Priority Common Stock
entitle holders to the same rights and privileges, except that holders of shares
of Priority Class A Common Stock are entitled to three votes per share on all
matters submitted to a vote of holders of Priority Common Stock and holders of
shares of Priority Class B Common Stock are entitled to one vote per share on
such matters. As a result of the distribution, Priority ceased to be a
subsidiary of BWI. Future dividends will be paid in accordance with declarations
by the Board of Directors in its sole discretion. The Company's primary bank
line of credit agreement requires the Company to maintain specified levels of
working capital and net worth, which may limit the Company's ability to pay
dividends in the future.
During the third quarter of 1994, the Company established an Automatic Dividend
Reinvestment Plan for its shareholders. This voluntary plan provides for
periodic investment of shareholder
16
<PAGE> 17
dividends in shares of the Company's common stock plus the opportunity to make
voluntary cash payments up to $5,000 per quarter to purchase additional shares
without incurring any service charges or brokerage fees.
SALES OF UNREGISTERED SECURITIES
On May 21, 1998, the Company issued a total of 1,316 shares, adjusted to reflect
retroactively the June 3, 1998 stock split, of common stock to its seven
non-employee Directors as the stock portion of their annual retainer. This
issuance was exempt from the registration requirements of the Securities Act of
1933, as amended, pursuant to Section 4(2) thereof.
17
<PAGE> 18
Item 6. Selected Financial Data
The selected financial data set forth below should be read in conjunction with
the Company's financial statements and related notes included elsewhere in this
report.
Five Year Financial Review and Selected Financial Data
BINDLEY WESTERN INDUSTRIES, INC.
<TABLE>
<CAPTION>
(in thousands, except share data)
- ---------------------------------------------------------------------------------------------------------------------
1998 (1) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales from stock $4,123,930 $2,760,235 $2,127,307 $1,928,738
Net brokerage sales 3,497,422 4,549,687 3,190,219 2,741,415
Other income 1,702 1,882 1,407 2,322
Cost of products sold 7,429,793 7,167,274 5,197,008 4,565,750
Selling, general and 70,531 62,555
administrative 107,852 81,078
Other expenses 45,711 23,688 20,523 16,406
Earnings before income taxes 39,698 39,764 30,871 27,764
Provision for income taxes 18,694 15,806 12,865 11,383
Minority interest in net income
of consolidated subsidiary 1,865 212
Net earnings 19,139 23,746 18,006 16,381
Earnings per share: (2)
Basic $ 0.89 $ 1.38 $ 1.19 $ 1.12
Diluted 0.84 1.19 1.01 0.96
Cash dividends declared per Common Share $ 0.08 $ 0.08 $ 0.08 $ 0.08
Other financial data:
Current assets $1,175,806 $1,185,025 $850,965 $777,366
Total assets 1,286,575 1,287,779 941,206 848,708
Current liabilities 949,404 897,916 616,322 573,369
Long-term debt 628 32,142 99,766 69,473
Total liabilities 953,234 934,401 719,119 647,948
Minority interest - 11,010 - -
Shareholders equity 333,341 342,368 222,087 200,760
Book value per share (2) 14.66 21.73 19.27 17.90
</TABLE>
(1) On December 31, 1998, BWI distributed to the holders of BWI Common Stock all
of the 10,214,286 shares of Priority Class A Common Stock owned by BWI in the
form of a dividend. As a result of the distribution, Priority ceased to be a
subsidiary of BWI as of December 31, 1998 and as such, their assets, liabilities
and equity are not included in the December 31, 1998 Consolidated Balance Sheet.
However, their results of operations, net of minority interest, for the year
ended December 31, 1998 are included in the BWI Consolidated Statement of
Earnings as Priority was a subsidiary of the Company for the full year of 1998.
(2) On June 3, 1998, a 4-for-3 split of the Company's Common Stock was effected
in the form of a dividend to all shareholders of record at the close of business
on May 21, 1998. Accordingly, all historical weighted average and per share
amounts have been restated to reflect the stock split. Share amounts in the
consolidated Balance Sheets reflect the actual share amounts outstanding for
each period presented.
18
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The discussion and analysis that follows should be read in conjunction with the
Consolidated Financial Statements and related notes included elsewhere in this
report.
Bindley Western Industries, Inc. ("BWI" or the "Company") has made the following
acquisitions which affect the comparison of the results of operations on a year
to year basis. All acquisitions have been accounted for under the purchase
method and, accordingly, the results of operations of the acquired entities are
included in the Company's financial statements from the respective dates of
acquisition.
The IV One Companies - Effective January 1995, the Company, through its Priority
Healthcare Corporation ("Priority") subsidiary, acquired all of the outstanding
stock of the IV One Companies ("IV One") in a cash transaction. IV One is
comprised of IV-1, Inc., IV-One Services, Inc. and National Pharmacy Providers,
Inc. These companies focus on high acuity specialty pharmacy services for
patients requiring home and ambulatory infusion therapy. Effective as of the
close of business on December 31, 1998, IV-One Services, Inc. and National
Pharmacy Providers, Inc. were merged into IV-1, Inc. and the name of IV-1, Inc.
was changed to Priority Healthcare Pharmacy, Inc.
Priority Healthcare Services Corporation - In January 1996, the Company formed a
new subsidiary, National Infusion Services, Inc. ("NIS"). Effective February 8,
1996, the Company, through its NIS subsidiary, purchased the assets of the
infusion services division of Infectious Disease of Indiana P.S.C. NIS is a
provider of quality care to patients in a variety of settings. In February of
1997, the corporate name was changed from NIS to Priority Healthcare Services
Corporation ("PHSC").
Tennessee Wholesale Drug Company - Effective July 31, 1997, the Company acquired
substantially all of the operating assets and assumed most of the liabilities of
Tennessee Wholesale Drug Company ("TWD"). TWD is a full-line, full-service
wholesale drug company with a distribution facility in Nashville, Tennessee.
Grove Way Pharmacy - Effective August 6, 1997, Priority acquired substantially
all of the assets of Grove Way Pharmacy, Inc. ("Grove Way"), a specialty
distributor of vaccines located in Castro Valley, California.
On December 31, 1998, BWI distributed to the holders of BWI Common Stock all of
the 10,214,286 shares of Priority Class A Common Stock owned by BWI on the basis
of .448 shares of Priority Class A Common Stock for each share of BWI Common
Stock outstanding on the record date, December 15, 1998. The two classes of
Priority Common Stock entitle holders to the same rights and privileges, except
that holders of shares of Priority Class A Common
19
<PAGE> 20
Stock are entitled to three votes per share on all matters submitted to a vote
of holders of Priority Common Stock and holders of shares of Priority Class B
Common Stock are entitled to one vote per share on such matters. As a result of
the distribution, Priority ceased to be a subsidiary of BWI as of December 31,
1998 and, therefore, their assets, liabilities and equity are not included in
the December 31, 1998 BWI Consolidated Balance Sheet. However, their results of
operations, net of minority interest, for the year ended December 31, 1998 are
included in the BWI Consolidated Statement of Earnings as Priority was a
subsidiary of the Company for the full year of 1998.
RESULTS OF OPERATIONS.
Net sales for 1998, 1997 and 1996 were $7,621 million, $7,310 million and $5,318
million, respectively. The 4% increase in 1998 sales over 1997 and the 37%
increase in 1997 over 1996 were generated primarily through internal growth. In
1998, brokerage type sales ("brokerage sales") experienced a 23% decrease from
1997. This was the result of the loss of the Rite Aid business. Brokerage sales
had increased by 43% from 1996 to 1997. This was the result of the consolidation
within the wholesale and chain drug industries. Brokerage sales generate very
little gross margin, however, they provide for increased working capital and
support the Company's programs to attract more direct store delivery business
from chain customers. Sales from the Company's inventory ("from stock sales")
increased 49% in 1998. These sales include sales from the Company's inventory to
chain customers and direct store delivery business. Direct store delivery sales
increased by 50% in 1998 and increased to 51% of the total sales in 1998. These
sales were only 35% of total sales in 1997. The increase in direct store
delivery sales as a percent of total sales was caused by the combination of the
Company's loss of the Rite Aid brokerage sales business and its ability to
expand its presence in the direct store delivery portion of the business through
increased sales to existing customers and the addition of new customers. In both
periods, the increase related to pricing was approximately equal to the increase
in the Consumer Price Index. Net sales for Priority for 1998, 1997 and 1996 were
$276 million, $231 million and $158 million, respectively. This growth was
generated internally and reflected primarily the addition of new customers, new
product introductions (including the new Rebetron treatment for Hepatitis-C),
additional sales to existing customers and, to a lesser extent, the acquisition
of Grove Way Pharmacy and inflationary price increases.
Gross margins for 1998, 1997 and 1996 were $192 million, $143 million and $121
million, respectively. The increases in gross margins from 1997 to 1998 and from
1996 to 1997 resulted primarily from internal growth. The acquisition of TWD
accounted for approximately 23% of the increase from 1996 to 1997 and had
substantially less impact from 1997 to 1998. The impact in 1998 is difficult to
quantify as the Baltimore, Maryland and Tampa, Florida warehouses of TWD were
closed in 1998 and their customers subsequently serviced out of existing
facilities. Gross margins as a percent of net sales increased to 2.51% in 1998
from 1.95% in 1997. This increase was the result of the change in mix away from
the lower margin brokerage sales to the higher margin from stock sales. This
change in mix resulted from both the loss of the Rite Aid brokerage sales
business and the increased direct store delivery sales. Gross margins as a
percent of net sales declined from 2.27% in 1996 to 1.95% in 1997. This decrease
was the result of the substantial increase in low margin brokerage sales and a
shift in the business mix of from stock sales to more managed care business. In
all years, the pressure on sell side margins continued and the purchasing gains
associated with pharmaceutical price inflation remained relatively constant.
Gross margins for Priority for 1998, 1997 and 1996 were $31.1 million, $23.2
million and $17.2 million, respectively. The gross margin as a percent of sales
for 1998, 1997 and 1996 was 11.30%, 10.01% and 10.85%, respectively. The
increase in 1998
20
<PAGE> 21
margins over 1997 margins is primarily attributed to the change in sales mix
resulting from significantly higher sales by Priority Pharmacy which generated
higher gross margins than those of Priority Distribution. The reduction in 1997
from 1996 is attributed to increased competition and a change in sales mix to
the lower margin wholesale distribution business.
Other income in 1998, 1997 and 1996 represented finance charges on certain
customers' receivables and gains on the sale of assets. The 1998 balance also
includes approximately $200,000 of interest related to the note from the CEO of
the Company.
Selling, general and administrative ("SGA") expenses were $107.9 million, $81.1
million and $70.5 million in 1998, 1997 and 1996, respectively. The primary
reasons for the increase in SGA from 1997 to 1998 and from 1996 to 1997 were
normal inflationary increases and costs to support the growing direct store
delivery business of Bindley Western Drug Company and the alternate
care/alternate site business of Priority. The cost increases related to the
direct store delivery and alternate care/alternate site businesses include,
among others, delivery expense, warehouse expense, and labor costs, which are
variable with the level of sales volume. However, management remains focused on
controlling SGA through improved technology, better asset management and
opportunities to consolidate distribution centers. This focus has resulted in a
decrease in SGA expense as a percent of from stock sales to 2.62% in 1998 from
2.94% in 1997 and 3.32% in 1996. Non recurring charges related to the startup,
consolidation and closing of certain divisions were $200,000 in 1998, $575,000
in 1997 and $200,000 in 1996. SGA for Priority was $14.0 million in 1998, $10.6
million in 1997 and $8.4 million in 1996. As a percent of sales, SGA for 1998
was 5.1% as compared to 4.6% in 1997. This increase was the result of expenses
associated with the opening of the Grove City, Ohio facility, which opened in
November, 1997, training and payroll costs from hiring additional sales
personnel at Priority Pharmacy and increased overall costs of being a publicly
traded company. The increase in 1997 SGA from 1996 was attributed to the above
mentioned normal costs to support this business. SGA as a percent of sales
actually decreased from 5.3% in 1996 to 4.6% in 1997.
Depreciation and amortization was $8.4 million, $7.4 million and $6.7 million in
1998, 1997 and 1996, respectively. These increases were the result of the
inclusion of acquired entities and the depreciation and amortization on new
facilities and equipment, particularly in management information systems and
systems to support customer needs. Depreciation and amortization for Priority
increased from $1 million in 1996 to $1.2 million for both 1997 and 1998. These
increases also resulted from depreciation on new equipment, particularly
management information systems.
Interest expense for 1998, 1997 and 1996 was $18.5 million, $15.9 million and
$13.0 million, respectively. The average short-term borrowings outstanding were
$249 million, $152 million and $119 million at an average short-term interest
rate of 6.3%, 6.4% and 6.4% for 1998, 1997 and 1996, respectively. The Company
has in place a private placement of $30 million Senior Notes due December 27,
1999 at an interest rate of 7.25%. Interest expense associated with these Notes
was approximately $2.2 million in both 1998 and 1997.
In the fourth quarter of 1998, the Company recorded a one-time, pre-tax charge
of approximately $19.0 million, which charge will amount to approximately $14.0
million on an after-tax basis. Of the $19.0 million charge, $11.0 million
represented a non-cash charge for the acceleration of the amortization of
compensation related to restricted stock grants in connection with the Priority
spin-off, $7.0 million represented the non-cash write-off of goodwill that has
been carried on the books from an acquisition dating back to early 1996 and $1.0
million represented the settlement of litigation associated with that
acquisition. See also, Note 6 -
21
<PAGE> 22
Intangibles, Note 9 - Long-term Debt, Note 12 Capital Stock and Note 16 - Legal
Proceedings, of the Company's financial statements for further discussion.
The provision for income taxes represented 47.1%, 39.8% and 41.7% of earnings
before taxes in 1998, 1997 and 1996, respectively. The increase in the 1998
effective rate was attributable to the nondeductible element of restricted stock
grants expensed in 1998.
On January 11, 1996, the Company was informed by the U.S. Attorney's office in
Indianapolis that the Drug Enforcement Administration ("DEA") was alleging
multiple violations of the recordkeeping and reporting regulations of the
Controlled Substances Act ("Act") resulting from a routine inspection of the
Company's Indianapolis Distribution Center during January and February 1994. On
November 7, 1996, the Company entered into a Civil Consent Decree with the
United States and the DEA resolving all issues relating to its Indianapolis
Distribution Center's alleged failure to comply with the Act. In exchange for
the settlement of all civil and administrative issues, the Company paid
$700,000, and agreed to pay an additional $300,000 if the Company did not
substantially comply with the terms of the Civil Consent Decree over the next
two years. The settlement charge recognized by the Company in 1996 included
professional fees of $112,000. On December 15, 1998, the Company was advised by
the U. S. Attorney's office in Indianapolis that the Company had fully complied
with the terms of the 1996 Civil Consent Decree and, accordingly, the civil
penalty of $300,000 would not be imposed.
On October 7, 1996, the Company and its subsidiary, National Infusion Services
(now known as Priority Healthcare Services Corporation) ("PHSC"), were named as
defendants in an action filed by Thomas G. Slama, M.D. in the Superior Court of
Hamilton County, Indiana. Dr. Slama is a former director of the Company and
formerly was Chief Executive Officer and President of PHSC. The complaint
alleged breach of contract and defamation arising from the termination of Dr.
Slama's employment with PHSC in October 1996. On October 26, 1998, Dr. Slama
filed a Second Amended Complaint which added Priority and William E. Bindley as
defendants and stated additional claims for breach of contract, breach of oral
contract, breach of fiduciary duty, securities fraud and conversion. Pursuant to
an Indemnification and Hold Harmless Agreement the Company indemnified and held
harmless Priority and its subsidiaries from and against any and all costs,
damages, charges and expenses (including without limitation legal and other
professional fees) which Priority might incur or which may be charged against
Priority in any way based upon, connected with or arising out of the lawsuit
filed by Dr. Slama. The Company, PHSC, Priority and Mr. Bindley answered the
complaint, denied the merits of Dr. Slama's claims, and also filed a
counterclaim against Dr. Slama which sought, among other things, declaratory
relief, compensatory and (in some instances) treble damages, punitive damages,
attorneys' fees, interest and costs. On December 31, 1998, a Settlement
Agreement was executed by and among the parties named above pursuant to which
mutual releases were obtained and, on January 4, 1999, a one-time payment of
$875,000 was made by the Company to Dr. Slama. The corresponding Joint
Stipulation of Dismissal was approved by the Court on January 11, 1999.
LIQUIDITY-CAPITAL RESOURCES.
On October 29, 1997, Priority consummated an initial public offering ("IPO").
Priority registered 2,300,000 shares of Class B Common Stock, all of which were
sold in a firm commitment underwriting at an aggregate offering price of $33.35
million. After underwriters' discount of $2.32 million and expenses incurred by
Priority in conjunction with the IPO of $1.05 million, the net offering proceeds
to Priority were approximately $29.98 million.
On December 31, 1998, BWI distributed to the holders of BWI Common Stock all of
the
22
<PAGE> 23
10,214,286 shares of Priority Class A Common Stock owned by BWI on the basis
of .448 shares of Priority Class A Common Stock for each share of BWI Common
Stock outstanding on the record date, December 15, 1998. The two classes of
Priority Common Stock entitle holders to the same rights and privileges, except
that holders of shares of Priority Class A Common Stock are entitled to three
votes per share on all matters submitted to a vote of holders of Priority Common
Stock and holders of shares of Priority Class B Common Stock are entitled to one
vote per share on such matters. As a result of the distribution, Priority ceased
to be a subsidiary of BWI. From the date of the IPO until the December 31, 1998
distribution to the holders of BWI Common Stock, the Company owned 81.6% of the
outstanding common stock of Priority. In 1998, the amount of net earnings
associated with the minority interest was $1.9 million as compared to $212,000
in 1997.
The Company's operations consumed $81.2 million in cash for the year ended
December 31, 1998. The use of funds resulted from increases in inventories and a
decrease in accounts payable. The increase in inventory resulted from the
significant increase in direct store delivery sales and the new bulk inventory
acquisition and purchasing management programs with certain customers. The
reduction of accounts payable is attributed to the timing of payments of
invoices and the reduction of brokerage type sales to Rite Aid. These uses of
cash were offset by the decrease in accounts receivables resulting from the
reduction of brokerage type sales to Rite Aid. The Company continues to closely
monitor working capital in relation to economic and competitive conditions.
However, the emphasis on direct store delivery business will continue to require
both net working capital and cash.
Capital expenditures were predominantly for the construction of the new
corporate headquarters building, the construction of a new warehouse facility in
Westbrook, Maine, the expansion and automation of existing warehouses and the
investment in additional management information systems and other systems to
support customer needs. Total expenditures were $33.5 million during 1998.
Effective July 31, 1997, the Company purchased substantially all of the
operating assets and assumed most of the liabilities and contractual obligations
of TWD. The Company expended approximately $27 million for the acquisition of
TWD, which approximated the fair value of the net assets acquired.
Effective August 6, 1997, Priority acquired substantially all of the operating
assets and assumed most of the liabilities of Grove Way Pharmacy, Inc., a
specialty distributor of vaccines and injectables located in Castro Valley,
California. The amount expended approximated the fair value of the net assets
acquired.
On August 27, 1997, the Company called for redemption on September 12, 1997 all
of its outstanding 6 1/2% Convertible Subordinated Debentures Due 2002 at a
redemption price of $1,039 per $1,000 principal amount of Debentures plus
accrued interest through the redemption date. Debenture holders could elect to
convert their debentures into shares of common stock of the Company through
September 12, 1997, which was the redemption date. Holders of all but $119,000
principal amount of the $67,350,000 outstanding Debentures elected to convert
their Debentures into common stock at the rate of 50.4 shares of common stock
for each $1,000 principal amount of Debentures. The redemption reduced the
Company's long-term debt by $67,350,000 and increased by 3.4 million the number
of issued shares of the Company's common stock.
23
<PAGE> 24
The Company holds a note receivable with a principal balance of $3.2 million
from the CEO of the Company. The proceeds of this note, which bears interest at
6.5% per annum and matures on December 16, 2000, were used by the CEO to
exercise stock options. The note provides for annual interest only payments with
outstanding interest and principal to be repaid at maturity.
In December 1998, the Company established a receivables securitization facility
(the "Receivables Facility") pursuant to which the Company sells substantially
all of its receivables arising in connection with the sale of goods or the
rendering of services ("Receivables") to Bindley Western Funding Corporation
("Funding Corp."), a wholly owned special purpose corporation subsidiary. The
Receivables are sold to Funding Corp. on a continuous basis, and the cash
generated by sales of interests in the Receivables or by collections on the
Receivables retained is used by Funding Corp. to, among other things, purchase
additional Receivables originated by the Company. The assets of Funding Corp.
will be available first and foremost to satisfy claims of Funding Corp.
creditors.
In connection with the Receivables Facility, Funding Corp. entered into a
Receivables Purchase Agreement, dated as of December 28, 1998, with Falcon Asset
Securitization Corporation ("Falcon"), an affiliate of The First National Bank
of Chicago ("First Chicago"), certain other financial institutions (collectively
with Falcon, the "Purchasers"), and First Chicago, as Agent. Pursuant to the
Receivables Purchase Agreement, Funding Corp. may, from time to time, sell
interests in the Receivables ("Receivables Interests") to the Agent for the
benefit of the Purchasers. Each Receivables Interest has an associated Discount
Rate and Tranche Period applicable to it, as selected by Funding Corp. The
Discount Rate may, at Funding Corp.'s election, be the Base Rate (the corporate
prime or base rate announced from time to time by First Chicago) or, with
respect to the Receivables Interests purchased by Falcon, the CP Rate
(generally, a commercial paper related rate based on Falcon's funding charges)
or, with respect to the Receivables Interests purchased by other Purchasers, the
LIBO Rate (generally, LIBOR for the applicable Tranche Period, plus 1/25% per
annum). The Receivables Facility terminates on December 27, 1999, and is subject
to final termination on December 28, 2003, subject to earlier termination in
certain events. At December 31, 1998, there were $224 million of Receivables
Interests outstanding, bearing a Discount Rate of 5.5% per annum. The Company
accounts for the Receivables Facility as a financing transaction in its
consolidated financial statements.
In connection with the implementation of the Receivables Facility, on December
28, 1998, the Company renegotiated its bank line of credit and now has $174.5
million of available credit. For 1998, the net decrease in borrowings under the
bank credit agreement was $127.5 million. At December 31, 1998, the Company had
borrowed $19.5 million under the bank credit agreement and had a remaining
availability of $155 million.
At December 31, 1998, the Company owed to Priority $16.5 million. This amount is
due on demand and represents loans of excess cash balances of Priority to the
Company on a short-term basis, bearing interest at the Company's average
incremental borrowing rate. At December 31, 1998, the incremental borrowing rate
was 6.3%.
The Company believes that its cash on hand, bank line of credit, Receivables
Facility and working capital management efforts are sufficient to meet future
working capital requirements.
The Company's primary exposure to market risk consists of changes in interest
rates on borrowings. An increase in interest rates would adversely affect the
Company's operating results and the cash flow available to fund operations and
expansion. Based on the average variable borrowings for 1998, an increase of 10%
in the average variable borrowing rate of the Company would result in a $2.2
million annual increase in interest expense. Conversely, a 10%
24
<PAGE> 25
decrease in the average variable borrowing rate would result in a $2.2 million
annual decrease in interest expense. The Company continually monitors this risk
and reviews the potential benefits of entering into hedging transactions, such
as interest rate swaps, to mitigate the exposure to interest rate fluctuations.
At December 31, 1998, the Company was not a party to any hedging transactions.
The Company's principal working capital needs are for inventory and accounts
receivable. The Company sells inventory to its chain drug warehouse and other
customers on various payment terms. This requires significant working capital to
finance inventory purchases and entails accounts receivable exposure in the
event any of its chain warehouse or other major customers encounter financial
difficulties. Although the Company monitors closely the creditworthiness of its
major customers and, when feasible, obtains security interests in the inventory
sold, there can be no assurance that the Company will not incur some collection
loss on chain drug or other major customer accounts receivable in the future.
YEAR 2000.
The year 2000 will pose a unique set of challenges to those industries reliant
on information technology. As a result of the methods employed by early
programmers, many software applications and operational programs may be unable
to distinguish the year 2000 from the year 1900. If not effectively addressed,
this problem could result in the production of inaccurate data, or in the worst
cases, the inability of the systems to continue to function altogether. The
Company and other companies in the same business are vulnerable to the
dependence on distribution and communications systems.
The Company's Daily Sales System, which controls ordering, pricing, inventory
control, and shipping for the Company and which accounts for 70% of the
Company's total investment in software, was initially designed and programmed to
comply with the Year 2000 challenge. The Company anticipates that its remaining
systems will be fully Year 2000 compliant by the end of the second quarter of
1999. Furthermore, all software purchases within the past three years have been
guaranteed to be compliant by the vendor. The Company has upgraded and replaced
its hardware and network systems for reasons other than Year 2000 compliance,
however, and such new hardware and network systems will be fully tested during
1999 to ensure that they are also Year 2000 compliant. Management estimates that
the total cumulative costs relating to its efforts to make its systems compliant
for the Year 2000 will be approximately $1 million, of which approximately
$340,000 had been incurred as of December 31, 1998.
Management believes that the expenditures required to bring the Company's
systems into compliance will not have a materially adverse effect on the
Company's performance. However, the Year 2000 problem is pervasive and complex
and can potentially affect any computer process. Accordingly, no assurance can
be given that the Year 2000 compliance can be achieved without additional
unanticipated expenditures and uncertainties that might affect future financial
results.
Moreover, to operate its business, the Company relies on governmental agencies,
utility companies, telecommunications companies, shipping companies, suppliers
and other third party service providers over which it can assert little control.
The Company's ability to conduct its business is dependent upon the ability of
these third parties to avoid Year 2000 related disruptions. The Company is in
the process of contacting its third party service providers about their Year
2000 readiness, but the Company has not yet received any assurances from any
such third parties about their Year 2000 compliance. If the Company's key third
party service
25
<PAGE> 26
providers do not adequately address their Year 2000 issues, the
Company's business may be materially affected, which could result in a
materially adverse effect on the Company's results of operations and financial
condition.
The Company has not to date developed any contingency plans, as such plans will
depend on the responses from its third party service providers, in the event the
Company or any key third party providers should fail to become Year 2000
compliant. If required, critical functions could be handled on a manual basis
until such time that the Year 2000 malfunction was identified and resolved.
INFLATION.
The Company's financial statements are prepared on the basis of historical costs
and are not intended to reflect changes in the relative purchasing power of the
dollar. Because of its ability to take advantage of forward purchasing
opportunities, the Company believes that its gross profits generally increase as
a result of manufacturers' price increases in the products it distributes. Gross
profits may decline if the rate of price increases by manufacturers declines.
Generally, price increases are passed through to customers as they are received
by the Company and therefore reduce the negative effect of inflation. Other
non-inventory cost increases, such as payroll, supplies and services, have been
partially offset during the past three years by increased volume and
productivity.
FORWARD LOOKING STATEMENTS.
Certain statements included in this annual report which are not historical facts
are forward looking statements. Such forward looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward looking statements involve certain risks and
uncertainties including, but not limited to, changes in interest rates,
competitive pressures, changes in customer mix, financial stability of major
customers, investment procurement opportunities, asserted and unasserted claims,
changes in government regulations or the interpretation thereof and the ability
of the Company and the entities with which it transacts business to modify or
redesign their computer systems to work properly in the year 2000, which could
cause actual results to differ from those in the forward looking statements.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See discussion in Item 7.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial data required to be included under this item is submitted in a
separate section of this report and incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
26
<PAGE> 27
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item concerning the Directors and nominees for
Directors of the Company and concerning disclosure of delinquent filers is
incorporated herein by reference to the Company's definitive Proxy Statement for
its 1999 annual meeting of common shareholders, to be filed with the Commission
pursuant to Regulation 14A within 120 days after the end of the Company's last
fiscal year. Information concerning the executive officers of the Company is
also included under "Executive Officers of the Company" at the end of Part I of
this Annual Report. Such information is incorporated herein by reference, in
accordance with General Instruction G(3) to Form 10-K and Instruction 3 to Item
401(b) of Regulation S-K.
Item 11. EXECUTIVE COMPENSATION.
The information required by this Item concerning remuneration of the Company's
officers and Directors and information concerning material transactions
involving such officers and Directors is incorporated herein by reference to the
Company's definitive Proxy Statement for its 1999 annual meeting of common
shareholders to be filed with the Commission pursuant to Regulation 14A within
120 days after the end of the Company's last fiscal year.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item concerning the stock ownership of
management and five percent beneficial owners is incorporated herein by
reference to the Company's definitive Proxy Statement for its 1999 annual
meeting of common shareholders to be filed with the Commission pursuant to
Regulation 14A within 120 days after the end of the Company's last fiscal year.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item concerning certain relationships and
related transactions is incorporated herein by reference to the Company's
definitive Proxy Statement for its 1999 annual meeting of common shareholders to
be filed with the Commission pursuant to Regulation 14A within 120 days after
the end of the Company's last fiscal year.
27
<PAGE> 28
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The documents listed below are filed as a part of this report except as
otherwise indicated:
(a) 1. FINANCIAL STATEMENTS. The following described financial
statements, required to be filed by Item 8 and incorporated therein by reference
are set forth on pages F-1 through F-25.
<TABLE>
<S> <C>
Report of Independent Accountants F-1
Consolidated Statements of Earnings for each of the three
years in the period ended December 31, 1998 F-2
Consolidated Balance Sheets as of December 31, 1998
and 1997 F-3
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1998 F-4
Consolidated Statements of Shareholders' Equity for each
of the three years in the period ended December 31, 1998 F-5
Notes to Consolidated Financial Statements F-6 to F-25
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES. No financial statement
schedules are included as the information required by Rule 5-04 is not
applicable, or is not material.
3. EXHIBITS. The list of exhibits filed as part of this report
is incorporated herein by reference to the Index to Exhibits beginning at Page
E-1.
(b) No reports on Form 8-K were filed by the Registrant during the
last quarter covered by this report.
28
<PAGE> 29
Report of Independent Accountants
To the Board of Directors and Shareholders of
Bindley Western Industries, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) 1 on page 28, present fairly, in all material
respects, the financial position of Bindley Western Industries, Inc. and its
subsidiaries (the "Company") at December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits 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.
PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 24, 1999
F-1
<PAGE> 30
CONSOLIDATED STATEMENTS OF EARNINGS
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
(In thousands, except share data)
<S> <C> <C> <C>
Revenues:
Net sales from stock $4,123,930 $2,760,235 $2,127,307
Net brokerage sales 3,497,422 4,549,687 3,190,219
--------------- --------------- ---------------
Total net sales 7,621,352 7,309,922 5,317,526
Other income 1,702 1,882 1,407
--------------- --------------- ---------------
7,623,054 7,311,804 5,318,933
Cost and expenses:
Cost of products sold 7,429,793 7,167,274 5,197,008
Selling, general and administrative 107,852 81,078 70,531
Depreciation and amortization 8,413 7,431 6,719
Interest 18,465 15,907 12,992
Settlement of 1994 DEA inspection matter 812
I.P.O. stock option grant 350
Unusual items 18,833
--------------- --------------- ---------------
7,583,356 7,272,040 5,288,062
Earnings before income taxes
and minority interest 39,698 39,764 30,871
--------------- --------------- ---------------
Provision for income taxes:
Current 22,180 19,640 14,896
Deferred (3,486) (3,834) (2,031)
--------------- --------------- ---------------
18,694 15,806 12,865
Minority interest in net income of
consolidated subsidiary 1,865 212
--------------- --------------- ---------------
Net earnings $ 19,139 $ 23,746 $ 18,006
=============== =============== ===============
Earnings per share:
Basic $ 0.89 $ 1.38 $ 1.19
Diluted $ 0.84 $ 1.19 $ 1.01
Average shares outstanding:
Basic 21,546,734 17,184,178 15,109,972
Diluted 22,722,121 21,508,146 20,360,201
</TABLE>
(See accompanying notes to consolidated financial statements)
F-2
<PAGE> 31
CONSOLIDATED BALANCE SHEETS
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
(In thousands, except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 42,982 $ 42,895
Accounts receivable, less allowance for doubtful
accounts of $3,558 for 1998 and $4,756 for 1997 453,552 606,265
Finished goods inventory 659,484 520,769
Deferred income taxes 11,506 9,707
Other current assets 8,282 5,389
----------------- -------------------
1,175,806 1,185,025
----------------- -------------------
Other assets 38 76
----------------- -------------------
Fixed assets, at cost 119,243 89,704
Less: accumulated depreciation (26,491) (22,076)
----------------- -------------------
92,752 67,628
----------------- -------------------
Intangibles, net 17,979 35,050
----------------- -------------------
TOTAL ASSETS $ 1,286,575 $ 1,287,779
================= ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 19,500 $ 147,000
Securitized borrowings 224,163
Private placement debt 30,000
Accounts payable 640,540 734,346
Note payable to Priority Healthcare Corporation 16,517
Other current liabilities 18,684 16,570
----------------- -------------------
949,404 897,916
----------------- -------------------
Long-term debt 628 32,142
----------------- -------------------
Deferred income taxes 3,202 4,343
----------------- -------------------
Minority interest 11,010
----------------- -------------------
Shareholders' equity:
Common stock. $.01 par value-authorized 40,000,000 shares;
issued 23,433,919 and 16,135,319 shares, respectively 3,376 3,359
Special shares, $.01 par value-authorized 1,000,000 shares
Additional paid in capital 213,462 198,764
Note receivable from officer (3,228) (3,228)
Retained earnings 130,412 147,400
----------------- -------------------
344,022 346,295
----------------- -------------------
Less: shares in treasury-at cost 689,161 and 380,942,
respectively (10,681) (3,927)
----------------- -------------------
Total shareholders' equity 333,341 342,368
----------------- -------------------
Commitments and contingencies
----------------- -------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,286,575 $ 1,287,779
================= ===================
</TABLE>
(See accompanying notes to consolidated financial statements)
F-3
<PAGE> 32
CONSOLIDATED STATEMENTS OF CASH FLOWS
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income $ 19,139 $ 23,746 $ 18,006
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation and amortization 8,413 7,431 6,719
Deferred income taxes (3,486) (3,834) (2,031)
Minority interest 1,865 212
Compensation expense on stock option grant 350
Compensation expense on restricted stock 1,589
Interest capitalized on conversion of debt 1,970
Gain on sale of fixed assets (102) (103) (58)
Unusual items 18,833
Change in assets and liabilities, net of acquisitions:
Accounts receivable 95,417 (229,518) 51,826
Finished goods inventory (163,102) (63,401) (99,713)
Accounts payable (60,203) 151,302 63,106
Other current assets and liabilities 401 4,724 6,097
----------------- -------------- ---------------
Net cash provided (used) by operating
activities (81,236) (107,121) 43,952
----------------- -------------- ---------------
Cash flow from investing activities:
Purchase of fixed assets and other assets (33,541) (22,643) (15,581)
Proceeds from sale of fixed assets 89 2,082 59
Acquisition of businesses (27,295) (9,064)
Distribution of Priority Healthcare Corporation (2)
----------------- -------------- ---------------
Net cash used by investing activities (33,454) (47,856) (24,586)
----------------- -------------- ---------------
Cash flow from financing activities:
Proceeds from sale of stock 26,783 14,594 4,260
Proceeds from IPO of subsidiary 29,982
Related party note receivable (3,228)
Addition (reduction) of long-term debt, net (282) (274) 28,651
Proceeds under line of credit agreement 1,600,000 1,496,000 1,064,000
Payments under line of credit agreement (1,727,500) (1,401,000) (1,086,500)
Proceeds from securitized borrowings 224,163
Payments to acquire treasury shares (6,754) (777)
Dividends (1,633) (1,083) (938)
----------------- -------------- ---------------
Net cash provided by financing activities 114,777 134,214 9,473
----------------- -------------- ---------------
Net increase (decrease) in cash 87 (20,763) 28,839
Cash at beginning of year 42,895 63,658 34,819
----------------- -------------- ---------------
Cash at end of year $ 42,982 $ 42,895 $ 63,658
================= ============== ===============
</TABLE>
(See accompanying notes to consolidated financial statements)
F-4
<PAGE> 33
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
-------------------------------------------------------
ADDITIONAL NOTE
SHARES SHARES PAID IN RECEIVABLE RETAINED SHAREHOLDERS'
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL FROM OFFICER EARNINGS EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 11,562,388 $3,313 348,291 $(3,150) $87,707 $112,890 $ 200,760
Net earnings 18,006 18,006
Dividends at $.08 per share (938) (938)
Shares issued upon exercise of
stock options 308,654 3 4,257 4,260
-------------- --------- ---------- ----------- --------- --------- --------- -------------
Balances at December 31, 1996 11,871,042 3,316 348,291 (3,150) 91,964 129,958 222,088
Net earnings 23,746 23,746
Dividends at $.08 per share (1,083) (1,083)
Shares issued upon exercise of
stock options 870,130 9 14,585 14,594
Shares issued upon conversion of
debt 3,394,147 34 67,460 67,494
IPO of subsidiary
24,405 (5,221) 19,184
IPO option grant 350 350
Note receivable from officer (3,228) (3,228)
Purchase of treasury shares 32,651 (777) (777)
-------------- --------- ---------- ----------- --------- --------- --------- -------------
Balances at December 31, 1997 16,135,319 3,359 380,942 (3,927) 198,764 (3,228) 147,400 342,368
Net earnings 19,139 19,139
Dividends at $.08 per share (1,633) (1,633)
Shares issued upon exercise of
stock options 1,324,943 13 26,770 26,783
Shares issued upon issuance of
restricted stock 350,000 4 12,334 12,338
Shares issued upon stock split 5,623,657 131,351
Distribution of Priority Healthcare (24,406) (34,494) (58,900)
Purchase of treasury shares 176,868 (6,754) (6,754)
-------------- --------- ---------- ----------- --------- --------- --------- -------------
Balances at December 31, 1998 23,433,919 $3,376 689,161 $(10,681) $213,462 $ (3,228) $130,412 $ 333,341
============== ========= ========== =========== ========= ========= ========= =============
</TABLE>
(See accompanying notes to consolidated financial statements)
F-5
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of Bindley Western Industries, Inc. and its subsidiaries
("BWI" or the "Company"). All significant intercompany accounts and transactions
have been eliminated.
REVENUE RECOGNITION. The Company differentiates sales as either
brokerage type sales ("brokerage sales") or sales from the Company's inventory
("from stock sales"). Brokerage sales are made to the chain warehouse market,
whereas from stock sales are made to both the chain warehouse and direct store
delivery markets. Revenues are recorded at the time of shipment.
INVENTORIES. Inventories are stated on the basis of lower of cost or
market using the first-in, first-out (FIFO) method.
FIXED ASSETS. Depreciation is computed on the straight-line method for
financial reporting purposes. Accelerated methods are primarily used for income
tax purposes. Assets, valued at cost, are generally being depreciated over their
estimated useful lives as follows:
<TABLE>
<CAPTION>
Estimated useful life (years)
<S> <C>
Buildings and furnishings 5-35
Leasehold improvements 3-20
Transportation and other equipment 3-20
</TABLE>
In the event facts and circumstances indicate an asset could be
impaired, an evaluation of the undiscounted estimated future cash flows is
compared to the asset's carrying amount to determine if a write-down is
required.
DEBT ISSUE COSTS. Debt issue costs are amortized on a straight-line
basis over the life of the Convertible Subordinated Debentures ("Debentures"),
which were redeemed on September 12, 1997, and the Senior Notes.
INTANGIBLES. The Company continually monitors its cost in excess of net
assets acquired ("goodwill") and its other intangibles (customer lists and
covenants not to compete) to determine whether any impairment of these assets
has occurred. In making such determination, the Company evaluates the
performance, on an undiscounted basis, of the underlying businesses which gave
rise to such amounts. Goodwill is being amortized on the straight-line method
over periods not exceeding 40 years. Other intangibles are being amortized on
the straight-line method over six to 15 years.
EARNINGS PER SHARE. The Company has adopted the provisions of Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
Basic earnings per share is based on the weighted average number of common
shares outstanding during each period. The diluted earnings per share is based
on the weighted average number of common shares and dilutive potential common
shares outstanding during each period. All periods presented have been restated
to conform with the requirements of SFAS 128. See Note 17 for a reconciliation
of earnings per share.
F-6
<PAGE> 35
INCOME TAXES. In accordance with the provisions of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes," the
Company accounts for income taxes using the asset and liability method. The
asset and liability method requires the recognition of deferred tax assets and
liabilities for expected future tax consequences of temporary differences that
currently exist between the tax bases and financial reporting bases of the
Company's assets and liabilities.
USE OF ESTIMATES. The preparation of financial statements in accordance
with generally accepted accounting principles requires the use of estimates made
by management. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying values of cash,
accounts receivable, other current assets, short-term borrowings, accounts
payable and other current liabilities approximate their fair market values due
to the short-term maturity of these instruments. The fair market value of long
term debt was determined based on market quoted rates or was estimated using
rates currently available to the Company for debt with similar terms and
maturities.
OTHER INCOME. Other income for 1998, 1997 and 1996 was substantially
all interest income and gains on the sale of assets.
PRIOR YEAR RECLASSIFICATIONS. Certain amounts in the prior year
financial statements have been reclassified to conform to the current year
presentation.
NOTE 2 - DISTRIBUTION OF PRIORITY HEALTHCARE CORPORATION
On December 31, 1998, the Company distributed to the holders of the Company's
Common Stock all of the 10,214,286 shares of Priority Healthcare Corporation
("Priority") Class A Common Stock owned by the Company on the basis of .448
shares Priority Class A Common Stock for each share of BWI Common Stock
outstanding on the record date, December 15, 1998. As a result of the
distribution, Priority ceased to be a subsidiary of the Company as of December
31, 1998. The dividend distribution of $58.9 million represents the Company's
ownership interest in the net assets of Priority. The spin-off resulted in the
removal of $107.5 million of assets and $37.2 million of liabilities from the
Company's Consolidated Balance Sheet as of December 31, 1998.
The results of operations for Priority, net of minority interest, for the year
ended December 31, 1998 are included in the Company's Consolidated Statement of
Earnings as Priority was a subsidiary for the full year of 1998. Summary
Statement of Earnings data for Priority is presented in Note 3 below.
NOTE 3 - OPERATING SEGMENTS
In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information", was issued effective for fiscal years ended after December
15, 1998. The Statement designates the internal management accountability
structure as the source of the Company's reportable segments. The statement also
requires disclosures about products and services, geographic areas and major
customers. The adoption of this standard did not affect results of operations or
financial position but did affect the disclosure of segment information.
F-7
<PAGE> 36
Prior to 1998, the Company operated as one industry segment. The 1996 and 1997
information presented below has been restated in order to conform to the current
year presentation.
The Company has two reportable segments, BWI and Priority, which conduct
substantially all of their business within the United States. The BWI segment
specializes in the distribution of pharmaceuticals and related health care
products to chain drug companies which operate their own warehouses, individual
drug stores, supermarkets and mass retailers with their own pharmacies,
hospitals, clinics, HMOs, state and federal government agencies and other health
care providers. The Priority segment distributes specialty pharmaceuticals and
related medical supplies to the alternate site healthcare market and is a
provider of patient-specific, self-injectable biopharmaceuticals and disease
treatment programs to individuals with chronic diseases. The significant
customers reported in Note 14 are all sold through the BWI segment.
These segments have separate management teams and infrastructures to facilitate
their specific customer needs and marketing strategies. The accounting policies
of the reportable segments are the same as those described in the summary of
significant accounting policies. The intersegment sales and transfers are not
significant. As discussed in Note 2, Priority ceased to be a subsidiary of the
Company as of December 31, 1998 and, therefore, their assets, liabilities and
equity are not included in the Company's December 31, 1998 Consolidated Balance
Sheet.
Segment information for the years ended 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
BWI Priority Total
<S> <C> <C> <C>
1998
Revenues $ 7,345,726 $ 275,626 $ 7,621,352
Interest expense 18,310 155 18,465
Depreciation and amortization 7,179 1,234 8,413
Unusual items 18,833 18,833
Segment net earnings 8,996 10,143 19,139
Total assets 1,286,575 1,286,575
Capital expenditures 32,636 905 33,541
1997
Revenues $ 7,078,940 $ 230,982 $ 7,309,922
Interest expense 15,907 15,907
Depreciation and amortization 6,270 1,161 7,431
Segment net earnings 17,595 6,151 23,746
Total assets 1,196,051 91,728 1,287,779
Capital expenditures 21,916 727 22,643
1996
Revenues $ 5,159,279 $ 158,247 $ 5,317,526
Interest expense 12,992 12,992
Depreciation and amortization 5,710 1,009 6,719
Segment net earnings 13,637 4,369 18,006
Total assets 883,986 57,220 941,206
Capital expenditures 15,176 405 15,581
</TABLE>
F-8
<PAGE> 37
NOTE 4 - SHORT-TERM BORROWINGS
The Company's short-term bank line of credit was $174,500,000 as of
December 31, 1998. The line was available, as necessary, for general corporate
purposes at rates based upon prevailing money market rates. At December 31,
1998, 1997 and 1996, the Company had borrowed on its short-term line of credit
$19,500,000 at a rate of 5.4%, $147,000,000 at a rate of 6.6% and $52,000,000 at
a rate of 6.4%, respectively.
No compensating balance is required on the line. Certain conditions
relating to the maintenance of working capital, net worth and corporate
existence have been imposed by the lenders.
A summary of 1998, 1997 and 1996 borrowings under the line of credit is
as follows:
<TABLE>
<CAPTION>
Maximum short-term Average Average
Year borrowings borrowings Interest rate
- -----------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
1998 $338,000 $249,000 6.3%
1997 $270,000 $152,000 6.4%
1996 $192,000 $119,000 6.4%
</TABLE>
On December 27, 1996, the Company completed a private placement of $30
million Senior Notes due December 27, 1999 at an interest rate of 7.25%. The
Company estimates the fair market value at December 31, 1998 approximates the
principal amount based on rates currently available to the Company for debt with
similar terms and maturities.
In December 1998, the Company established a receivables securitization
facility (the "Receivables Facility") pursuant to which the Company sells
substantially all of its receivables arising in connection with the sale of
goods or the rendering of services ("Receivables") to Bindley Western Funding
Corporation ("Funding Corp."), a wholly owned special purpose corporation
subsidiary. The Receivables are sold to Funding Corp. on a continuous basis, and
the cash generated by sales of interests in the Receivables or by collections on
the Receivables retained is used by Funding Corp. to, among other things,
purchase additional Receivables originated by the Company. The assets of Funding
Corp. will be available first and foremost to satisfy claims of Funding Corp.
creditors.
In connection with the Receivables Facility, Funding Corp. entered into
a Receivables Purchase Agreement, dated as of December 28, 1998, with Falcon
Asset Securitization Corporation ("Falcon"), an affiliate of The First National
Bank of Chicago ("First Chicago"), certain other financial institutions
(collectively with Falcon, the "Purchasers"), and First Chicago, as Agent.
Pursuant to the Receivables Purchase Agreement, Funding Corp. may, from time to
time, sell interests in the Receivables ("Receivables Interests") to the Agent
for the benefit of the Purchasers. Each Receivables Interest has an associated
Discount Rate and Tranche Period applicable to it, as selected by Funding Corp.
The Discount Rate may, at Funding Corp.'s election, be the Base Rate (the
corporate prime or base rate announced from time to time by First Chicago) or,
with respect to the Receivables Interests purchased by Falcon, the CP Rate
(generally, a commercial paper related rate based on Falcon's funding charges)
or, with respect
F-9
<PAGE> 38
to the Receivables Interests purchased by other Purchasers, the LIBO
Rate (generally, LIBOR for the applicable Tranche Period, plus 1/25% per annum).
The Receivables Facility terminates on December 27, 1999, and is subject to
final termination on December 28, 2003, subject to earlier termination in
certain events. At December 31, 1998, there were $224 million of Receivables
Interests outstanding, bearing a Discount Rate of 5.5% per annum. The Company
accounts for the Receivables Facility as a financing transaction in its
consolidated financial statements.
The agreement requires the Company to take a number of actions to
administer Bindley Western Funding Corporation as a separate legal entity such
as maintaining clearly identified offices, books and records and other
administrative procedures. Since the agreement was not executed until December
28, 1998, certain of these administrative matters were not yet completed. While
the Company was in technical noncompliance with certain provisions of the
agreement at December 31, 1998, management intends to expeditiously implement
all required provisions in early 1999.
NOTE 5 - FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
- --------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Land $ 6,749 $ 6,321
Buildings and furnishings 52,633 34,050
Leasehold improvements 2,849 2,705
Transportation and
other equipment 57,012 46,628
------------------------------------------
119,243 89,704
Less: Accumulated
Depreciation (26,491) (22,076)
------------------------------------------
$ 92,752 $ 67,628
==========================================
</TABLE>
NOTE 6- INTANGIBLES
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
- --------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Goodwill $ 22,091 $ 35,184
Accumulated amortization (5,342) (5,849)
-----------------------------------------
Goodwill, net 16,749 29,335
Other 3,074 13,664
Accumulated amortization (1,844) (7,949)
-----------------------------------------
Other, net 1,230 5,715
-----------------------------------------
Intangibles, net $ 17,979 $ 35,050
=========================================
</TABLE>
In performing the review for impairment on the intangible assets
related to Priority Healthcare Services, the Company determined that the loss of
key personnel as part of the distribution of Priority and the recent and
projected operating results and cash flows were not
F-10
<PAGE> 39
adequate to support the recorded amount. In the fourth quarter of 1998,
the Company wrote off approximately $6 million in goodwill and $2 million in
other intangibles, which is presented in the Consolidated Statement of Earnings
as part of the unusual items caption. Priority Healthcare Services is a
component of the BWI segment.
The remainder of the reduction is the result of the distribution of
Priority at December 31, 1998.
NOTE 7 - RELATED PARTY TRANSACTIONS
At December 31, 1998 and 1997, the Company held a note receivable with
a principal balance of $3.2 million from the Chief Executive Officer of the
Company in connection with his exercise of stock options granted to him under
the 1993 Stock Option and Incentive Plan. This note, which bears interest at
6.5% per annum, matures on December 16, 2000 and provides for annual interest
only payments, beginning in 1998, with outstanding interest and principal to be
repaid at maturity. In 1998, other income includes $200,000 of interest income
related to this note.
At December 31, 1998, the Company owed Priority $16.5 million. This
amount is due on demand and represents loans of excess cash balances of Priority
to the Company on a short-term basis, bearing interest at the Company's average
incremental borrowing rate. At December 31, 1998, the incremental borrowing rate
was 6.3%.
F-11
<PAGE> 40
NOTE 8 - INCOME TAXES
The provision for income taxes includes state income taxes of
$3,110,000, $2,657,000 and $2,113,000 in 1998, 1997 and 1996, respectively.
The following table indicates the significant elements contributing to
the difference between the U.S. federal statutory tax rate and the effective tax
rate:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Percentage of earnings before taxes:
U.S. federal statutory rate 35.0% 35.0% 35.0%
State and local taxes on income, net of
Federal income tax benefit 5.1% 4.4% 4.4%
Nondeductible element of restricted
stock grants 6.2%
Other .8% .6% 2.3%
================================================================
Effective rate 47.1% 40.0% 41.7%
================================================================
</TABLE>
Presented below are the significant elements of the net deferred tax
balance sheet accounts at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Deferred tax assets: 1998 1997
---- ----
<S> <C> <C>
Current:
Accounts receivable $6,635 $ 6,573
Inventories 1,371 977
Deferred compensation 2,354 765
Other, net 1,146 1,392
-----------------------------------
Subtotal 11,506 9,707
Long-term:
Acquired net operating loss benefits 368 425
Intangibles 2,327
-----------------------------------
Subtotal 2,695 425
-----------------------------------
Total deferred tax assets $14,201 $ 10,132
===================================
Deferred tax liabilities:
Current $ $
Long-term:
Fixed assets $5,897 $ 4,129
Intangibles 639
-----------------------------------
Subtotal 5,897 4,768
-----------------------------------
Total deferred tax liabilities $5,897 $ 4,768
===================================
</TABLE>
F-12
<PAGE> 41
In connection with the acquisition of Goold, the Company acquired
federal net operating loss carryforwards of $2.3 million. Due to certain tax law
limitations, annual utilization of the carryforward is limited to $163,000. The
remaining tax loss carryforward at December 31, 1998 is $1.2 million. The
carryover period expires in 2006.
NOTE 9 - LONG-TERM DEBT
The long-term debt at December 31, 1998 is comprised of a mortgage
obligation. In 1997, the balance included a private placement of $30 million
Senior Notes due December 27, 1999 which was classified in short-term borrowings
as of December 31, 1998. The remaining balance in 1997 related to mortgage
obligations, and certain other obligations related to the purchase of the IV One
Companies and Priority Healthcare Services Corporation. The remaining $1.2
million obligation, which related to the purchase of Priority Healthcare
Services, was included as a reduction of the fourth quarter unusual items charge
resulting from the litigation settlement agreement on December 31, 1998.
On September 24, 1992 and October 20, 1992, the Company concluded a
public offering of $65,000,000 and $2,350,000, respectively, of 6 1/2%
Convertible Subordinated Debentures, due 2002, for approximately $65,565,000,
net of underwriting and other costs. On August 27, 1997, the Company called for
redemption on September 12, 1997 all of these Debentures at a redemption price
of $1,039 per $1,000 principal amount of Debentures plus accrued interest
through the redemption date. Debenture holders could elect to convert their
debentures into shares of common stock of the Company through September 12,
1997. Holders of all but $119,000 principal amount of the $67,350,000
outstanding Debentures elected to convert their Debentures into common stock at
the rate of 50.4 shares of common stock for each $1,000 principal amount of
Debentures. The redemption reduced the Company's long-term debt by $67,350,000
and increased by 3.4 million the number of issued shares of the Company's common
stock.
NOTE 10 - PROFIT SHARING PLAN
The Company and its subsidiaries maintain a qualified Profit Sharing
Plan ("Profit Sharing Plan") for eligible employees. All employees are generally
eligible to participate in the Profit Sharing Plan as of the first January 1,
April 1, July 1 or October 1 after having completed at least one year of service
(as defined in the Profit Sharing Plan) and having reached age 21.
The annual contribution of the Company and its subsidiaries to the
Profit Sharing Plan is at the discretion of the Board and is generally 8% of the
Participant's compensation for the year. The employer contribution for a year is
allocated among the Participants employed on the last day of the year in
proportion to their relative compensation for the year. The Company's
contributions to the plan for the years ended December 31, 1998, 1997 and 1996
were $1,785,000, $1,576,000 and $1,334,600, respectively.
Subject to limitations imposed by the Internal Revenue Code, a
Participant may have a percentage of his or her compensation withheld from pay
and contributed to the Profit Sharing Plan and make "rollover" contributions to
the Profit Sharing Plan of qualifying distributions from other employers'
qualified plans.
F-13
<PAGE> 42
A Participant's interest in amounts withheld from his or her pay and
contributed to the Profit Sharing Plan or in rollover contributions and in the
earnings on those amounts are fully vested at all times. A Participant's
interest in employer contributions made on his or her behalf and the earnings on
those contributions become 20% vested after three years of service and an
additional 20% vested during each of the next four years. A Participant's
interest in employer contributions made on his or her behalf and the earnings on
those contributions will also become fully vested when the employee retires at
age 65 or older, dies or becomes totally disabled.
All contributions to the Profit Sharing Plan are paid in cash to a
trustee bank, as trustee, and are invested by the trustee until distributed to
Participants or their beneficiaries. Participants are permitted to direct the
trustee as to the investment of their accounts by choosing among several
investment funds that are offered under the Profit Sharing Plan, including one
fund consisting of common stock of the Company. Participants may elect to invest
in one fund or a combination of the available funds according to their
investment goals. If a Participant does not make an investment election, his or
her Profit Sharing Plan accounts will be invested in a fund designated by the
Company.
NOTE 11 - MINORITY INTEREST
On October 29, 1997, the Company consummated an initial public
offering ("IPO") of its Priority Healthcare Corporation ("Priority") subsidiary.
Priority registered 2,300,000 shares of Class B Common Stock, all of which were
sold in a firm commitment underwriting at an aggregate offering price of $33.35
million. After underwriters' discount of $2.32 million and expenses incurred in
conjunction with the IPO of $1.05 million, the net offering proceeds to Priority
were approximately $29.98 million.
The Priority IPO resulted in the establishment of minority interest of
$11 million, which represents the minority shareholders' interest in
shareholders' equity of Priority, and an increase of $19.2 million in the
Company's additional paid in capital, which represents the Company's incremental
share of Priority's shareholders' equity, both at October 29, 1997.
See Note 2 for discussion of the Company's distribution of Priority.
NOTE 12 - CAPITAL STOCK
The Company's capitalization presently consists of 40,000,000
authorized shares of Common Stock and 1,000,000 authorized shares of Special
Stock. Both the Common Stock and Special Stock have a $.01 par value per share.
On June 3, 1998, a 4-for-3 stock split was effected in the form of a stock
dividend to shareholders of record at the close of business on May 21, 1998.
Prior to May 20, 1993, the Company had a 1983 Incentive Stock Option
Plan, a 1983 Nonqualified Option Plan, and a 1987 Stock Option and Incentive
Plan. The number of shares available for issuance pursuant to such plans
aggregated 2,500,000 shares. Incentive stock options, granted at a minimum of
100% of fair market value, and nonqualified stock options, granted at a minimum
of 85% of fair market value, both exercisable for up to 10 years from the date
of grant, were authorized under such plans.
F-14
<PAGE> 43
On May 20, 1993, the Company's shareholders approved the 1993 Stock
Option and Incentive Plan (the "1993 Plan") authorizing 1,000,000 shares of the
Company's common stock for sale or award to officers and key employees
(including any such officer or employee who holds at least 10% of the Company's
common stock) as stock options or restricted stock. Options generally become
exercisable over a one to four year period following date of grant and expire 10
years following date of grant. No further awards will be made from the shares of
common stock that remained available for grants under the prior stock option
plans.
On May 19, 1994, the Company's shareholders approved amendments to the
Company's 1983 Incentive Stock Option Plan, the 1983 Nonqualified Stock Option
Plan, the 1987 Stock Option and Incentive Plan and the 1993 Plan to permit the
Company's Compensation and Stock Option Committee of the Board of Directors
("Committee") to allow participants under these plans, including the holders of
outstanding options, to exercise an option during its term following cessation
of employment by reason of death, disability or retirement. Such amendments also
permitted the Committee, in its sole discretion, to change the exercise and
termination terms of options granted if such changes are otherwise consistent
with applicable federal and state laws. In addition, the 1993 Plan was amended
to (i) increase from 1,000,000 to 1,500,000 the number of shares authorized for
issuance pursuant to awards made under the 1993 Plan; (ii) limit to 100,000
shares the number of shares that any one participant may receive under the 1993
Plan during any calendar year; and (iii) provide that the Board of Directors may
amend the 1993 Plan in any respect without shareholder approval, unless such
approval is required to comply with Rule 16b-3 under the Securities Exchange Act
of 1934 or Section 422 of the Internal Revenue Code of 1986. On May 16, 1996,
the Company's shareholders approved an amendment to the 1993 Plan to increase to
3,000,000 the number of shares authorized for issuance pursuant to awards made
under the 1993 Plan. At the May 21, 1998 annual shareholders meeting, the
Company's shareholders approved an amendment to the 1993 Plan to (i) increase to
4,000,000 (now restated to 5,333,332 as a result of the stock split and to
7,821,973 as a result of the spin-off of Priority, each restatement made
pursuant to an anti-dilution provision contained in the 1993 Plan) the number of
shares authorized for issuance pursuant to awards made under the 1993 Plan and
(ii) increase to 300,000 the number of shares that any one participant may
receive under the 1993 Plan during any calendar year.
On May 14, 1991, the Company's shareholders approved the Outside
Directors Stock Option Plan (the "Directors Plan"). Each eligible director is
automatically granted an option to purchase 1,000 shares of the Company's common
stock on June 1 of each year beginning in 1991. The option exercise price per
share is 85% of the fair market value of one share of common stock on the date
of grant. Each option becomes exercisable six months following the date of grant
and expires 10 years following the date of grant.
On December 11, 1998, the Company's Board of Directors adopted the 1998
Non-Qualified Stock Option Plan (the "1998 Non-Qualified Plan"), which reserves
for issuance 600,000 shares of the Company's common stock held by the Company as
treasury shares. The 1998 Non-Qualified Plan provided for the grant of
nonqualified stock options to employees who are not officers or directors of the
Company or its affiliates. Under the 1998 Non-Qualified Plan, no individual
participant may receive awards for more than 50,000 shares in any calendar year.
F-15
<PAGE> 44
On August 25, 1997, Priority's Board of Directors and the then sole
shareholder (the Company) adopted Priority's 1997 Stock Option and Incentive
Plan (the "1997 Stock Option Plan"). The 1997 Stock Option Plan reserves for
issuance 1,250,000 shares of Priority Class B Common Stock, subject to
adjustment in certain events. The 1997 Stock Option Plan provides for the grant
of options to purchase shares of Class B Common Stock and restricted shares of
Class B Common Stock to officers, key employees and consultants of Priority.
Stock options granted under the 1997 Stock Option Plan may be either options
intended to qualify for federal income tax purposes as "incentive stock
options" or options not qualifying for favorable tax treatment ("nonqualified
stock options"). No individual participant may receive awards for more than
300,000 shares in any calendar year.
Also on August 25, 1997, Priority's Board of Directors and the then
sole shareholder (the Company) adopted Priority's Outside Directors Stock
Option Plan ("the Priority Directors Plan"). The number of shares of Priority's
Class B Common Stock authorized for issuance pursuant to the Priority Directors
Plan is 25,000. Each eligible director is automatically granted an option to
purchase 1,000 shares of Priority's Class B Common Stock on June 1 of each year
beginning in 1998. The option exercise price per share is equal to the fair
market value of one share of Class B Common Stock on the date of grant. Each
option becomes exercisable six months following the date of grant and expires
10 years following the date of grant.
On September 15, 1998, Priority's Board of Directors adopted the
Broad Based Stock Option Plan, which reserves for issuance 400,000 shares of
Priority Class B Common Stock. The Broad Based Stock Option Plan provides for
the grant of nonqualified stock options to key employees who are not officers
or directors of Priority or its affiliates. The number of shares which may be
granted under the Broad Based Plan during any calendar year shall not exceed
40,000 shares to any one person.
F-16
<PAGE> 45
In accordance with the provisions of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has
elected to continue following Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its stock option plans, and accordingly,
generally does not recognize compensation expense related to these options. If
the Company had elected to recognize compensation expense based on the fair
value of the options at the grant date as prescribed by SFAS 123, pro forma net
income and earnings would have been:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------
(In thousands, except share data)
<S> <C> <C> <C>
Net earnings - as reported $ 19,139 $ 23,746 $ 18,006
Net earnings - pro forma $ 15,849 $ 21,211 $ 16,019
Earnings per share
Basic - as reported .89 1.38 1.19
Basic - pro forma .74 1.23 1.06
Diluted - as reported .84 1.19 1.01
Diluted - pro forma .70 1.07 .92
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions for the years ended:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------
<S> <C> <C> <C>
Company Options
Risk free interest rates 5.31% 5.71% 6.05%
Expected dividend yields .16% .26% .41%
Expected life of options 4.34 4.66 4.60
Volatility of stock price 28.85% 27.23% 29.43%
Weighted average fair
value of options $ 9.34 $ 10.16 $ 6.20
Priority Options
Risk free interest rates 5.02% 5.90%
Expected dividend yields .00% .00%
Expected life of options 4.71 4.60
Volatility of stock price 55.94% 54.79%
Weighted average fair
value of options $ 9.65 $ 7.52
</TABLE>
Compensation expense based on the fair value of options granted prior
to January 1, 1995 was not included in the preceding pro forma calculations.
Therefore, the resulting pro forma compensation cost may not be representative
of that to be expected in future years.
F-17
<PAGE> 46
Changes in stock options under the Company's plans are shown below, (All
historical shares and per share amounts have been restated to reflect the
4-for-3 stock split):
<TABLE>
<CAPTION>
NUMBER OF SHARES OPTION PRICE PER SHARE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding
at December 31, 1995 3,722,372 $ 4.07 to $14.54
Forfeited during 1996 (75,466) $ 8.63 to $13.59
Granted during 1996 1,131,697 $ 10.92 to $15.06
Exercised during 1996 (411,537) $ 4.07 to $13.22
---------------------
Options outstanding
at December 31, 1996 4,367,066 $ 4.07 to $15.06
Forfeited during 1997 (52,217) $ 5.16 to $17.72
Granted during 1997 1,088,794 $ 13.22 to $23.63
Exercised during 1997 (1,160,182) $ 4.07 to $15.06
---------------------
Options outstanding
at December 31, 1997 4,243,461 $ 4.38 to $23.63
Forfeited during 1998 (146,623) $ 8.63 to $28.45
Granted during 1998 27,281 $ 20.95 to $31.94
Exercised during 1998 (1,445,905) $ 4.38 to $23.63
---------------------
Options outstanding
at December 31, 1998 2,678,214 $ 7.41 to $31.94
Effect of Spin-off of
Priority Healthcare (1) 2,394,938
---------------------
Converted options outstanding
at December 31, 1998 5,073,152 $ 3.91 to $16.86
=============================================
Exercisable
at December 31, 1998 3,326,658 $ 3.91 to $12.47
=============================================
Available for grant
at December 31, 1998 1,330,620
=====================
</TABLE>
(1) As a result of the spin-off of Priority, in order to preserve the economic
value of the outstanding stock options, effective after the close of business on
December 31, 1998, all such outstanding options were converted pursuant to
anti-dilution provisions contained in the various stock option plans. As these
options were converted in accordance with accounting principles issued by the
Financial Accounting Standards Board, no compensation expense was recorded as a
result of such conversion.
F-18
<PAGE> 47
In certain cases, the exercise of stock options results in state and
federal income tax deductions to the Company on the difference between the
market price at the date of exercise and the option price. The tax benefits
obtained from these deductions are included in additional paid in capital.
Additional information regarding the Company's options outstanding at
December 31, 1998 is shown below:
<TABLE>
<CAPTION>
EXERCISE PRICE RANGE
- ----------------------------------------------------------------------------------------------------------------------
$3.91-$6.98 $7.18-$9.97 $11.06-$16.86 TOTAL
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number of options
outstanding 2,269,529 1,019,408 1,784,215 5,073,152
Weighted average
exercise price $5.91 $7.25 $12.49 $8.49
Weighted average remaining
contractual life 5.76 7.96 8.96 7.33
Number of shares
exercisable 1,972,763 580,677 773,218 3,326,658
Weighted average
exercisable price $5.78 $7.26 $12.44 $7.59
</TABLE>
Changes in stock options under all of Priority's plans are shown below
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE PER SHARE
SHARES
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding
at December 31, 1996
Forfeited during 1997 (13,800) $ 14.50 to $14.50
Granted during 1997 473,050 $ 14.50 to $15.00
Exercised during 1997
----------------
Options outstanding
at December 31, 1997 459,250 $ 14.50 to $15.00
================
Forfeited during 1998 (29,120) $ 14.50 to $20.00
Granted during 1998 601,953 $ 12.24 to $20.00
Exercised during 1998
----------------
Options outstanding
at December 31, 1998 1,032,083 $ 12.24 to $20.00
================
</TABLE>
F-19
<PAGE> 48
During 1998, the Company issued 350,000 (restated to 466,667 to reflect
the stock split) restricted stock grants to certain key executives with a grant
date fair value of $35.25 per share. Pending the lapse of the forfeiture and
transfer restrictions established by the Compensation and Stock Option
Committee, the grantee generally will have all the rights of a shareholder,
including the right to vote the shares and the right to receive all dividends
thereon. Upon issuance of the restricted stock grants, unearned compensation
equivalent to the market value at the date of grant was recorded as unamortized
value of restricted stock and is being charged to earnings over the period
during which the restrictions lapse. Compensation expense related to these
restricted stock grants of $1.6 million was recorded in the first nine months of
1998. The remaining $11.1 million was recorded in the fourth quarter as part of
the unusual items when the lapse of the forfeiture and transfer restrictions on
the restricted stock was accelerated by the Compensation and Stock Option
Committee.
NOTE 13 - COMMITMENTS
The Company leases warehouse and office space under noncancelable
operating leases expiring at various dates through 2004, with options to renew
for various periods. Minimum commitments under leases aggregate $1,562,000 for
1999, $1,569,000 for 2000, $1,307,000 for 2001, $992,000 for 2002 and $739,000
for 2003.
The consolidated rent expense for the years ended December 31, 1998,
1997 and 1996 was $2,272,000, $2,107,000 and $1,520,000, respectively, of which
none pertained to leases of one year or less for 1998 and approximately
$1,034,000 in 1997 and $209,000 in 1996 which pertained to leases with terms of
one year or less.
In 1998, the Company completed construction of a new 180,000 square
foot, five-story office building in Indianapolis, Indiana. This building
provides space for the accounting, human resources, information systems,
purchasing and sales and marketing departments, along with the Company's
executive offices and related staff. Subject to favorable market conditions, the
Company through its wholly-owned subsidiary, College Park Plaza Associates,
Inc., intends to sell the building to a third party and then lease back the top
two floors.
In 1998, the Company entered into operating lease agreements for the
bottom three floors of the newly constructed office building in Indianapolis,
Indiana. The rental income received in 1998 was immaterial. Minimum future
rentals on noncancelable leases aggregate $1,268,000 for 1999 and $1,506,000 per
year for 2000, 2001, 2002 and 2003.
NOTE 14 - MAJOR CUSTOMERS
The Company services customers in 37 states and Puerto Rico from
its 14 distribution centers located in 13 states. Its principal customers are
chain drug companies that operate their own warehouses. Other customers include
independent drug stores, chain drug stores, supermarkets and mass merchandisers
with their own pharmacies, hospitals, clinics, HMOs, state and federal
government agencies and other health care providers. The following chain drug
warehouse customers each accounted for over 10% of the Company's net sales
during the years shown: Eckerd Corporation (18%) and CVS (17%) in 1998; CVS
(22%), Rite Aid Corporation (18%) and Eckerd Corporation (16%) in 1997; and
Eckerd Corporation (17%), Rite Aid Corporation (14%) and Revco D.S., Inc. (12%)
in 1996. Sales to these customers
F-20
<PAGE> 49
aggregated 35%, 56% and 43% of net sales in 1998, 1997 and 1996, respectively.
The Company sells inventory to its chain drug warehouse and other customers on
various payment terms. This entails accounts receivable exposure, especially if
any of its chain warehouse customers encounter financial difficulties. Although
the Company monitors closely the creditworthiness of its major customers and,
when feasible, obtains security interests in the inventory sold, there can be no
assurance that the Company will not incur the write-off or writedown of chain
drug accounts receivable in the future.
During the second quarter of 1998, Rite Aid informed the Company that
Rite Aid signed a supply agreement with another wholesaler that began in May
1998. In 1997, Rite Aid comprised 18% of the Company's sales. Sales to Rite Aid
were predominantly to their warehouses. The loss of this customer did not have a
material adverse impact on the Company's results of operations.
NOTE 15 - STATEMENT OF CASH FLOWS
Cash paid for interest expense and income taxes was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997 1996
(in thousands)
<S> <C> <C> <C>
Interest $ 19,632 $14,129 $13,126
Income taxes $ 14,941 $16,935 $13,640
</TABLE>
Presented below is a brief discussion of recent acquisitions by the
Company. The purchase price has been allocated based on a determination of the
fair value of the assets acquired and liabilities assumed. The goodwill
associated with these acquisitions is being amortized on a straight line basis
not exceeding 40 years. All acquisitions were treated as purchases and the
financial statements include the results of operations from the respective
effective date of acquisition. Results of operations of the acquired companies
from January 1 of the year of acquisition to the effective dates of the
transactions are not material to the consolidated results of operations of the
Company for the respective years.
In January 1996, the Company formed a new subsidiary, National Infusion
Services, Inc. ("NIS"). Effective February 8, 1996, the Company through its NIS
subsidiary purchased the assets of the infusion services division of Infectious
Disease of Indiana P.S.C. NIS is a provider of quality care to patients in a
variety of settings. In February 1997, the corporate name was changed from NIS
to Priority Healthcare Services Corporation. The Company acquired the assets of
NIS for approximately $9 million in cash and incurred a long-term obligation of
approximately $1.5 million, resulting in approximately $9.8 million in
intangible assets. As discussed in Note 6 and Note 9 above, the remaining
balance of the intangible assets and the long-term obligation were written off
as part of the unusual items caption in the fourth quarter of 1998.
Effective July 31, 1997, the Company purchased substantially all of the
operating assets and assumed most of the liabilities and contractual obligations
of Tennessee Wholesale Drug Company ("TWD"). The Company expended approximately
$27 million for the acquisition of TWD, which approximated the fair value of the
net assets acquired. During 1998, the Company
F-21
<PAGE> 50
closed the TWD divisions located in Baltimore, Maryland and Tampa, Florida. The
customers of these divisions are serviced from existing facilities. The Company
recognized a liability related to the closure of the facilities of $413,000 as
of December 31, 1997. The Company offered all employees an opportunity to
interview for openings elsewhere in the Company and agreed to pay a lump sum
relocation cost to those that relocated. Employees who did not relocate and
worked up to the designated date of his/her separation of employment received a
benefits and compensation package based on his or her tenure with the Company.
The plan also included operational and data processing costs associated with the
closure. Both facilities were closed in 1998 and the costs associated with those
closures were paid and approximated the liability established.
Effective August 6, 1997, Priority acquired substantially all of the
operating assets and assumed most of the liabilities of Grove Way Pharmacy,
Inc., a specialty distributor of vaccines and injectables located in Castro
Valley, California. The amount expended approximated the fair value of the net
assets acquired.
NOTE 16 - LEGAL PROCEEDINGS
The Company is a defendant in a consolidated class action filed in the
United States District Court for the Northern District of Illinois in 1993 which
names the Company, other pharmaceutical wholesalers and pharmaceutical
manufacturers as defendants, In re Brand Name Prescription Drugs Litigation, MDL
997. Plaintiffs allege that pharmaceutical manufacturers and wholesalers
conspired to fix prices of brand-name prescription drugs sold to retail
pharmacies at artificially high levels in violation of the federal antitrust
laws. The plaintiffs seek injunctive relief, unspecified treble damages, costs,
interest and attorneys' fees. The Company has denied the complaint allegations.
Several of the manufacturer defendants and the class plaintiffs have
reached settlement agreements. The trial against the remaining defendants,
including the Company, began on September 14, 1998. On November 30, 1998, the
Court granted all remaining defendants' motions for judgments as a matter of
law, dismissing all class claims against the Company and other defendants. The
class plaintiffs' appeal of the Court's ruling is pending.
At this time, the Company is a defendant in 115 additional cases
brought by plaintiffs who "opted out" of the federal class action described
above. One hundred eleven of these complaints contain allegations and claims for
relief that are substantially similar to those in the federal class action. The
four remaining complaints add allegations that the defendants' conduct violated
state law. The damages period in these cases begins in October 1993. The Company
has denied the allegations in all of these complaints.
On November 20, 1997, two additional complaints were filed in the MDL
997 proceeding by Eckerd Corporation and American Drug Stores naming certain
pharmaceutical manufacturers and wholesalers, including the Company, as
defendants. These complaints contain allegations and claims for relief that are
substantially similar to those in the federal class action. The Company has
denied the allegations in these complaints.
On July 1, 1996, the Company and several other wholesalers were joined
as the defendants in a seventh amended and restated complaint filed in the
Circuit Court of Greene County, Alabama, Durrett v. The Upjohn Company, Civil
Action No. 94-029. The case was first
F-22
<PAGE> 51
filed in 1994. The plaintiffs claim the prices of prescription drugs they
purchase in interstate commerce are artificially high because of alleged illegal
activities of the defendant pharmaceutical manufacturers and wholesalers. The
plaintiffs seek monetary damages, injunctive relief and punitive damages. The
Company has denied the allegations of the complaint.
On June 16, 1998, a suit was filed in the Circuit Court for Cocke
County, Tennessee purportedly on behalf of consumers of prescription drugs in
the following states: Tennessee, Alabama, Arizona, Florida, Kansas, Maine,
Michigan, Minnesota, New Mexico, North Carolina, North Dakota, South Dakota,
West Virginia and Wisconsin. Graves et al. v. Abbott Laboratories et al., Civil
Action No. 25,109-00. The complaint charges that pharmaceutical manufacturers
and wholesalers, including the Company, engaged in a price-fixing conspiracy in
violation of the Tennessee's Trade Practices Act and Consumer Protection Act,
and the unfair or deceptive trade practices statutes of the other jurisdictions
named therein. The Company has denied the allegations of the complaint.
On October 21, 1994, the Company entered into an agreement with the
other wholesalers and pharmaceutical manufacturers covering all of the cases
listed above. Among other things, the agreement provides that for all judgments
that might be entered against both the manufacturer and wholesaler defendants,
the Company's total exposure for joint and several liability is limited to
$1,000,000 and the wholesaler defendants are indemnified for $9,000,000 in
related legal fees and expenses. The effect of the previously noted settlements
on the agreement is that the Company will continue to receive reimbursement of
some, if not all, of its legal fees and expenses in excess of its proportionate
share of the $9,000,000.
The Company is unable to form a reasonably reliable conclusion
regarding the likelihood of a favorable or unfavorable outcome of these cases,
each of which is being defended vigorously. The Company believes the allegations
of liability are without merit with regard to the wholesaler defendants and that
the attendant liability of the Company, if any, would not have a material
adverse effect on the Company's financial condition or liquidity. Adverse
decisions, although not anticipated, could have an adverse material effect on
the Company's results of operations.
On October 7, 1996, the Company and its subsidiary, National Infusion
Services (now known as Priority Healthcare Services Corporation) ("PHSC"), were
named as defendants in an action filed by Thomas G. Slama, M.D. in the Superior
Court of Hamilton County, Indiana . Dr. Slama is a former director of the
Company and formerly was Chief Executive Officer and President of PHSC. The
complaint alleged breach of contract and defamation arising from the termination
of Dr. Slama's employment with PHSC in October 1996. On October 26, 1998, Dr.
Slama filed a Second Amended Complaint which added Priority and William E.
Bindley as defendants and stated additional claims for breach of contract,
breach of oral contract, breach of fiduciary duty, securities fraud and
conversion. Pursuant to an Indemnification and Hold Harmless Agreement the
Company indemnified and held harmless Priority and its subsidiaries from and
against any and all costs, damages, charges and expenses (including without
limitation legal and other professional fees) which Priority might incur or
which may be charged against Priority in any way based upon, connected with or
arising out of the lawsuit filed by Dr. Slama. The Company, PHSC, Priority and
Mr. Bindley answered the complaint, denied the merits of Dr. Slama's claims, and
also filed a counterclaim against Dr. Slama which sought,
F-23
<PAGE> 52
among other things, declaratory relief, compensatory and (in some instances)
treble damages, punitive damages, attorneys' fees, interest and costs. On
December 31, 1998, a Settlement Agreement was executed by and among the parties
named above pursuant to which mutual releases were obtained, and on January 4,
1999, a one-time payment of $875,000 was made by the Company to Dr. Slama. The
corresponding Joint Stipulation of Dismissal was approved by the Court on
January 11, 1999. This one time payment, and approximately $150,000 of legal
costs, were included in the unusual item charge recorded in the fourth quarter
of 1998.
On January 11, 1996, the Company was informed by the U.S. Attorney's
office in Indianapolis that the Drug Enforcement Administration ("DEA") was
alleging multiple violations of the recordkeeping and reporting regulations of
the Controlled Substances Act ("Act") resulting from a routine inspection of the
Company's Indianapolis Distribution Center during January and February 1994. On
November 7, 1996, the Company entered into a Civil Consent Decree with the
United States and the DEA resolving all issues relating to its Indianapolis
Distribution Center's alleged failure to comply with the Act. In exchange for
the settlement of all civil and administrative issues, the Company paid
$700,000, and agreed to pay an additional $300,000 if the Company did not
substantially comply with the terms of the Civil Consent Decree over the next
two years. The settlement charge recognized by the Company in 1996 included
professional fees of $112,000. On December 15, 1998, the Company was advised by
the U. S. Attorney's office in Indianapolis that the Company had fully complied
with the terms of the 1996 Civil Consent Decree and, accordingly, the civil
penalty of $300,000 would not be imposed.
NOTE 17 - EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for 1998, 1997 and 1996.
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Basic:
Net earnings $ 19,139 $ 23,746 $ 18,006
Weighted shares
Outstanding 21,546,734 17,184,178 15,109,972
Per share amount $ .89 $ 1.38 $ 1.19
Diluted:
Net earnings $ 19,139 $ 23,746 $ 18,006
6 1/2% convertible
debentures 1,889 2,654
Diluted earnings $ 19,139 $ 25,635 $ 20,660
Weighted shares
Outstanding 21,546,734 17,184,178 15,109,972
Debentures 3,144,973 4,529,635
Stock Options 1,063,904 1,178,995 720,594
Restricted Stock 111,483
Diluted Shares 22,722,121 21,508,146 20,360,201
Per share amount $ .84 $ 1.19 $ 1.01
</TABLE>
F-24
<PAGE> 53
The earnings per share for 1997 and 1996 have been restated to give effect for
the 4-for-3 stock split.
See Note 12 regarding changes to outstanding options at the close of business on
December 31, 1998.
NOTE 18 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table presents the quarterly financial data for 1998 and 1997.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
- -------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
1998
Net sales $1,961,771 $1,848,048 $1,813,210 $1,998,323
Gross margin 43,124 47,241 48,222 52,971
Net earnings 7,574 8,172 7,908 (4,515)
Earnings per share:
Basic (1) $ 0.36 $ 0.38 $ 0.37 $ (0.21)
Diluted (1) 0.34 0.36 0.35 (0.21)
1997
Net sales $1,634,663 $1,811,028 $1,812,468 $2,051,763
Gross margin 32,831 33,997 35,777 40,043
Net earnings 5,521 5,554 5,523 7,147
Earnings per share:
Basic (1) $ 0.36 $ 0.36 $ 0.33 $ 0.34
Diluted (1) 0.30 0.29 0.28 0.32
</TABLE>
(1) The earnings per share for 1997 and the first quarter of 1998 have been
restated to give effect for the 4-for-3 stock split effected in the form of a
dividend on June 3, 1998 to shareholders of record on May 21, 1998.
F-25
<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.
March 25, 1999 BINDLEY WESTERN INDUSTRIES, INC.
By /s/ William E. Bindley
-------------------------------
William E. Bindley
Chairman, President
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>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ William E. Bindley
- ------------------------------
William E. Bindley Chairman of the Board and President
(Principal Executive Officer); Director March 25, 1999
/s/ William F. Bindley, II
- ------------------------------
William F. Bindley, II Director
March 25, 1999
/s/ Keith W. Burks
- ------------------------------
Keith W. Burks Executive Vice President; Director
March 25, 1999
/s/ Seth B. Harris
- ------------------------------
Seth B. Harris Director
March 25, 1999
/s/ Robert L. Koch, II
- ------------------------------
Robert L. Koch, II Director
March 25, 1999
/s/ Michael D. McCormick
- ------------------------------
Michael D. McCormick Executive Vice President, General Counsel
and Secretary; Director March 25, 1999
/s/ J. Timothy McGinley
- ------------------------------
J. Timothy McGinley Director
March 25, 1999
/s/ James K. Risk, III
- ------------------------------
James K. Risk, III Director
March 25, 1999
/s/ Thomas J. Salentine
- ------------------------------
Thomas J. Salentine Executive Vice President and Chief Financial
Officer (Principal Accounting and Financial March 25, 1999
Officer); Director
/s/ K. Clay Smith
- ------------------------------
K. Clay Smith Director
March 25, 1999
/s/Carolyn Woo
- ------------------------------
Carolyn Woo Director
March 25, 1999
</TABLE>
-23-
<PAGE> 55
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page No.
Exhibit This
No. Description Filing
---------- -------------------------------------------------------------------- ----------
<S> <C> <C> <C>
3-A 1 (i)Amended and Restated Articles of Incorporation of
Registrant..........................................................
2 (ii)Amendment to Restated Articles of Incorporation increasing
number of authorized shares.........................................
3 (iii)Amendment to Restated Articles of Incorporation establishing
terms of Class A Preferred Stock....................................
17 (iv)Amendment to Restated Articles of Incorporation increasing
number of authorized shares.........................................
3-B 18 Restated By-Laws of Registrant, as amended to date..................
4-A Third Amended and Restated Credit Agreement, dated as of December
28, 1998, by an among Registrant, NationsBank, N.A., The Bank of
Tokyo-Mitsubishi, Ltd., KeyBank National Association, Suntrust Bank,
Central Florida, N.A., National City Bank of Indiana, Fifth Third
Bank, Indiana, (f/k/a The Fifth Third Bank of Central Indiana), The
Northern Trust Company, NBD Bank, N.A., and Bank One, Indiana, NA,
as Agent ...........................................................
---------
4-B Receivables Purchase Agreement, dated as of
December 28, 1998, among Bindley Western Funding
Corporation, Falcon Asset Securitization
Corporation, NBD Bank, N.A., KeyBank National
Association, Comerica Bank, NationsBank, N.A.,
Fifth Third Bank, Indiana, National City Bank of
Indiana, and The First National Bank of Chicago, as
Agent...............................................................
---------
Registrant agrees to furnish to the Securities and
Exchange Commission, upon request, a copy of each
instrument with respect to other issues of
Registrant's long-term debt, the authorized
principal amount of which does not exceed 10% of
Registrant's total assets on a consolidated basis.
</TABLE>
-35-
<PAGE> 56
<TABLE>
<CAPTION>
Page No.
Exhibit This
No. Description Filing
---------- ------------------------------------------------------------------- ----------
<S> <C> <C> <C>
10-A* 6 (iii)Employee Benefit Trust Agreement of Registrant dated November
30, 1990...........................................................
5 (v)Split Dollar Insurance Agreement dated December 11, 1992 between
Registrant and William F. Bindley, II and K. Clay Smith as trustees
of the William E. Bindley Irrevocable
Trust..............................................................
5 (vi)The William E. Bindley Trust Agreement dated December 11, 1992
between William E. Bindley, grantor, and William F. Bindley, II and
K. Clay Smith, trustees............................................
10-B* 7 (i)Nonqualified Stock Option Plan of Registrant....................
10 (ii)Amendment to the Nonqualified Stock Option Plan of
Registrant.........................................................
10-C* 7 (i)Incentive Stock Option Plan of Registrant.......................
10 (ii)Amendment to the Incentive Stock Option Plan of
Registrant.........................................................
10-D* 8 (i)1987 Stock Option and Incentive Plan of Registrant..............
9 (ii)Amendment to 1987 Stock Option and Incentive
Plan...............................................................
9 (iii)Outside Directors Stock Option Plan of Registrant.............
10 (iv)Amendment to the 1987 Stock Option and Incentive Plan of
Registrant.........................................................
10-E* 5 (i)1993 Stock Option and Incentive Plan of Registrant..............
10 (ii) First Amendment to the 1993 Stock Option and Incentive Plan of
Registrant.........................................................
14 (iii) Second Amendment to the 1993 Stock Option and Incentive Plan
of Registrant .....................................................
20 (iv)Third Amendment to the 1993 Stock Option and Incentive Plan of
Registrant.........................................................
21 (v)Fourth Amendment to the 1993 Stock Option and Incentive Plan of
Registrant.........................................................
</TABLE>
-36-
<PAGE> 57
<TABLE>
<CAPTION>
Page No.
Exhibit This
No. Description Filing
---------- ------------------------------------------------------------------- ----------
<S> <C> <C> <C>
10-F 15 Subordinated Promissory Note between Registrant and Priority
Healthcare Corporation ............................................
10-G 16 Revolving Credit Promissory Note between Registrant and Priority
Healthcare Corporation ............................................
10-I 23 Revolving Credit Promissory Note between Registrant (Maker)
and Priority Healthcare Corporation (Holder).......................
10-H 4 Distribution Agreement, dated as of October 23, 1998, between
Registrant and Priority Healthcare Corporation.....................
10-J* 13 Form of Termination Benefits Agreement, dated April 1, 1996,
between Registrant and each of William E. Bindley, Keith W. Burks,
Michael D. McCormick, and Thomas J. Salentine......................
10-V 19 (i)Agreement dated July 14, 1997 between Eaton & Lauth Real Estate
Services, Inc. and Registrant......................................
19 (ii)Assignment and Assumption Agreement dated January 14, 1998
between College park Plaza Associates, Inc. and Registrant.........
10-Y 12 Collective Bargaining Agreement dated October 21, 1994 between
J.E. Goold & Co. and Truck Drivers, Warehousemen and Helpers Union
Local No. 340......................................................
10-Z* 10 (i)401(k) Profit Sharing Plan (Nonstandardized) Adoption Agreement
of Registrant, effective January 1, 1994...........................
11 (ii)Amendment to page 4 of the 401(k) Profit Sharing Plan
(Nonstandardized) Adoption Agreement of Registrant, effective
January 1, 1994....................................................
12 (iii)401(k) Profit Sharing Plan (Nonstandardized) Adoption
Agreement of Registrant, effective January 1, 1996.................
12 (iv)Amendment to page 6 of the 401(k) Profit Sharing Plan
(Nonstandardized) Adoption Agreement of Registrant, effective
January 1, 1996....................................................
</TABLE>
-37-
<PAGE> 58
<TABLE>
<CAPTION>
Page No.
Exhibit This
No. Description Filing
---------- ------------------------------------------------------------------- ----------
<S> <C> <C> <C>
19 (v)Amendment to Item B.3 of the 401(k) Profit Sharing Plan
(Nonstandardized) Adoption Agreement of Registrant, effective
October 1, 1997 ...................................................
19 (vi)401 (k) Profit Sharing Plan (Nonstandardized) Participation
Agreement of Registrant, effective July 31, 1997...................
19 (vii)401 (k) Profit Sharing Plan (Nonstandardized) Participation
Agreement of Registrant, effective August 8, 1997..................
22 (viii)Profit Sharing Plan of Bindley Western Industries, Inc. &
Subsidiaries (PRISM(R) Prototype Retirement Plan and Trust)........
10-AA* 11 (i)Form of Profit Sharing Excess Plan and related Trust between
Registrant and each of William E. Bindley, Keith W. Burks, Michael
D. McCormick, and Thomas J. Salentine..............................
11 (ii)Form of 401(k) Excess Plan and Related Trust between
Registrant and each of William E. Bindley, Keith W. Burks,
Michael D. McCormick, and Thomas J. Salentine......................
12 (iii)First Amendment to 401(k) Excess Plan.........................
19 (iv)Form of Profit Sharing Excess Plan, restated as of
January 1, 1996, between Registrant and each of William E. Bindley,
Keith W. Burks, Michael D. McCormick, Robert L. Myers, and
Thomas J. Salentine................................................
19 (v)Form of 401(k) Excess Plan, restated as of January 1, 1996,
between Registrant and each of William E. Bindley, Keith W. Burks,
Michael D. McCormick, Robert L. Myers, and Thomas J. Salentine.....
10-BB* 1998 Non-Qualified Stock Option Plan of Registrant, as amended..... ----------
21 List of subsidiaries of Registrant................................. ----------
23 Written Consent of PriceWaterhouseCoopers LLP...................... ----------
</TABLE>
-38-
<PAGE> 59
<TABLE>
<CAPTION>
Page No.
Exhibit This
No. Description Filing
---------- ------------------------------------------------------------------------ ----------
<S> <C> <C>
27 Financial Data Schedule.................................................
----------
</TABLE>
- ---------------
*The indicated exhibit is a management contract, compensating plan, or
arrangement required to be filed by Item 601 of Regulation S-K.
1 The copy of this exhibit filed as the same exhibit number to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1987 is incorporated herein by reference.
2 The copy of this exhibit filed as Exhibit 4(a)(ii) to the Registrant's
Registration Statement on Form S-3 (Registration No. 33-45965) is
incorporated herein by reference.
3 The copy of this exhibit filed as Exhibit 1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 is
incorporated herein by reference.
4 The copy of this exhibit filed as Exhibit 10 to the Registrant's
Current Report on Form 8-K, as filed with the Commission on January 4,
1999, is incorporated herein by reference.
5 The copy of this exhibit filed as the same exhibit number to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1992 is incorporated herein by reference.
6 The copy of this exhibit filed as the same exhibit number to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1990 is incorporated herein by reference.
7 The copy of this exhibit filed as the same exhibit number to the
Registrant's Registration Statement on Form S-1 (Registration No.
2-84862) is incorporated herein by reference.
8 The copy of this exhibit filed as the same exhibit number to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1986 is incorporated herein by reference.
9 The copy of this exhibit filed as the same exhibit number to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1991 is incorporated herein by reference.
10 The copy of this exhibit filed as the same exhibit number to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1993 is incorporated herein by reference.
11 The copy of this exhibit filed as the same exhibit number to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1994 is incorporated herein by reference.
12 The copy of this exhibit filed as the same exhibit number to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1995 is incorporated herein by reference.
13 The copy of this exhibit filed as exhibit 10-CC to the Registrant's
Quarterly Report on form 10-Q for the quarter ended March 31, 1996 is
incorporated herein by reference.
-39-
<PAGE> 60
14 The copy of this exhibit filed as the same exhibit number to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1996 is incorporated herein by reference.
15 The copy of this exhibit filed as Exhibit 10-K to Priority Healthcare
Corporation's Registration Statement on Form S-1 (Registration No.
333-34463) is incorporated herein by reference.
16 The copy of this exhibit filed as Exhibit 10-N to priority Healthcare
Corporation's Registration Statement on Form S-1 (Registration No.
333-34463) is incorporated herein by reference.
17 The copy of this exhibit filed as Exhibit 4.1 (iv) to the Registrant's
Registration Statement on Form S-8 (Registration No. 333-57975) is
incorporated herein by reference.
18 The copy of this exhibit filed as Exhibit 4.2 to the Registrant's
Registration Statement on Form S-8 (Registration No. 333-57975) is
incorporated herein by reference.
19 The copy of this exhibit filed as the same exhibit number to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1997 is incorporated herein by reference.
20 The copy of this exhibit filed as Exhibit 4.3 (iv) to the Registrant's
Registration Statement on Form S-8 (Registration No. 333-60279) is
incorporated herein by reference.
21 The copy of this exhibit filed as Exhibit 4.3 (v) to the Registrant's
Registration Statement on Form S-8 (Registration No. 333-60279) is
incorporated herein by reference.
22 The copy of this exhibit filed as Exhibit 4.3 to the Registrant's
Registration Statement on Form S-8 (Registration No. 333-57975) is
incorporated herein by reference.
23 The copy of this exhibit filed as Exhibit 10-G(ii) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 is
incorporated herein by reference.
99 Form 11-K Annual Report of the Profit Sharing Plan of Bindley Western
Industries, Inc. & Subsidiaries for the Year ended December 31, 1998
(to be filed by amendment).
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<PAGE> 1
EXHIBIT 4-A
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This THIRD AMENDED AND RESTATED CREDIT AGREEMENT ("Agreement") is
entered into effective as of December 28, 1998, by and among BINDLEY WESTERN
INDUSTRIES, INC. (hereinafter referred to as the "Borrower"), the banks listed
on the signature pages hereof (collectively the "Banks" and each individually a
"Bank", with NBD BANK, N.A., which is one of the Banks, being referred to
sometimes hereinafter as "NBD Bank") and BANK ONE, INDIANA, NA, a national
banking association as administrative agent for the Banks (hereinafter in its
capacity as administrative agent for the Banks, together with any successor,
assign or delegatee, the "Agent").
WHEREAS, the Borrower, the Agent, NBD Bank, N.A., NationsBank, N.A.,
The Bank of Tokyo - Mitsubishi, Ltd, KeyBank National Association, SunTrust
Bank, Central Florida, N.A., National City Bank of Indiana, Fifth Third Bank,
Indiana (f/n/a The Fifth Third Bank of Central Indiana) and The Northern Trust
Company (all of such banks hereinafter collectively referred to as the "Original
Banks") are parties to that certain Second Amended and Restated Credit Agreement
dated June 30, 1998, as subsequently amended (the "Original Agreement"); and
WHEREAS, the Borrower, the Agent, the Original Banks (other than The
Bank of Tokyo - Mitsubishi, Ltd), and the Banks now desire to amend and restate
the Original Agreement as hereinafter provided, which amendment and restatement
shall, upon its execution and delivery by all parties, replace, supersede, and
terminate the Original Agreement.
NOW, THEREFORE, the Borrower, the Agent, and the Banks agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01 Certain Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms have the meanings indicated for purposes of
this Agreement:
"Advance" means a loan under the Revolving Credit made hereunder by the
Banks pursuant to Section 2.01.
"Affiliate" means, as to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"Aggregate Commitment" means the sum of all of the Commitments of the
Banks.
"Applicable Spread" means that number of Basis Points to be taken into
account in determining the per annum rate at which interest will accrue on the
Revolving Credit or the Swing Line, as the case may be, determined by reference
to the implied senior debt rating of the Borrower as reported quarterly by
Standard & Poors, Inc. in accordance with the following table:
<PAGE> 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>>
Tier Senior Debt Rating Base Rate LIBOR* Federal Funds**
- ------------------------------------------------------------------------------------------
1 BBB- and above: 0.0 66.5 b.p 66.5 b.p.
- ------------------------------------------------------------------------------------------
2 BB+ and below or unrated: 0.0 81.5 b.p 81.5 b.p.
- ------------------------------------------------------------------------------------------
</TABLE>
* applicable to LIBOR Advances only.
** applicable to Swing Line Advances only.
Initially, the Applicable Spread shall be as shown on Tier 2 indicated on the
above table. Thereafter, (a) with respect to a LIBOR Advance, the Applicable
Spread shall be determined on the basis of the report of Standard & Poors, Inc.
most recently delivered to the Agent prior to the first day of the LIBOR
Interest Period for which the interest rate is calculated with effect for the
entire LIBOR Interest Period, and, (b) with respect to a Base Rate Advance or a
Swing Line Advance, the Applicable Spread shall be determined on the basis of
the report of Standard & Poors, Inc. most recently delivered to the Agent prior
to the making of the Advance or Swing Line Advance with the Applicable Spread to
be adjusted thereafter, up or down as applicable, on the third Banking Day
following receipt by the Agent of a report which contains a change in the
Borrower's implied senior debt rating. In the event that the senior debt rating
of the Borrower as reported by Standard & Poors, Inc. is not available, the
Applicable Spread shall be the Applicable Spread as shown on Tier 2 indicated on
the above table and shall remain effective until such time as the implied senior
unsecured debt rating of the Borrower as reported by Standard & Poors, Inc.
becomes available.
"Asset Backed Debt" means debt associated with transactions under the
Receivables Purchase Agreement.
"Base Rate" means, on any particular date, the greater of (a) the Prime
Rate and (b) the Federal Funds Effective Rate plus fifty (50) Basis Points.
"Base Rate Advance" means an Advance for which interest is payable
based on the Base Rate as described in Section 2.02(a)(i) hereof.
"Basis Point" means one-one hundredth of one percent (0.01%).
"Business Day" or "Banking Day" a day which is not (a) a Saturday,
Sunday or legal holiday on which banking institutions in the State of Indiana or
the city in which the office of the Agent is located is authorized to remain
closed, or (b) a day on which the New York Stock Exchange is closed. For the
Agent, a "Business Day" ends at 2:00 P.M. Eastern Standard Time, and all
business transacted after such time on any particular day shall be deemed to
have been transacted as of the next Business Day.
"Closing Date" means the date of execution of this Agreement.
"Commitment" means for each Bank the obligation to make available the
amount under the Revolving Credit set forth opposite its name in Section 2.01.
"Competitive Bid" means an offer by a Bank to make a Competitive Bid
Advance pursuant to Section 2.04 hereof in the form of Exhibit "A" attached to
this Agreement.
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<PAGE> 3
"Competitive Bid Advance" means an advance made by a Bank described in
Section 2.04 hereof.
"Competitive Bid Facility" means the credit facility described in
Section 2.04 hereof.
"Competitive Bid Rate" shall mean, as to any Competitive Bid made by a
Bank pursuant to Section 2.04(b) hereof, the rate of interest per annum (rounded
to the nearest 1/100th of 1%) offered for each such Competitive Bid Advance.
"Competitive Bid Request" means a request by Borrower made pursuant to
Section 2.04 hereof in the form of Exhibit "B" attached to this Agreement.
"Competitive Bid Request by Agent" means a request made by Agent made
pursuant to Section 2.04 hereof in the form of Exhibit "C" attached to this
Agreement.
"Competitive Bid Interest Period" means, for each Competitive Bid
Advance, the period commencing on the date of such Advance and ending on the
earlier of one month, two months, three months or six months thereafter
associated with a LIBOR Rate, as requested by the Borrower in the Competitive
Bid Request, or (b) the Termination Date; provided, however, that the last day
of each Competitive Bid Interest Period shall be determined in accordance with
the practices of the London interbank market or the certificate of deposit
dealers, as appropriate and applicable, as from time to time in effect when the
Competitive Bid Rate is based on LIBOR Rate.
"Competitive Loan Note" means the promissory notes of the Borrower in
favor of each Bank in the form of Exhibits "D-1" through "D-7" attached to this
Agreement, as amended, replaced, supplemented, or modified from time to time,
and "Competitive Loan Note" means any one of such Notes.
"Consolidated" or "Consolidating" means: (a) when used herein with
reference to financial statements, ratios, assets or liabilities, that any
calculations have been made by consolidating the assets and liabilities of the
Borrower and its consolidated Subsidiaries after eliminating all intercompany
items and making such adjustments as required by GAAP; and (b) when used herein
with reference to a Subsidiary of the Borrower, a Subsidiary whose financial
statements have been or, in accordance with GAAP, are required to be, presented
together on a consolidated basis with those of the Borrower.
"Default" and "Event of Default" means any of the events specified in
Article VIII hereof, whether or not any requirement for the giving of notice,
the lapse of time, or both, or any other condition, has been satisfied.
"Dollars" and "$" shall mean legal tender of the United States of
America.
"EBITDA" means the Borrower's (on a FIFO basis) earnings before
interest expense, taxes, depreciation and amortization expense excluding any
one-time gains or losses from asset dispositions; provided, however, that such
amount shall exclude any earnings and expenses attributable to Priority
Healthcare Corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
all of the rules and regulations promulgated pursuant thereto, as amended from
time to time.
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<PAGE> 4
"Eurocurrency" means any currency other than United States dollars
which is freely transferable and freely convertible into United States dollars.
"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 on such day, 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 any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m.,
Indianapolis, Indiana time on such day on such transactions received by the
Agent from three (3) federal funds brokers of recognized standing selected by
the Agent in its sole discretion.
"Fiscal Year"' means a year commencing January 1 and ending December
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"Hazardous Material" means and includes any hazardous, toxic or
dangerous waste, substance or material defined as such in or for the purpose of
the Comprehensive Environmental Response, Compensation and Liability Act, the
Toxic Substance Control Act, any so-called "Superfund" or "Superlien" law, or
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order, decree or other requirement of any governmental authority
regulating, relating to, or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste or material, as now or at any
time hereafter in effect.
"Indebtedness" means as to any Person (a) all obligations of such
Person (including without limitation all fees, costs or unpaid accrued interest)
for or with respect to borrowed money or for the deferred purchase price of
property or services, (b) all obligations of such Person created or arising
under any conditional sale or other title retention agreement with respect to
any property acquired by such Person and all obligations created or arising
under such agreement even though the rights and remedies of the seller or lender
thereunder are limited to repossession or sale of such property in the event of
default, (c) all obligations of such Person under leases which shall have been
or should be recorded as capitalized leases in accordance with GAAP, (d) all
guarantees and other obligations (contingent or otherwise) of such Person to
assure a creditor against loss (including, without limitation, letters of
responsibility or comfort letters, arrangements to purchase or repurchase
property or obligations, pay for property, goods or services whether or not
delivered or rendered, maintain working capital, equity capital or other
financial statement condition of, or lend or contribute to or invest in, any
such Person) in respect of obligations of any other Person; (e) all endorsements
of such Person (other than in the case of instruments for deposit or collection
in the ordinary course of business); (f) all obligations of such Person for
extensions of credit including the face amount of letters of credit to or on
behalf of such Person, whether or not representing obligations for borrowed
money; and (g) all obligations or indebtedness described in clauses (a) through
(f) secured by a Lien on any property owned by such Person, whether or not such
Person has assumed or become liable for the payment thereof.
"Independent Public Accountant" means Price Waterhouse or other public
accounting firm of national reputation selected by the Borrower and acceptable
to the Majority Banks.
"Interest Expense Coverage Ratio" means the ratio of net income
(excluding all extraordinary gains and losses and without giving effect to FASB
106 and excluding any net income attributable to Priority Healthcare
Corporation), plus income tax and interest expense (including the allowance for
interest used in computing net
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<PAGE> 5
lease rental payments under financing leases) for such period over interest
payments due on all indebtedness during such period (including the allowance for
interest used in computing net lease rental payments under financing leases),
all determined on a Consolidated basis.
"Investment" means (a) any loan, advance, guarantee, extension of
credit (other than in the ordinary course of business to trade customers) or
contribution of capital to any Person or the purchase of any Person s notes,
stock, bonds or other securities, (b) advances to employees of a Person other
than in the ordinary course of business for the purpose of defraying travel,
relocation or business expenses, and (c) any contribution of capital or property
or services contributed or committed to be contributed by a Person in connection
with the purchase of debt or equity or other ownership interests.
"Lending Installation" means, with respect to a Bank or the Agent, the
office, branch, subsidiary or Affiliate of such Bank or the Agent listed on the
signature pages hereof or on a schedule or otherwise selected by such Bank or
the Agent pursuant to Section 2.20 hereof.
"LIBOR Advance" means an Advance for which interest is payable based on
LIBOR as described in Section 2.02(a)(ii) hereof.
"LIBOR Interest Period" means, with respect to each LIBOR Advance, each
consecutive one, two, three or six month period effective as of the first day of
each LIBOR Interest Period and ending on the earlier of the (A) last day of each
LIBOR Interest Period and (B) the Termination Date; provided that if any LIBOR
Interest Period is scheduled to end on a date for which there is no numerical
equivalent to the date on which the LIBOR Interest Period commenced, then it
shall end instead on the last day of such calendar month.
"LIBOR Rate" means the offered rate for U.S. Dollar deposits of not
less than $1,000,000.00 for a period of time equal to each LIBOR Interest Period
as of 11:00 A.M. City of London, England time two (2) London Business Days prior
to the first date of each LIBOR Interest Period of the applicable Note as shown
on the display designated as "British Bankers Assoc. Interest Settlement Rates"
by Bloomberg, or such other electronic publisher as may be reasonably selected
by the Agent if Bloomberg's services are no longer available for the purpose of
displaying such rate. If such rate is not available on Bloomberg then such
offered rate shall be otherwise independently determined by the Agent from an
alternate, substantially similar independent source available to Bank or shall
be calculated by the Agent by a substantially similar methodology as that
theretofore used to determine such offered rate in Bloomberg. Each determination
of LIBOR made by the Agent in accordance with this paragraph shall be conclusive
except in the case of demonstrative or manifest error.
"Lien" means any mortgage, pledge, assignment, security interest,
encumbrance, lien (statutory or other) or charge or preferential arrangement of
any kind (including without limitation any agreement to provide any of the
foregoing), any conditional sale or other title retention agreement or any lease
in the nature thereof, or any filing or agreement to file a financing statement
under the Uniform Commercial Code or comparable law to evidence or perfect any
such lien or security interest.
"Loan Documents" means, collectively, this Agreement, the Notes and any
other documents evidencing or securing the Obligations, as any such documents
may be amended, modified, restructured or replaced from time to time.
"Loans" means the Revolving Credit, the Swing Line and the Competitive
Bid Facility, together with all renewals and extensions thereof.
-5-
<PAGE> 6
"London Business Day"means any day other than a Saturday, Sunday or a
day on which banking institutions are generally authorized or obligated by law
or executive order to close in the City of London, England.
"Majority Banks" means Banks whose Pro Rata shares, in the aggregate,
of the Aggregate Commitment are greater than sixty-six and two-thirds percent
(66-2/3%); provided, however, that if any of the Banks shall have failed to fund
its Pro Rata share of any Advance requested by the Borrower, which such Banks
are obligated to fund under the terms of this Agreement and any such failure has
not been cured, then for so long as such failure continues, "Majority Banks"
means Banks (excluding all Banks whose failure to fund their respective Pro Rata
share of such Advance has not been so cured) whose Pro Rata shares of the
Aggregate Commitment represent greater than sixty-six and two-thirds percent
(66-2/3%) of the aggregate Pro Rata shares of such Banks.
"Margin Stock" has the meaning ascribed to it in Regulation U of the
Board of Governors of the Federal Reserve System.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, results of operations, properties,
liabilities or prospects of the Borrower and its Subsidiaries, considered as a
whole.
"Maturity Date" means, with respect to a LIBOR Advance, the last day of
the corresponding LIBOR Interest Period, and with respect to a Base Rate Advance
or a Swing Line Advance, the Termination Date.
"Net Income" means, with reference to any period, the net income (or
loss) of the Borrower and its Consolidated Subsidiaries computed for such period
on a consolidated basis consistently applied, in accordance with GAAP.
"Net Worth" means total assets minus total liabilities of the Borrower
and its Consolidated Subsidiaries, computed on a consolidated basis consistently
applied, in accordance with GAAP.
"Note" or "Notes" means a Revolving Note, a Competitive Loan Note or
the Swing Line Note, as the context requires, and in the plural refers to two or
more of such Notes, collectively.
"Obligations" means (i) all obligations, Indebtedness and liabilities
of the Borrower under the Loan Documents, whether now or hereafter owing to the
Banks, and (ii) all obligations or other liabilities regarding a cap, floor or
collar, forward rate, future rate, asset swap or index, price or market linked
transaction or agreement, other exchange or rate protection transaction
agreement, other similar transaction (however designated) or any combination
thereof or any option with respect thereto executed by the Borrower for the
purpose of moderating interest rate fluctuations.
"Original Agreement" has the meaning set forth in this Agreement's
preamble.
"PBGC" means the Pension Benefit Guaranty Corporation created under
Section 4002(a) of ERISA or any successor thereto.
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<PAGE> 7
"Permitted Liens" means:
(a) Liens for taxes not yet due or which are being actively contested
in good faith by appropriate proceedings (in a manner sufficient to prevent
enforcement of the matter under contest) as to which adequate reserves have been
set aside in an amount determined in accordance with GAAP;
(b) Other Liens incidental to the conduct of the business of the
Borrower and its Consolidated Subsidiaries or the ownership of their respective
properties and assets which were not incurred in connection with the incurring
of Indebtedness, and which do not materially detract from the value of such
property or assets or impair the use thereof in the operation of the Borrower's
and its Subsidiaries' business;
(c) Liens on property or assets of a Subsidiary to secure the
obligations of such Subsidiary to the Borrower or to another Subsidiary; and
(d) Liens conveyed simultaneously or hereafter by the Borrower to the
Agent for the benefit of the Banks to secure the Obligations.
(e) The transfer of an interest in accounts and notes receivable which
is permitted under Section 7.04(e) hereof.
"Person" means an individual, a corporation, a partnership, an
association, a trust, a joint venture or any other entity or organization,
including a governmental or political subdivision or an agent or instrumentality
thereof, or other entity of any kind.
"Plan" means any employee pension benefit plan maintained or
contributed to by the Borrower or any of its Subsidiaries or by any trade or
business (whether or not incorporated) under common control with. the Borrower
or any of its Subsidiaries as defined in Section 4001(b) of ERISA and insured by
the PBGC under Title IV of ERISA.
"Prepayment Premium" means the excess, if any, as determined by the
Agent of: (i) the present value at the time of prepayment of the interest
payments which would have been payable on account of an amount prepaid from the
date of prepayment until the end of the period during which interest would have
accrued at a LIBOR Rate but for prepayment over (ii) the present value at the
time of prepayment of interest payments calculated at the rate (the
"Reinvestment Rate") which the Agent then estimates each Bank would receive
upon reinvesting the principal amount of the prepayment in an obligation which
presents a credit risk substantially similar (as determined in accordance with
the commercial credit rating system then used by the Agent) to that which is
then presented by the Loan for a period approximately equal to the balance of
the period during which interest would accrue on the portion of the Loan
prepaid at a LIBOR Rate, but for prepayment. The discount rate used by the
Agent in determining such present values shall be the Reinvestment Rate.
"Prime Rate" means a variable per annum interest rate equal at all
times to the rate of interest established and quoted by the Agent as the Prime
Rate, such rate to change contemporaneously with each change in such established
and quoted rate, provided that it is understood that the Prime Rate shall not
necessarily be representative of the rate of interest actually charged by the
Agent on any loan or class of loans.
"Pro Rata" means (a) with respect to each Bank's share of all Advances
under the Revolving Credit and all other amounts to be disbursed or advanced by
such Bank under the Revolving Credit, including but not limited to amounts to be
disbursed pursuant to Section 9.06 hereof, such Bank's ratable share of such
amount determined as the proportion that such Bank's Commitment bears to the
Aggregate Commitment of all Banks; and (b) with
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<PAGE> 8
respect to each Bank's share of all payments of principal, interest, and fees on
the Revolving Credit to be received by such Bank, such Bank's ratable share of
such amount determined as the percentage of the aggregate unpaid principal
amount of all Advances under the Revolving Credit funded by such Bank, or if
there are no Advances under the Revolving Credit outstanding, the proportion
that such Bank's Commitment bears to the Aggregate Commitment of all of the
Banks; and (c) with respect to each Bank's share of all payments of principal
and interest on the Competitive Bid Facility to be received by such Bank, such
Bank's ratable share of such amount determined as the percentage of the
aggregate unpaid principal amount of all Competitive Bid Advances under the
Competitive Bid Facility funded by such Bank.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement dated as of December 28, 1998 among Bindley Western Funding
Corporation, Falcon Asset Securitization Corporation, The First National Bank of
Chicago, as agent and the investors who become parties thereto, as the same may
be amended from time to time.
"Reinvestment Rate" is used as defined in the text of the definition of
"Prepayment Premium" in this Section.
"Reportable Events" has the meaning ascribed in ERISA.
"Reserve Percentage" for each day during a LIBOR Interest Period is
that percentage (expressed as a decimal) which is in effect on such day, as
prescribed under Regulation D by the Board of Governors of the Federal Reserve
System (or any successor) for determining the reserve requirement for a member
bank of the Federal Reserve System (or any successor) on non-personal time
deposits of $100,000.00 or more having a maturity comparable to the maturity of
such Eurocurrency liabilities with a maturity comparable to the maturity of such
LIBOR Interest Period, as the case may be.
"Revolving Credit" means the credit facility described in Section 2.01.
"Revolving Note" means each promissory note to be executed by the
Borrower in favor of each Bank in the form of Exhibits "E-1" through "E-7"
attached hereto, as amended, replaced, supplemented or modified from time to
time.
"Subordinated Debt" means all Indebtedness of the Borrower and its
Consolidated Subsidiaries which is subordinated to the Indebtedness of the
Borrower and its Consolidated Subsidiaries to the Banks under such terms that
such Indebtedness is, in the judgment of all of the Banks, functionally the
equivalent of shareholders' equity in relation to the Borrower's Indebtedness to
the Banks.
"Subsidiary" as to any Person means any corporation or other business
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or other ownership interests having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation or other business
entity are at the time owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person.
"Swing Line" means the credit facility described in Section 2.05
hereof.
"Swing Line Advance" means a loan made available to the Borrower by the
Swing Line Bank pursuant to Section 2.05 hereof.
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<PAGE> 9
"Swing Line Bank" means NBD Bank or any other lender as a successor
Swing Line Bank.
"Swing Line Commitment" means the obligation of the Swing Line Bank to
make Swing Line Advances up to a maximum of the lesser of (i) Twenty Million and
No/100 Dollars ($20,000,000.00) and (ii) the Aggregate Commitments less the
outstanding principal balance under the Revolving Credit and the Competitive Bid
Facility.
"Swing Line Note" means a promissory note, in substantially the form of
Exhibit B attached hereto, duly executed by the Borrower and payable to the
order of the Swing Line Bank in the amount of its Swing Line Commitment, as
amended, replaced, supplemented or modified from time to time.
"Termination Date" means the earlier to occur of (a) December 27, 1999,
as such date may hereafter be extended upon the mutual agreement of the Borrower
and all of the Banks in their sole discretion, and (b) the date on which the
Loans are terminated, accelerated or both pursuant to Article VIII hereof.
"Total Debt" means all outstandings for borrowed money exclusive of the
Asset Backed Debt outstandings.
"Transfer Agreements" means the Transfer Agreement dated as of December
28, 1998, between Special Services Company and the Borrower and the Transfer
Agreement dated as of December 28, 1998 between the Borrower and Bindley Western
Funding Corporation in connection with the Receivables Purchase Agreement, as
the same may be amended from time to time.
1.02 Financial Standards. All accounting terms used herein and not
expressly defined in this Agreement shall (unless otherwise expressly indicated)
have the respective meanings given to them in accordance with GAAP. All
financial computations made under this Agreement for the purpose of determining
compliance with the financial requirements of this Agreement shall be made, and
all financial information required under this Agreement shall be prepared, in
accordance with GAAP, as in effect on the Closing Date, consistently applied.
All computations made under this Agreement for the purpose of determining
compliance with the financial covenants herein shall be made on a Consolidated
basis.
ARTICLE II
THE CREDITS
2.01 Revolving Credit. Subject to the terms and conditions hereof,
including but not limited to the limitation stated in this Section 2.01 below
and Section 2.05(a) hereof, each Bank severally agrees to make Advances
(collectively, the "Revolving Credit") to the Borrower at any time and from time
to time on and after the date hereof to and including the Termination Date in an
aggregate principal amount at any one time outstanding not to exceed the Bank's
Commitment set forth opposite such Bank's name below:
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<PAGE> 10
<TABLE>
<CAPTION>
Amount of Percentage of
Bank Commitment Aggregate Commitment
---- ---------- --------------------
<S> <C> <C>
NBD Bank, N.A. $ 37,500,000.00 21.490%
NationsBank, N.A. $ 22,000,000.00 12.607%
KeyBank National Association $ 31,000,000.00 17.765%
Suntrust Bank, Central Florida, N.A. $ 35,000,000.00 20.057%
National City Bank of Indiana $ 20,000,000.00 11.461%
Fifth Third Bank, Indiana $ 9,000,000.00 5.157%
The Northern Trust Company $ 20,000,000.00 11.461%
Total $ 174,500,000.00 100.00%
</TABLE>
The Revolving Credit is a revolving credit facility and subject to
Section 2.12 and within the limits of the Aggregate Commitment of the Banks, the
Borrower may prepay and reborrow as Borrower may elect, provided that (y) all
Advances must mature no later than the Termination Date, and (z) the aggregate
outstanding principal balance of the Revolving Credit, the Competitive Bid
Facility and the Swing Line may not exceed $174,500,000.00; provided, however,
notwithstanding any terms contained in this Agreement or the Loan Documents to
the contrary, the availability under the Aggregate Commitment shall be
temporarily reduced from the Closing Date until the earlier of (y) notification
to the Borrower from NBD Bank or (z) March 30, 1999 to $162,500,000.00 and the
availability under each Bank's Commitment shall be pro ratably adjusted to
reflect such reduction in availability.
2.02 Interest and Principal.
(a) Each Advance under the Revolving Credit shall bear interest until
such Advance is paid in full at a rate per annum equal to, at the Borrower's
option: (i) the Base Rate plus the Applicable Spread; or (ii) the rate
determined by the Agent to be the LIBOR Rate for such LIBOR Interest Period plus
the Applicable Spread.
(b) The Borrower shall pay accrued interest on each Base Rate Advance
in arrears on the first Banking Day of each calendar month and on its Maturity
Date, with the first such payment due on the earlier of such date after the
respective Advance is made.
(c) The Borrower shall pay accrued interest on each LIBOR Advance on
the Maturity Date for such Advance, provided that if a LIBOR Interest Period is
six (6) months, accrued interest shall also be paid three (3) months following
the date of making such Advance and on the Maturity Date of such Advance.
Interest on LIBOR Advances shall be computed on the basis of a year of 360 days
and on actual days elapsed.
(d) Each Base Rate Advance shall be for such period as the Borrower
shall determine; provided, that no Base Rate Advance made hereunder may have a
Maturity Date after the Termination Date.
(e) The Borrower shall pay the principal of each Advance in full on its
Maturity Date unless the Borrower gives the Agent notice as provided in Section
2.03 that such Advance is to be renewed. Renewals of LIBOR Advances are subject
to Sections 2.10, 2.11, and 2.12 hereof. Subject to the provisions of Sections
2.03, 2.10, 2.11 and 2.12 hereof, on the Maturity Date of any Advance the
Borrower shall have the right to elect to have any outstanding Advance converted
into a different type of Advance provided for under the terms of this Agreement;
provided, that if no notice is given of the election of the Borrower to convert
or renew a LIBOR Advance on its respective Maturity Date under Section 2.03, the
Borrower shall have been deemed to have elected to convert to a Base Rate
Advance.
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(f) Each Advance shall be in an aggregate minimum amount of Five
Million Dollars ($5,000,000.00) with additional increments of One Million
Dollars ($1,000,000.00).
(g) The Borrower may not have more than seven (7) LIBOR Advances
outstanding at any one time.
2.03 Requests for Advances; Funding by Banks. (a) The Borrower shall
give the Agent at least three (3) Banking Days' irrevocable notice of each LIBOR
Advance or renewal thereof to be made hereunder, and same-day notice of each
Base Rate Advance to be made. Each such request ("Request") shall be
irrevocable, shall be received by the Agent by no later than 10:30 A.M.
Indianapolis, Indiana time on the date required hereunder, and shall specify the
date the Advance is to be made (which shall be a Banking Day), the type of
Advance, the tenor of the applicable LIBOR Interest Period, in the case of a
LIBOR Advance, and the amount of the Advance, which amount shall not exceed the
Aggregate Commitment of the Banks (subject to the limitations of Section 2.01).
Requests may be made by telephone and the Agent may rely on such telephonic
request as the act of the Borrower through its authorized representative. The
Borrower shall promptly confirm all telephonic requests in writing if the Agent
so requires. Upon receipt of each Request the Agent shall promptly notify each
Bank thereof. If Borrower fails to specify the type of Advance, it shall be
deemed to have selected a Base Rate Advance. If Borrower fails to specify the
length of any LIBOR Interest Period, it shall be deemed to have selected a LIBOR
Interest Period of one (1) month. Notwithstanding the foregoing, upon the
execution hereof the Borrower shall be deemed to have requested a Base Rate
Advance in the amount of the aggregate principal and accrued interest unpaid and
outstanding under the Original Agreement on the Closing Date unless the Borrower
gives the Agent notice otherwise of its Request for a LIBOR Advance on the
Closing Date. The proceeds of such Advance or Advances shall be automatically
applied by the Banks to the payment of all outstanding principal and accrued
interest under the Original Agreement.
(b) The Agent shall promptly notify each Bank upon receipt of a Request
for Advance from the Borrower specifying the portion of such Advance to be
funded by each Bank, the interest rate and the date of borrowing. Each Advance
or renewal thereof shall be made on a Pro Rata basis by the Banks and each
Bank's portion of each Advance shall be determined by application of the
percentage set forth opposite such Bank's name in Paragraph 2.01 to the total
amount of the Advance. Provided that each Bank is given the notice required in
this Section 2.04, each Bank agrees that it will make the funds which it is to
advance hereunder available to the Agent not later than 12:30 p.m. Indianapolis,
Indiana time on the date such Advance is to be made. The Agent will thereupon
advance to the Borrower the amount so received from the Banks unless the Agent
shall determine that any condition precedent applicable to the Advance set forth
in Sections 4.01, 4.02 or 4.03 shall not be fulfilled as of the date of such
Advance. All Advances will be made to the Borrower by a credit to Borrower's
account with the Agent, or to any account of the Borrower maintained by the
Borrower at a bank designated by the Borrower which is a wholly owned subsidiary
of BANK ONE CORPORATION and for which the Borrower has provided to the Agent a
draw down authorization. All notices (including Requests for Advances) sent by
the Borrower to the Agent and received by the Agent after 10:30 a.m.
Indianapolis, Indiana time (or such other time as is specified in any Section
hereof) on a Banking Day shall be deemed received on the next succeeding Banking
Day.
2.04 Competitive Bid Facility. In addition to the Revolving Credit and
the Swing Line, the Borrower may, as set forth in this Section, request the
Banks at any time prior to the Termination Date to make offers to make
Competitive Bid Advances to the Borrower. The aggregate principal amount at any
one time outstanding under the Competitive Bid Facility shall not exceed
$60,000,000.00, and in no event may the aggregate outstanding principal balances
of the Competitive Bid Facility, the Revolving Credit and the Swing Line exceed
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<PAGE> 12
174,500,000.00. The Banks may, but shall have no obligation to, make such offers
and the Borrower may, but shall have no obligation to, accept any such offers in
the manner set forth in this Section. Each utilization of the Competitive Bid
Facility by the Borrower shall serve to reduce the available and unused
Aggregate Commitment under the Revolving Credit; provided, that neither the Pro
Rata share of each Bank of the Aggregate Commitment nor the amount of each
Bank's Commitment shall be altered by virtue of any Bank financing a Competitive
Bid Advance.
(a) In order to request Competitive Bids, the Borrower shall hand
deliver, telex, or telecopy to the Agent a duly completed Competitive Bid
Request in the form of Exhibit "C" hereto, to be received by the Agent not later
than 12:00 P.M., Indianapolis, Indiana time, one (1) Banking Day before the
making of the proposed Competitive Bid Advance. A Competitive Bid Request that
does not conform substantially to the format of Exhibit "C" may be rejected in
the Agent's sole discretion, and the Agent shall promptly notify the Borrower of
such rejection by telex or telecopier. Such request shall in each case refer to
this Agreement and specify (i) the proposed date of such Advance (which shall be
a Banking Day), (ii) and the aggregate principal amount thereof (which shall not
be less than $10,000,000.00 or greater than the Aggregate Commitment and shall
be an integral multiple of $1,000,000.00), and (iii) the Competitive Bid
Interest Period with respect thereto (which may not end after the Termination
Date). Promptly after its receipt of a Competitive Bid Request that is not
rejected as aforesaid, but in any event no later than 3:30 P.M. Indianapolis,
Indiana time on the date of receipt of the Competitive Bid Request, the Agent
shall invite by telex or telecopier (in the form set forth in Exhibit "B"
hereto) the Banks to bid, on the terms and conditions of this Agreement, to make
a Competitive Bid Advance pursuant to such Competitive Bid Request.
(b) Each Bank may, in its sole discretion, make a Competitive Bid to
the Borrower responsive to the Competitive Bid Request. Each Competitive Bid by
a Bank must be received by the Agent via telex or telecopier, in the form of
Exhibit "A" not later than 10:00 A.M., Indianapolis, Indiana time, on the
proposed date of the making of the Competitive Bid Advance, provided that NBD
Bank's Competitive Bid must be received by the Agent no later than 9:30 a.m.
Indianapolis, Indiana time on such date. Competitive Bids that do not conform
substantially to the format of Exhibit "A" may be rejected by the Agent after
conferring with, and upon the instruction of, the Borrower, and the Agent shall
notify the Bank making such nonconforming bid of such rejection as soon as
practicable. Each Competitive Bid shall refer to this Agreement and specify (i)
the principal amount (which shall be in an minimum principal amount of
$10,000,000.00 and in an integral multiple of $1,000,000.00 and which may equal
(but not exceed) the entire principal amount of the Competitive Bid Advance
requested by the Borrower) of the portion of the Competitive Bid Advance that
the Bank is willing to make to the Borrower and (ii) the Competitive Bid Rate at
which the Bank is prepared to make the Competitive Bid Advance. If any Bank
shall elect not to make a Competitive Bid, such Bank shall so notify the Agent
via telex or telecopier not later than 10:30 A.M., Indianapolis, Indiana time,
on the Banking Day of the making of the proposed Competitive Bid Advance;
provided, however, that failure by any Bank to give such notice shall not cause
such Bank to be obligated to make any Competitive Bid Advance as part of such
Competitive Bid Facility. A Competitive Bid submitted by a Bank pursuant to this
Section shall be irrevocable.
(c) The Agent shall promptly notify the Borrower no later than 11:00
A.M. Indianapolis, Indiana time on the same day as it receives the Competitive
Bids by telex or telecopier of all the Competitive Bids made, the Competitive
Bid Rate and the principal amount of the portion of each Competitive Bid Advance
in respect of which a Competitive Bid was made and the identity of the Bank that
made each bid. The Agent shall send a copy of all Competitive Bids to the
Borrower for its records as soon as practicable after completion of the bidding
process set forth in this Section 2.04.
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(d) The Borrower may in its sole and absolute discretion, subject only
to the provisions of this subsection (d), accept or reject any Competitive Bid
referred to in subsection (c) above. The Borrower shall notify the Agent by
telex or telecopier whether and to what extent it has decided to accept or
reject any of or all the bids referred to in subsection (c) above, not later
than 12:00 P.M., Indianapolis, Indiana time, on the Banking Day of the proposed
Competitive Bid Advance; provided, however, that (i) the failure by the Borrower
to give such notice shall be deemed to be a rejection of all the bids referred
to in subsection (c) above, (ii) the Borrower shall not accept a bid made at a
particular Competitive Bid Rate if the Borrower has decided to reject a bid made
at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive
Bids accepted by the Borrower shall not exceed the principal amount specified in
the Competitive Bid Request, (iv) if the Borrower shall accept a bid or bids
made at a particular Competitive Bid Rate but the amount of such bid or bids
shall cause the total amount of bids to be accepted by the Borrower to exceed
the amount specified in the Competitive Bid Request, then the Borrower shall
accept a portion of the bid or bids in an amount not to exceed the amount
specified In the Competitive Bid Request; (v) if the Borrower shall accept bids
made at a particular Competitive Bid Rate but the aggregate amount of bids made
at such rate shall exceed the amount specified in the Competitive Bid Request,
then the Borrower shall accept pro rata (based on the aggregate principal amount
of such bids) a portion of each bid made at such Competitive Bid Rate. A notice
given by the Borrower pursuant to this subsection (d) shall be irrevocable.
(e) The Agent shall notify each bidding Bank no later than 1:00 P.M.
Indianapolis, Indiana time whether or not its Competitive Bid has been accepted
(and if so, in what amount and at what Competitive Bid Rate) by telex or
telecopier, and each successful bidder will thereupon become bound, subject to
the other applicable conditions hereof, to make the Competitive Bid Advance in
respect of which its bid has been accepted no later than 2:00 P.M. Indianapolis,
Indiana time, on the same Banking Day.
(f) A Competitive Bid Request shall not be made within ten (10) Banking
Days of the date of any other Competitive Bid Request, unless the Borrower and
the Agent shall mutually agree otherwise.
(g) All Competitive Bid Advances shall reduce the Aggregate Commitment,
and at no time shall the sum of the aggregate outstanding principal balances of
the Revolving Credit, the Swing Line and the Competitive Bid Facility exceed
$174,500,000.00.
(h) All Competitive Bid Advances made by each Bank shall be evidenced
by a Competitive Loan Note payable to the order of such Bank and executed by the
Borrower prior to the disbursement of the Competitive Bid Advance in the amount
of such Competitive Bid Advance.
2.05 Swing Line.
(a) Amount of Swing Line Advances. Upon the satisfaction of the
conditions precedent set forth in Section 4.01 and 4.02 hereof from and
including the date of this Agreement and prior to the Termination Date, the
Swing Line Bank agrees, on the terms and conditions set forth in this Agreement,
to make Swing Line Advances to the Borrower from time to time, in Dollars, in an
amount not to exceed the Swing Line Commitment; provided, however, at no time
shall the outstanding principal balance under the Revolving Credit, the
Competitive Bid Facility and the Swing Line exceed the Aggregate Commitment.
Subject to the terms of this Agreement, the Borrower may borrow, repay and
reborrow Swing Line Advances at any time prior to the Termination Date.
(b) Borrowing Notice. The Borrower shall deliver to both the Agent and
the Swing Line Bank a borrowing notice ("Request") signed by it, not later than
1:00 p.m. Indianapolis time on the proposed date of disbursement of a Swing Line
Advance ("Borrowing Date") of each Swing Line Advance, specifying (i) the
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applicable Borrowing Date (which shall be a Business Day), and (ii) the
aggregate amount of the requested Swing Line Advance which shall be an amount
not less than One Hundred Thousand and No/100 Dollars ($100,000.00), and (iii)
the Borrower's interest rate election with respect to such Advance.
(c) Making of Swing Line Advances; Interest. Provided that the Swing
Line Bank and the Agent are given the notice required in Section 2.05 (b), then
not later than 3:00 p.m. Indianapolis, Indiana time on the applicable Borrowing
Date, the Swing Line Bank shall make available its Swing Line Advance, in funds
immediately available in Indianapolis to the Agent at its address specified
pursuant to Article X hereof. The Agent will promptly make the funds so received
from the Swing Line Bank available to the Borrower at the Agent's aforesaid
address. Each Swing Line Advance shall bear interest until such Swing Line
Advance is paid in full at a per annum rate equal to, at the Borrower's option:
(i) the Base Rate, (ii) the Federal Funds Effective Rate plus the Applicable
Spread, or (iii) such other rate as may be agreed upon between the Swing Line
Bank and the Borrower prior to the disbursement of such Swing Line Advance.
(d) Repayment of Swing Line Advances. The Swing Line Advances shall be
evidenced by the Swing Line Note. The Borrower may at any time pay, without
penalty or premium, all outstanding Swing Line Advances or, in a minimum amount
and increments of One Hundred Thousand and No/100 Dollars ($100,000.00), any
portion of the outstanding Swing Line Advances, upon notice to the Agent and the
Swing Line Bank. In addition, the Agent shall (i) at any time upon the request
of the Swing Line Bank after a Default or an Event of Default, or (ii) at any
time necessary to insure that the Commitment of the Swing Line Bank will not be
exceeded, require each Bank (including the Swing Line Bank) to make an Advance
in the amount of such Bank's Pro Rata Share of such Swing Line Advance, for the
purpose of repaying such Swing Line Advance. Not later than 2:00 p.m.
Indianapolis time on the date of any notice received pursuant to this Section
2.05(d), each Bank shall make available its required Advance, in funds
immediately available in Indianapolis to the Agent at its address specified
pursuant to Article X hereof. Advances made pursuant to this Section 2.05(d)
shall initially be Base Rate Advances and thereafter may be continued as or
converted into LIBOR Advances in the manner provided in Section 2.01 and subject
to the other conditions and limitations therein set forth and set forth in this
Article II. Unless a Bank shall have notified the Swing Line Bank, prior to its
making any Swing Line Advance, that any applicable condition precedent set forth
in Sections 4.01 and 4.02 hereof had not then been satisfied, such Bank's
obligation to make Advances pursuant to this Section 2.05(d) to repay Swing Line
Advances shall be unconditional, continuing, irrevocable and absolute and shall
not be affected by any circumstances, including, without limitation, (a) any
set-off, counterclaim, recoupment, defense or other right which such Bank may
have against the Agent, the Swing Line Bank or any other Person, (b) the
occurrence of continuance of a Default, (c) any adverse change in the condition
(financial or otherwise) of the Borrower, or (d) any other circumstances,
happening or event whatsoever. In the event that any Bank fails to make payment
to the Agent of any amount due under this Section 2.05(d), the Agent shall be
entitled to receive, retain and apply against such obligation the principal and
interest otherwise payable to such Bank hereunder until the Agent receives such
payment from such Bank or such obligation is otherwise fully satisfied. In
addition to the foregoing, if for any reason any Bank fails to make payment to
the Agent of any amount due under this Section 2.05(d), such Bank shall be
deemed, at the option of the Agent, to have unconditionally and irrevocably
purchased from the Swing Line Bank, without recourse or warranty, an undivided
interest and participation in the applicable Swing Line Advance in the amount of
such Swing Line Advance required by such Bank hereunder, and such interest and
participation may be recovered from such Bank together with interest thereon at
the Federal Funds Rate for each day during the period commencing on the date of
demand and ending on the date such amount is received. On the Termination Date,
the Borrower shall repay in full the outstanding principal balance of the Swing
Line Advances.
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2.06 Evidence of Credit Extensions.
(a) Principal, interest and all other sums owing to the Banks under
this Agreement shall be evidenced by entries in records maintained by each Bank.
Each payment on and any other credits with respect to principal, interest, and
all other sums outstanding under this Agreement shall be evidenced by entries in
such records. All such entries shall be prima facie proof that such sums are
owing or that such payments have been made. The failure to so record any such
amount or any error in so recording any such amount shall not, however, limit or
otherwise affect the obligations of the Borrower hereunder or under any Note to
repay the principal amount of the Advances, the Competitive Bid Advances or
Swing Line Advances together with all interest accruing thereon.
(b) The Borrower agrees that it shall, from time to time at the request
of any Bank through the Agent, execute and deliver to such Bank a Note for all
or part of the outstanding principal amount of such Bank's portion of the
Revolving Credit and/or the Competitive Bid Facility, each such Note to be in
the principal amount determined by such Bank, to provide for the payment of
interest and principal as set forth in Section 2.02 and Section 2.04 hereof, and
to be in form and substance satisfactory to such Bank.
2.07 Fees.
For the period from the date of this Agreement, to but excluding the
Termination Date, the Borrower shall pay to the Agent for the account of each
Bank a facility fee equal to 18.5 Basis Points per annum calculated on the
Aggregate Commitment. Such fees shall be paid in advance with the first such
payment due on the date of this Agreement for the period from the date hereof
through March 31, 1999, and thereafter calculated on a quarterly basis and paid
in advance on the last Banking Day of each March, June, September and December,
beginning on March 31, 1999. The Agent may debit any demand deposit account of
the Borrower on the date such administrative or facility fees are due in payment
of such fees, without further authority, and the Agent shall promptly distribute
(i) to each Bank its Pro Rata share of each payment of the facility fee, and
(ii) to the Agent the amount of its administrative fee. Such fees shall be
calculated on the basis of a 360-day year and actual days elapsed. All fees
payable hereunder shall be non-refundable and deemed to be earned in full upon
payment, except in the event of a permanent reduction in the Aggregate
Commitments as contemplated in Section 2.15 hereof in which event Borrower shall
be entitled to a prorated refund of such fees. The Borrower also agrees to pay
to the Agent for the sole account of the Agent and First Chicago Capital
Markets, Inc. (the "Arranger") unless otherwise agreed between the Agent or the
Arranger and any Bank, the fees set forth in the Letter Agreement among the
Agent, the Arranger and the Borrower dated November 12, 1998, payable at the
times and in the amounts set forth therein.
2.08 Taxes. All payments and reimbursements required to be made
hereunder shall be made free and clear of and without deduction of any and all
taxes, fees or other charges of any nature whatsoever imposed by any taxing
authority, except such taxes as are imposed on or measured by a Bank's net
income by the jurisdiction or any political subdivision thereof in which such
Bank's principal office or actual lending branch is located. The Borrower shall
reimburse or compensate such Bank, upon demand by such Bank, for all costs
incurred, losses suffered or payments made in connection with the Loans or any
part thereof which costs, losses or payments are a result of any present or
future reserve, special deposit or similar requirement against assets of,
liabilities of, deposits with or for the account of or loans by such Bank,
imposed on such Bank or the offshore interbank market by any regulatory
authority, central bank or other authority, whether or not having the force of
law. If Borrower is prohibited by operation of law from (i) making payments
without deduction as provided in this Section, or (ii) paying, causing to be
paid, or reimbursing any Bank for the cost of, any and all taxes, duties, fees
or other charges as provided in this Section, then payments due to any such Bank
under this Agreement (and any Note required hereunder) shall be increased to
such amount which, after provision for such taxes, duties, fees or other
charges,
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is necessary to yield and remit to such Bank payments at the applicable rate
specified in Sections 2.02, 2.04 and 2.05. The Borrower shall provide evidence
that all applicable taxes imposed on the transaction contemplated by this
Agreement shall have been paid to the appropriate taxing authorities by delivery
to Agent of the official tax receipts or notarized copies of such receipts
within thirty (30) days after payment of any such tax.
2.09 Availability, Yield. With respect to the LIBOR Advances,
notwithstanding anything to the contrary contained herein, if at any time any
Bank in its discretion determines that there is a reasonable probability that
United States dollar deposits in the amount of any requested LIBOR Advance and
for a period equal to the LIBOR Interest Period for such Advance will not be
available in the offshore interbank market, or there is a reasonable probability
that the rate of interest at which such deposits will be available will not
accurately reflect the cost to such Bank of maintaining such LIBOR Advance
during such LIBOR Interest Period, such Bank shall promptly give notice thereof
to Agent who shall notify the Borrower and, unless the Borrower elects to
withdraw its request for borrowing on the date it receives such notice from such
Bank, Borrower shall be deemed to have requested a Base Rate Advance in lieu of
such LIBOR Advance.
2.10 Rate Not Ascertainable. Anything herein to the contrary
notwithstanding, if at any time the Agent shall determine (which determination
shall be binding and conclusive on all parties hereto) that by reason of
circumstances affecting the offshore interbank market, adequate and reasonable
means do not exist for ascertaining the applicable LIBOR Rate, then so long as
such circumstances shall continue (a) the Agent shall promptly give notice of
such determination to each Bank and the Borrower, (b) no Bank shall be under any
obligation to make or continue, or convert into LIBOR Advances, (c) any request
of the Borrower for LIBOR Advances (whether by continuation or conversion or
otherwise) shall be deemed a request for Base Rate Advances, and (d) the
Borrower shall, in the case of each outstanding LIBOR Advance, on the maturity
date of such Advance, either cause such Advance to be converted into a Base Rate
Advance or pay or prepay such advance in full (together with accrued interest
thereon).
2.11 Illegality. Notwithstanding anything to the contrary contained
herein, if at any time any Bank determines that any change in applicable law or
regulation or any interpretation thereof makes it unlawful for such Bank to make
or continue any LIBOR Advance, or to comply with its obligations hereunder in
respect of LIBOR Advances, such Bank shall give notice of the same to Agent and
Borrower, at which time the obligation of such Bank to lend on the basis of the
LIBOR Rate, as the case may be, shall terminate. If after consultation with
Borrower, such Bank determines that the effect of such change cannot reasonably
be mitigated, the Borrower shall, upon request of such Bank and subject to
Section 2.12, immediately prepay in full the outstanding LIBOR Rate Advances, as
the case may be, together with all interest accrued thereon to the date of
payment, and shall pay all other sums due such Bank in connection with such
LIBOR Rate Advances, provided, however, that Borrower may then elect to borrow
the sums being prepaid at the rate specified in Section 2.02(a)(i) or (iv)
hereof.
2.12 Prepayments. Voluntary prepayment prior to the expiration of the
applicable LIBOR Interest Period of all or any portion of a Loan on which
interest is accruing at a LIBOR Rate shall be subject to contemporaneous payment
of the Prepayment Premium if, at the time of prepayment, the Reinvestment Rate
is less than the LIBOR Rate at which interest accrues on the Loan. A Prepayment
Premium shall also be due and payable on prepayment of all or any portion of any
Loan prior to scheduled maturity because of acceleration of maturity on account
of an Event of Default if, at the time of acceleration of maturity, the
Reinvestment Rate is less than the applicable LIBOR Rate at which interest is
accruing on the Loan. If at the time of any voluntary or mandatory prepayment of
any portion of the principal of any Loan, interest accrues at both a LIBOR Rate
or Rates, and at a Base Rate on portions of the Loan, then any prepayment of
principal will be applied first to the
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portion of the Loan on which interest accrues at the Base Rate and next to the
portion or portions at which interest accrues at a LIBOR Rate, and if interest
accrues on the Loan at more than one LIBOR Rate, first to that portion or those
portions on which interest accrues at a rate or rates which results in no
Prepayment Premium or the lowest Prepayment Premium or Premiums. If Borrower
prepays all or any portion of a Loan bearing interest at a LIBOR Rate, provided
Borrower makes any such prepayment other than on the last day of a LIBOR
Interest Period, Borrower shall pay all accrued interest on the principal amount
prepaid with such prepayment and, in addition to any applicable Prepayment
Premium described above, shall also on demand reimburse each Bank and hold each
Bank harmless from all other losses and expenses incurred by such Bank as a
result of such prepayment, including, without limitation, any losses and
expenses arising from the liquidation or reemployment of deposits acquired to
fund or maintain the principal amount prepaid. Such reimbursement shall be
calculated as though such Bank funded the principal amount prepaid through the
purchase of U.S. Dollar deposits in the London, England interbank market having
a maturity corresponding to such LIBOR Interest Period and bearing an interest
rate equal to the LIBOR Rate for such LIBOR Interest Period, whether in fact
that is the case or not. Agent's determination of the amount of such
reimbursement shall be conclusive in the absence of manifest error.
2.13 Method of Payment; Mistakes.
(a) Each payment of principal, interest and other sums due under this
Agreement shall be made to the Agent without set-off or counterclaim in
immediately available funds on a Banking Day when due not later than 11:30 a.m.
Indianapolis time. All sums received after such time shall be deemed received on
the next Banking Day, and interest thereon shall be payable at the
then-applicable rate during such extension. Any payment due on a day that is not
a Banking Day shall be made on the next Banking Day, and interest thereon shall
be payable at the then-applicable rate during such extension.
(b) Payment of all sums under this Agreement shall be made by the
Borrower to the Agent for the account of the Banks, and the Agent shall promptly
distribute to each Bank its Pro Rata share of such payments in like funds as
received. Borrower agrees that Agent may debit Borrower's account with the
Agent, or any account of the Borrower maintained by the Borrower at a bank
designated by the Borrower which is a wholly owned subsidiary of BANK ONE
CORPORATION and for which the Borrower has provided to the Agent a draw down
authorization ("DDA Account") for payments due under this Agreement and the
Agent may credit the DDA Account with the amount of any Advance or Swing Line
Advance.
(c) Unless the Agent shall have been notified in writing by any Bank
prior to the date of an Advance that such Bank will not make available to the
Agent on such date such Bank's Pro Rata share of such Advance, the Agent may
(but shall not be required to) assume that such Bank has made such amount
available to the Agent on such date and, in reliance thereon, may make available
to Borrower a corresponding amount on behalf of such Bank. If such Bank
subsequently makes its Pro Rata share of an Advance available to the Agent, such
Bank shall pay to the Agent on demand an amount equal to the product of (i) the
applicable interest rate for such Advance from and including the date of the
Advance to but excluding the date such Bank's Pro Rata share of the Advance was
made available to the Agent (the "Out-of-Funds Period"), multiplied by (ii) an
amount equal to such Bank's Pro Rata share of the Advance, multiplied by (iii) a
fraction, the numerator of which is the number of days in the Out-of-Funds
Period and the denominator of which is 360. A certificate of the Agent submitted
to any Bank with respect to any amounts owing under this subsection (c) shall be
conclusive in the absence of manifest error. If such amount is not in fact made
available to the Agent by such Bank within one (1) Banking Day after the date of
an Advance, the Agent shall be entitled to recover such amount, with interest
thereon at the rate per annum then applicable to such Advance, on demand from
the Borrower.
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(d) Unless the Agent shall have been notified in writing by the
Borrower prior to any date on which a payment is due hereunder or under the
Notes that the Borrower will not make the required payment on such date, the
Agent may (but shall not be required to) assume that the Borrower will make such
payments to the Agent and, in reliance upon such assumption, may make available
to each Bank the amount due to it on such date. If such amount is not in fact
paid to the Agent by the Borrower within one (1) Banking Day after such payment
is due, the Agent shall be entitled to recover from each Bank the amount paid to
it by the Agent, together with interest thereon in the amount equal to the
product of: (i) the daily average federal funds rate (i.e. 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 by
the Federal Reserve Bank of Chicago) from and including the payment date to but
excluding the date the payment was made available to the Agent (the
"Out-of-Funds Period"), multiplied by (ii) an amount equal to such Bank's Pro
Rata share of the total amount paid by the Agent, multiplied by (iii) a
fraction, the numerator of which is the number of days in the Out-of-Funds
Period and the denominator of which is 360. A certificate of the Agent submitted
to any Bank with respect to any amounts owing under this subsection (d) shall be
conclusive in the absence of manifest error.
(e) Neither the Agent nor any Bank which continues to make its Pro Rata
share of Advances available to the Borrower shall have any liability to the
Borrower for the actions of a Bank which does not make its Pro Rata share of
Advances available, and the Borrower's sole remedy for damages for the refusal
of a Bank to lend its Pro Rata share of Advances, if any, shall be for actual
damages from such non-performing Bank only.
2.14. Capital Reimbursement. (a) If either (i) the introduction or
implementation of, or any change in, or in the interpretation of, any law, rule
or regulation, or (ii) the introduction or implementation of or compliance with
any request, directive or guideline from any central bank or other governmental
authority (whether or not having the force of law) (A) affects or would affect
the amount of capital required or expected to be maintained by any Bank or any
corporation controlling any Bank or (B) results in the imposition, modification
or applicability of any reserve, special deposit, assessment or similar
requirement (other than the Reserve Percentage) relating to any extensions of
credit or other assets of, or any deposits with or other liabilities or
commitments of, any Bank (or its Lending Installation), including the Commitment
of any Bank (or its applicable Lending Installation), then, upon demand by such
Bank the Borrower will pay to the Agent for benefit of such Bank, from time to
time as specified by such Bank, such additional amount or amounts which such
Bank shall determine to be appropriate to compensate such Bank or any
corporation controlling such Bank in light of such circumstances, to the extent
that such Bank reasonably determines that the amount of any such capital would
be increased or the rate of return on any such capital would be reduced by, or
in whole or in part based on the existence of, the face amount of such Bank's
Pro Rata share of the Loans or such Bank's Commitment under this Agreement.
(b) Any amount otherwise payable by the Borrower to a Bank under the
foregoing subsection (a) (hereinafter referred to as the "Capital Cost") shall
be reduced by the remainder of (i) that portion of the Capital Cost determined
by such Bank to be allocable to the amount of any interest or participation
transferred by such Bank in such Bank's Advance, Competitive Bid Advance, Swing
Line Advance or Commitment under this Agreement, minus (ii) the sum of (A) the
amount of the Capital Cost which such Bank has agreed or is otherwise obligated
to pay to the holder of such interest or participation as determined by such
Bank, plus (B) the amount such Bank shall determine to be appropriate to
compensate such Bank or any corporation controlling such Bank to the extent that
such Bank reasonably determines that the capital required or expected to be
maintained by such Bank, or by any corporation controlling such Bank, will be
increased, in whole or in part, based upon the existence of such interest or
participation so transferred.
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(c) Notwithstanding the foregoing, any amount payable with respect to
Capital Cost as determined under subsections (a) and (b) above shall be payable
by the Borrower to the relevant Bank (the "Reimbursed Bank") within sixty (60)
days after demand therefor, which demand shall be accompanied by the calculation
of the Capital Cost in reasonable detail, with a copy to the Agent. Within such
sixty (60) day period, additionally, the Borrower may, in its sole option,
obtain a new lender to replace the participation of the Reimbursed Bank in this
Agreement. Upon replacing the Reimbursed Bank with a new lender, the Borrower
shall pay the Reimbursed Bank the outstanding principal amount of the Reimbursed
Bank's Advances, together with accrued interest thereon, together with the
Capital Cost demanded by the Reimbursed Bank. Thereafter, the Reimbursed Bank
shall no longer be a party to this Agreement, and the Borrower shall have no
further obligation hereunder with respect to the Reimbursed Bank.
2.15 Reduction of Aggregate Commitment. The Borrower shall have the
right, upon at least three (3) Banking Days' notice to the Agent, to reduce in
increments of not less than $5,000,000.00 the unused portion of the Aggregate
Commitment, provided that no reduction shall be permitted if, after giving
effect thereto, and to any prepayment made therewith, the outstanding and unpaid
principal amount of the Loans shall exceed the Aggregate Commitment. Any
reduction in part of the unused portion of the Aggregate Commitment shall be
made in the proportion that each Bank's Commitment bears to the total amount of
the Aggregate Commitment. The Aggregate Commitment, once reduced or terminated,
may not be reinstated.
2.16 Calculation of Interest. Except as expressly provided otherwise
herein, interest on each of the Loans shall be calculated on the basis that an
entire year's interest is earned in 360 days.
2.17 Manner of Payment - Application. Unless otherwise agreed to, in
writing, or otherwise required by applicable law, payments will be applied first
to accrued, unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs, late charges and other charges, provided, however, upon
delinquency or other Default, Banks reserve the right to apply payments among
principal, interest, late charges, collection costs and other charges at their
discretion. All prepayments shall be applied to the indebtedness owing hereunder
in such order and manner as Agent may from time to time determine in its sole
discretion.
2.18 Late Payment. If payment is ten (10) days or more late, Borrower
will be charged Five Percent (5.0%) of the regularly scheduled payment or
$25.00, whichever is greater, up to the maximum amount of $250.00 per late
charge.
2.19 Default Rate of Interest. Upon Default, including failure to pay
upon final maturity, Agent, at its option may, or if requested by the Majority
Banks, shall also, if permitted under applicable law, do one or both of the
following: (a) increase the applicable interest rate on the respective Note by
three percentage points (3.0%), and (b) add any unpaid accrued interest to
principal and such sum will bear interest therefrom until paid at the rate
provided herein or in the respective Note (including any increased rate). The
interest rate will not exceed the maximum rate permitted by applicable law.
2.20 Lending Installations. Each Bank may book its Loans at any Lending
Installation selected by such Bank and may change its Lending Installation from
time to time. 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 Bank for the benefit of any such Lending Installation. Each Bank may, by
written notice to the Agent and the Borrower in accordance with Section 10.01
hereof, designate replacement or additional Lending Installations through which
Loans will be made by it and for whose account Loan payments are to be made.
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ARTICLE III
EXPENSE REIMBURSEMENT
The Borrower will, on demand, reimburse the Agent for all expenses,
including the reasonable fees and expenses of legal counsel for the Agent,
incurred by the Agent in connection with the preparation, administration,
amendment or modification of this Agreement and the Loan Documents and the
collection or attempted collection of the Notes.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions Precedent to Closing. In addition to the requirements
set forth in Section 4.02 hereof, the obligation of each Bank to make its first
Advance under the Revolving Credit, the Competitive Bid Facility and the Swing
Line Bank to extend its first Swing Line Advance is subject to the condition
precedent that the following shall have been delivered to the Agent in form and
substance satisfactory to the Agent and its counsel and in sufficient numbers
for each Bank:
(a) Borrower's Incorporation Documents. A copy of the Articles of
Incorporation and By-laws, including all amendments thereto, of the Borrower,
certified by the Secretary or an Assistant Secretary as being in full force and
effect on the Closing Date, and with respect to the Certificate of
Incorporation, certified by the Indiana Secretary of State, unless unchanged
since the date of the Original Agreement in which case the Borrower's Secretary
or Assistant Secretary may attest to such fact in a writing delivered to the
Agents.
(b) Borrower's Corporate Resolutions. Copies of resolutions of the
Board of Directors of the Borrower, certified by the Secretary or an Assistant
Secretary of Borrower as being in full force and effect on the Closing Date,
authorizing the borrowings provided for herein and the execution, delivery and
performance of this Agreement, the Notes and any other Loan Document, instrument
or agreement required to be executed and delivered by the Borrower hereunder.
(c) Incumbency Certificates. Certificates, signed by the Secretary or
an Assistant Secretary of Borrower, dated the Closing Date, as to the
incumbency, and containing the specimen signatures, of the Persons authorized to
execute and deliver this Agreement, the Notes and any other instrument or
agreement required hereunder.
(d) Loan Documents. The Notes, each duly executed by Borrower, payable
to the order of each Bank in the amount of each Bank's Commitment and dated the
Closing Date, together with all other Loan Documents duly executed by the
Borrower.
(e) Certificates of Good Standing/Existence. Certificate of existence
and/or good standing certificates for the Borrower in the state of its
incorporation and where qualified, duly certified by the Indiana Secretary of
State or other appropriate official of each such state.
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(f) Other Evidence Agents May Require. Such other documents or evidence
as any Bank, through the Agents, may reasonably request to consummate the
transactions contemplated hereby and by the other Loan Documents, the taking of
all necessary actions in any proceedings in connection herewith or therewith and
compliance with the conditions set forth in this Agreement or any other Loan
Document.
(g) Opinion of Counsel. An opinion of counsel for the Borrower in form
and substance satisfactory to the Banks.
(h) Payment of Fees and Expenses. Payment by Borrower of all applicable
and due and payable expenses pursuant to Section 2.07 and Article III hereof.
(i) Closing of Asset Backed Debt. Evidence reasonably acceptable to the
Agent that the Asset Backed Debt transaction has been successfully closed prior
to or effective simultaneously with the Closing Date.
4.02 Conditions Precedent to Each Borrowing. The obligation of each
Bank to make any Advance, Competitive Bid Advance and any Swing Line Advance
hereunder, including the first Advance, Competitive Bid Advance or Swing Line
Advance, is subject to the following conditions precedent:
(a) On the Closing Date, the representations and warranties contained
in Article V and in any other Loan Document executed by the Borrower shall be
true and correct.
(b) The Agent shall have received a Request from the Borrower.
(c) All fees, expenses and other amounts due and payable to or for the
benefit of the Agent or any of the Banks under this Agreement or any other Loan
Document shall have been paid in full.
(d) No Default or Event of Default shall have occurred and be
continuing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Banks and the Agent on the
date hereof and shall be deemed to have made such representations and warranties
to the Banks and the Agent on the date of each Advance and Swing Line Advance
hereunder that:
5.01 Corporate Existence. The Borrower is a corporation duly organized
and validly existing under the laws of the State of Indiana, and is duly
qualified as a foreign corporation and is properly licensed and in good standing
In each jurisdiction where the failure to qualify or be licensed would have a
material adverse effect on its business, properties or conditions (financial or
otherwise). The principal office of the Borrower is located at 8909 Purdue Road,
Indianapolis, Indiana 46268.
5.02 Subsidiaries' Existence. Schedule 1 attached hereto contains a
list of all of the Borrower's Subsidiaries effective as of December 31, 1998
(reflecting the disposition of the Borrower's ownership interest in Priority
Healthcare Corporation) showing, as to each, its jurisdiction of incorporation
and principal place of business. All of the outstanding shares of stock of each
of the Subsidiaries have been validly issued, are fully paid and non-assessable,
and except for directors' qualifying shares, are owned by the Borrower or
another Subsidiary
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of the Borrower free and clear of all Liens. Each Consolidated Subsidiary is
duly organized and validly existing under the laws of the jurisdiction of its
incorporation, and is properly licensed and in good standing in each
jurisdiction in which the failure to qualify or be licensed would have a
material adverse effect on the business, properties or financial condition of
the Borrower or of such Consolidated Subsidiary.
5.03 Corporate Powers. The execution, delivery and performance of this
Agreement and any instrument or agreement required to be delivered by the
Borrower hereunder are within the Borrower's corporate powers, have been duly
authorized by all requisite corporate action, and are not in conflict with the
terms of any charter, By-law or other organization papers of the Borrower, or
any instrument or agreement to which the Borrower is a party or by which the
Borrower is bound or affected.
5.04 Power of Officers. The officers of the Borrower executing this
Agreement, the Notes and any certificate, instrument or agreement required to be
delivered by Borrower hereunder or thereunder have been duly elected or
appointed and were fully authorized to execute the same at the time such
agreement, certificate or instrument was executed.
5.05 Government and Other Approvals. No approval, consent, exemption or
other action by, or notice to or filing with, any governmental authority by the
Borrower is necessary in connection with the execution, delivery or performance
of the Loan Documents.
5.06 Compliance with Laws; Environmental Matters. There is no law, rule
or regulation, nor is there any judgment, decree or order of any court or
governmental authority binding on the Borrower which would be contravened by the
execution, delivery or performance of the Loan Documents. Borrower is in
compliance with all laws and regulations, including all requirements of
applicable federal, state and local environmental, health and safety statutes
and regulations and is not the subject of any federal, state or local
investigation evaluating whether any remedial action is needed with respect to
any Hazardous Material and neither the Borrower nor, to the best of the
Borrower's knowledge, any other Person, has ever caused or permitted any
Hazardous Material in hazardous quantities to be disposed of, treated,
generated, stored or used on or under any property of the Borrower and no such
property has been used as a dump or disposal site for any Hazardous Material.
5.07 Enforceability of Agreement. This Agreement is the legal, valid
and binding agreement of the Borrower and the Notes when executed and delivered
will be, the legal, valid and binding agreement of the Borrower, enforceable
against Borrower in accordance with their respective terms, and any other
exhibit, instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable in accordance
with its terms.
5.08 Title to and Condition of Property. The Borrower has good and
marketable title to all of its properties and assets free and clear of all Liens
except for Permitted Liens. The execution, delivery and performance of this
Agreement, the Notes and any other instrument or agreement required to be
delivered by the Borrower hereunder will not result in the creation of any Lien
except as provided for herein. All of the facilities and properties of the
Borrower are in good operating condition and repair except for facilities and
properties which are obsolete or otherwise not required for the conduct of its
business, or which are being repaired in the ordinary course of business.
5.09 Litigation. There are no suits, proceedings, claims or disputes
pending or, to the actual knowledge of the Borrower, threatened against or
affecting the Borrower or its respective properties, the adverse determination
of which individually or in the aggregate might materially adversely affect the
business, properties
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or condition (financial or otherwise) of the Borrower or impair the Borrower's
ability to perform its obligations hereunder, under any other Loan Document or
under any instrument or agreement required hereby, except as otherwise
previously initially disclosed to the Banks in writing in accordance with the
terms hereof, with current updates having been conveyed by the Borrower to the
Banks orally as of a recent date.
5.10 Events of Default. No Default or Event of Default has occurred and
is continuing or would result from the execution or performance of any Loan
Document or the incurring of the Obligations by the Borrower. The Borrower is
not in default under any charter instrument or by-law, indenture, or under any
loan agreement or any material agreement or instrument to which it is a party or
by which it or its properties are bound.
5.11 Investment Company Act of 1940. The Borrower is not, and, by such
acts as may be necessary will continue not to be, an investment company and is
not controlled by an investment company within the meaning of the Investment
Company Act of 1940, as amended.
5.12 Regulation U. The proceeds of the Loans will not be used, directly
or indirectly, to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock.
5.13 Financial Information.
(a) The balance sheets of the Borrower and its Consolidated
Subsidiaries dated as of September 30, 1998, and as of December 31, 1997,
(complete and accurate copies of which have been delivered by the Borrower to
the Banks) and all other information and data furnished by the Borrower to the
Banks are materially complete and correct, and such financial statements have
been prepared In accordance with GAAP consistently applied, and fairly present
the consolidated financial condition and results of operations of the Borrower
and its Consolidated Subsidiaries as of such dates and the results of operations
for the respective periods then ended. Neither the Borrower nor any Consolidated
Subsidiary has any contingent obligations, unbooked liabilities for taxes or
other outstanding financial obligations.
(b) Since September 30, 1998, there has not been and Borrower does not
know or have reason to know of any development or threatened development (other
than general economic conditions) of a nature which may cause any material
adverse change in the financial condition or operations of the Borrower and its
Consolidated Subsidiaries sufficient to impair the Borrower's ability to repay
the Revolving Credit and otherwise perform the Obligations in accordance with
the terms of this Agreement and the Loan Documents.
5.14 ERISA. No fact or circumstance, including but not limited to any
Reportable Event, exists in connection with any Plan of the Borrower or any of
its Consolidated Subsidiaries which would constitute grounds for the termination
of any such Plan by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer any such Plan and which would
result in the termination of a Plan and the Borrower or its Affiliates incurring
material liability to the Plan, the PBGC, participants, beneficiaries or a
trustee under ERISA. No Plan maintained by the Borrower and no trust created
under any such Plan has incurred any "accumulated funding deficiency" as defined
in Section 302 of ERISA, and the present value of all benefits vested under each
Plan did not exceed, as of the last annual valuation date, the value of the
assets of the respective Plan allocable to such vested benefits. For the
purposes of this representation and warranty the Borrower or such Consolidated
Subsidiary, if not the Plan administrator, shall be deemed to have knowledge of
all facts attributable to the Plan administrator designated pursuant to ERISA.
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<PAGE> 24
5.15 Year 2000 Compliance.
As of the date of any request for an Advance under the Revolving
Credit, a Competitive Bid Advance under the Competitive Bid Facility or a Swing
Line Advance under the Swing Line, as of the date of any renewal, extension or
modification of the Revolving Credit, the Competitive Bid Facility or the Swing
Line, and at all times the Revolving Credit, the Competitive Bid Facility or the
Swing Line or Banks' commitment to make advances under the Loans are
outstanding:
(a) Except as otherwise disclosed to the Agent and the Banks, all
devices, systems, machinery, information technology, computer software and
hardware, and other date sensitive technology (jointly and severally the
"Systems") necessary for each of the Borrower and its Subsidiaries to carry on
its business as presently conducted and as contemplated to be conducted in the
future are Year 2000 Compliant or will be Year 2000 Compliant within a period of
time calculated to result in no material disruption of any of Borrower's or its
Subsidiaries' business operations. For purposes of these provisions, "Year 2000
Compliant" means that such Systems are designed to be used prior to, during and
after the Gregorian calendar year 2000 A.D. and will operate during each such
time period without error relating to date data, specifically including any
error relating to, or the product of, date data which represents or references
different centuries or more than one century.
(b) Borrower has: (i) undertaken a detailed inventory, review, and
assessment of all areas within its business and operations that could be
adversely affected by the failure of Borrower and its Subsidiaries to be Year
2000 Compliant on a timely basis; (ii) developed a detailed plan and time line
for becoming Year 2000 Compliant on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable in all material
respects.
(c) Borrower reasonably believes that its key suppliers, vendors, and
customers have initiated programs to become Year 2000 Compliant and will be
compliant. For purposes hereof, "key suppliers, vendors, and customers" refers
to those suppliers, vendors, and customers of Borrower whose business failure
would, with reasonable probability, result in a material adverse change in the
business, properties, condition (financial or otherwise), or prospects of
Borrower. For purposes of this paragraph, Banks, as lenders of funds under the
terms of the Loans, confirm to Borrower that each of the Banks has initiated its
own corporate-wide Year 2000 program with respect to its lending activities.
5.16 Material Adverse Effect. Since September 30, 1998, there has
occurred no event or circumstance which has had, or could reasonably be expected
to have, or result in a material Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that so long as the Aggregate
Commitment remains available and until all Obligations have been paid in full it
will:
6.01 Use of Proceeds. Use the proceeds of the Revolving Credit as
working capital of the Borrower, to pay the balance of the revolving credit
extended to the Borrower under the Original Agreement as provided in Section
2.03 hereof, and to pay the balance of the revolving credit extended to the
Borrower under that certain Credit Agreement by and between Borrower and Bank
One, Indiana, NA dated November 3, 1998 ("Other Agreement").
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<PAGE> 25
6.02 Notices. Promptly give written notice to the Agent of:
(a) all litigation affecting Borrower or any of its Subsidiaries where
the amount claimed in any one instance or in the aggregate for all such
litigation is Two Hundred Fifty Thousand Dollars ($250,000.00) or more in excess
of insurance coverage or where the insurance carrier has denied its
responsibility as to an amount claimed of Two Hundred Fifty Thousand Dollars
($250,000.00) or more;
(b) any Reportable Event under Section 4043(b)(5), (6), or (9) of ERISA
with respect to any Plan, any decision to terminate or withdraw from a Plan, any
finding made with respect to a Plan under Section 4401(c) or (3) of ERISA, the
commencement of any proceeding with respect to a Plan under Section 4042 of
ERISA, or any material increase in the actuarial present value of unfunded
vested benefits under all Plans, over the preceding year;
(c) any strikes, work-stoppages, slow-downs or other labor disputes or
grievances involving the Borrower or a Consolidated Subsidiary which could have
material adverse effect on the operations or financial condition of the Borrower
and its Consolidated Subsidiaries, taken as a whole;
(d) the acquisition of any Subsidiary by the Borrower together with
financial statements of such Subsidiary before giving effect to the acquisition;
(e) all Defaults specifying the nature and the period of existence
thereof and what action the Borrower has or proposes to take with respect
thereto;
(f) any change in the payment terms extended to the Borrower's chain
drug customers from the terms in effect as of the date of this Agreement; and
(g) any other event which might have a material adverse effect on the
business, properties, operations, prospects or condition (financial or
otherwise) of the Borrower or any Consolidated Subsidiary.
6.03 Financial Statements, Reports. Etc. Deliver to each Bank:
(a) as soon as available but not later than forty-five (45) days after
the close of each quarter of each Fiscal Year, the consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries as of the
close of such quarter, and the Borrower and its Subsidiaries' consolidated and
consolidating statements, statements of income and retained earnings and changes
in financial position or statement of cash flow of such quarter and that portion
of the Fiscal Year ending with such quarter, all prepared in accordance with
GAAP, consistently applied, certified by the chief financial officer of the
Borrower as being complete and correct and fairly presenting the Borrower's
financial condition and results of operations as of the end of such quarter and
for that portion of the Fiscal Year ending with such quarter, accompanied by a
statement from the chief financial officer of the Borrower stating that as of
the end of such quarter no Default or Event of Default existed or, if such did
exist, a statement describing such Default or Event of Default and the action
the Borrower is taking or proposes to take with respect thereto;
(b) as soon as available but not later than ninety (90) days after the
close of each Fiscal Year, the Borrower and its Subsidiaries' Consolidated
balance sheets as of the close of such year, and Consolidated statements,
statements of income and retained earnings and changes in financial position or
statement of cash flow for such year, prepared in accordance with GAAP,
consistently applied, together with the notes thereon and the report of the
Independent Public Accountant thereon, audited and reported on by an Independent
Public Accountant. Such auditor's report shall state that the Consolidated
statements present fairly the financial position
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of the Borrower and its Subsidiaries in accordance with GAAP, consistently
applied, and shall be free from exceptions, reservations or qualifications as a
result of which the auditor is unable to conclude that the financial statements
fairly present or adequately disclose the financial condition of the Borrower
and its Subsidiaries and shall not be limited because of restricted or limited
access by such auditor to any material portion of the Borrower's or any of its
Subsidiaries' records and shall be accompanied by a statement from such auditor
that during the examination no Default or Event of Default came to their
attention. Such report shall also be accompanied by a certificate from the chief
financial officer of the Borrower stating that as of the end of such year no
Default or Event of Default existed or, if such did exist, a statement
describing such Default or Event of Default and the action the Borrower has
taken or proposes to take with respect thereto;
(c) promptly upon receipt thereof, any management letters provided to
the Borrower by the Independent Public Accountant containing any reference to
any inadequacy, defect, problem, qualification or other lack of satisfactory
accounting controls utilized by the Borrower or any of its Subsidiaries;
(d) promptly provide the Bank with copies of all 10-Q reports, 10-K
reports, and other information submitted to the Securities and Exchange
Commission and concurrently with any 10-Q reports or 10-K reports, Borrower's
chief financial officer shall submit a certificate stating that the Borrower is
in compliance with all terms and conditions of this Agreement, or if the
Borrower is not in compliance, the nature of such noncompliance and the plan of
the Borrower to cure such noncompliance;
(e) within forty-five (45) days after the end of each calendar quarter,
a Compliance Certificate in the form of Exhibit "G" delivered for each calendar
quarter. The Agent shall promptly deliver a photocopy of the Compliance
Certificate when received to all Banks.
(f) such other statements or reports as the Agent or any Bank acting
through the Agent may reasonably request in form and detail satisfactory to the
Agent.
6.04 Existence, Etc. Maintain and preserve its existence and all
rights, privileges and franchises now enjoyed and necessary for the operation of
its business and keep all of its properties in good working order and condition,
normal wear and tear excepted, except properties that the Borrower or a
Consolidated Subsidiary reasonably determines to be surplus, obsolete or
otherwise not necessary or useful in the conduct of its business.
6.05 Payment of Obligations. Pay all taxes, assessments, governmental
charges and other obligations when due, except such as may be contested in good
faith or as to which a bona fide dispute may exist, and for which adequate
reserves have been established in an amount determined in accordance with GAAP.
6.06 Compliance with Laws. At all times comply in all material respects
with all laws, rules, regulations, orders and directions of any governmental
authority having jurisdiction over its business.
6.07 Insurance. Maintain and pay all premiums with regard to insurance
with responsible insurance companies against such risks, on such properties and
in at least such amounts as is customarily maintained by similar businesses in
the exercise of reasonable business judgment, provided that such insurance is
reasonably commercially available; deliver to the Agent at the request of any
Bank a list in reasonable detail of the insurance policies then in effect,
stating the names of the insurance companies, the amounts and rates of
insurance, the dates of the expiration thereof and the properties and risks
covered thereby.
6.08 Adequate Books. Maintain adequate books, accounts and records in
order to provide financial statements in accordance with GAAP and, if requested
by a Bank, permit employees or representatives of the
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<PAGE> 27
Agent and such Bank at any reasonable time and upon reasonable notice to inspect
and audit their properties, to examine or audit their inventory, books, accounts
and their respective affairs, finances and accounts with their respective
accountants (and by their provisions the Borrower authorizes such accountants to
discuss with the Agent or any Bank the finances and affairs of the Borrower and
its Subsidiaries).
6.09 Consolidated Net Worth. Maintain at all times, a Consolidated Net
Worth of not less than Two Hundred Seventy Five Million and 00/100 Dollars
($275,000,000.00), which required minimum amount will increase as of the end of
each fiscal quarter of the Borrower, commencing with the quarter ending December
31, 1998 by an amount equivalent to the sum of (i) fifty percent (50.0%) of the
Borrower's Consolidated Net Income for such quarter (with no deduction on
account of negative Consolidated Net Income for a fiscal quarter), plus (ii) one
hundred percent (100.0%) of the net proceeds, cash or otherwise, of all
offerings and issuances of additional equity by the Borrower and its
Subsidiaries.
6.10 Consolidated Total Debt to Consolidated EBITDA. Maintain at all
times a ratio of Consolidated Total Debt to Consolidated EBITDA for the period
of four (4) consecutive fiscal quarters most recently ended on or prior to such
determination date of not greater then 3.50 to 1.0.
6.11 Consolidated Interest Expense Coverage Ratio. During each period
of four consecutive fiscal quarters, maintain at all times a Consolidated
Interest Expense Coverage Ratio for the period of four (4) consecutive fiscal
quarters most recently ended on or prior to such determination date of not less
than 2.50 to 1.0.
6.12 ERISA. Make prompt payment of contributions required to meet the
minimum funding standards set forth in ERISA except (a) to the extent waived or
deferred by the PBGC and (b) with respect to unfunded contributions required to
be paid by Subsidiaries of the Borrower acquired after the date hereof, which
unfunded contributions existed at the time of the acquisition of such
Subsidiaries and do not in the aggregate, together with unfunded contributions
of all other Subsidiaries of the Borrower, exceed $500,000.00 at any time, so
long as no criminal or material civil penalty is or may be incurred in
connection therewith.
6.13 Subsidiary Payments. Cause each Subsidiary of the Borrower to make
dividend cash payments during each calendar quarter to its stockholders in an
amount sufficient to enable the Borrower to pay its Indebtedness and all other
obligations, including the Obligations.
6.14 Hazardous Materials. (a) Comply with all laws, regulations and
orders with respect to the discharge and removal of any Hazardous Materials, (b)
not release or dispose of any Hazardous Material on or under any of the
properties of the Borrower or its Subsidiaries, (c) indemnify and hold harmless
the Banks and their officers, employees and consultants from and against all
losses, costs, damages and expenses (including reasonable attorneys' fees and
expenses) any such Person may sustain in connection with the use, disposal or
release of any Hazardous Material by the Borrower or any of its Subsidiaries or
in connection with the existence of any Hazardous Material on or under any of
the properties of the Borrower or any of its Subsidiaries.
6.15 Year 2000 Covenants
(a) Furnish such additional information, statements and other reports
with respect to Borrower's activities, course of action and progress towards
becoming Year 2000 Compliant as Agent may request from time to time.
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(b) In the event of any change in circumstances that causes or will
likely cause any of Borrower's representations and warranties with respect to
its being or becoming Year 2000 Compliant to no longer be true (hereinafter,
referred to as a "Change in Circumstances"), then Borrower shall promptly, and
in any event within ten (10) days of receipt of information regarding a Change
in Circumstances, provide Agent with written notice (the "Notice") that
describes in reasonable detail the Change in Circumstances and how such Change
in Circumstances caused or will likely cause Borrower's representations and
warranties with respect to being or becoming Year 2000 Compliant to no longer be
true. Borrower shall, within ten (10) days of a request, also provide Agent with
any additional information Agent requests of Borrower in connection with the
Notice and/or a Change in Circumstances.
(c) Give any representative of the Agent access during all business
hours to inspect any of the properties and Systems of Borrower, and to project
test the Systems to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of the Agent.
6.16 Mandatory Prepayments and Reductions of Aggregate Commitments.
Borrower shall immediately remit to the Agent for application to the outstanding
principal balances under the Loans One Hundred Percent (100%) of the net
proceeds received by the Borrower or any of its Subsidiaries associated with the
following:
(a) The sale of material assets of the Borrower or any of its
Subsidiaries, except for the contemplated sale of stock or assets of Priority
Healthcare Corporation;
(b) Issuance of other debt, including subordinated debt by the Borrower
or any of its Subsidiaries other than additional debt permitted under Section
7.01 hereof;
(c) Issuance of other equity by the Borrower or any of its
Subsidiaries.
Additionally, the Aggregate Commitments shall be automatically and permanently
reduced, without further action required by the Borrower or the Banks, in an
amount equal to the net proceeds as contemplated above which are applied to the
Loans from time to time.
6.17 Primary Banking Relationship. The Borrower shall maintain its
primary concentration and deposit accounts with one or more of the Banks or Bank
One, Indiana, NA.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as the Aggregate
Commitment shall remain available and until full and final payment of all
Obligations, it will not, and will not permit any Subsidiary to, except with the
prior written consent of the Majority Banks:
7.01 Indebtedness. Except for borrowings under this Agreement, create
or incur any Indebtedness or sell or discount with recourse any accounts
receivable or any debt instrument (other than in connection with a disposition
of assets permitted herein and which are part of any entity which is being sold)
owned by it, or enter into any other arrangement which has the effect of
assuring a creditor of a Person against loss (including arrangements to purchase
or repurchase property or obligations, pay for property, goods or services,
whether or
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not delivered or rendered, maintain working capital, equity capital or other
financial condition of, or lend or contribute to or invest in, any such Person);
provided, however, that this Section shall not be deemed to prohibit:
(a) the acquisition of goods, supplies or merchandise on normal trade
credit in the ordinary course of business;
(b) the execution of bonds or undertakings or the obtaining of
performance standby letters of credit or commercial letters of credit in the
ordinary course of its business as presently conducted;
(c) the endorsement of instruments for deposit and collection in the
ordinary course of business;
(d) Indebtedness of the Borrower to any Consolidated Subsidiary or of
any Consolidated Subsidiary to the Borrower or of any Consolidated Subsidiary to
another Consolidated Subsidiary, so long as any evidence of such Indebtedness is
not pledged, assigned or endorsed to any Person;
(e) Indebtedness up to a maximum of Twenty-Five Million and No/100
Dollars ($25,000,000.00) in the form of unsecured indebtedness, provided that
such indebtedness, when aggregated with the outstanding principal balance of the
Loans, does not exceed the Aggregate Commitments, and provided further that the
incurrence of such debt does not result in a Default or Event of Default; and
(f) Asset Backed Debt, provided that the amount of financing under such
transactions does not exceed at any one time outstanding an amount equal to Four
Hundred Fifty Million and 00/100 Dollars ($450,000,000.00) less the maximum
principal amount available under the Loans.
7.02 Liens. Create, assume or suffer to exist any Lien on any of its or
its Consolidated Subsidiaries' properties whether now owned or hereafter
acquired, except Permitted Liens and Liens in favor of the Banks, or enter into
any agreement with any Person (other than the Banks pursuant to this Agreement)
which restricts the right of the Borrower or any of its Consolidated
Subsidiaries to create, assume or suffer Liens on any of their respective
assets.
7.03 Change in Business. Engage in any business activities or
operations substantially different from and unrelated to present business
activities and operations conducted by the Borrower or any Affiliate of the
Borrower on the Closing Date other than business activities or operations in
which the aggregate investment of the Borrower and its Subsidiaries does not
exceed ten percent (10%) of the Net Worth of the Borrower.
7.04 Mergers, Sales of Assets, Etc. Liquidate, dissolve, or enter into
any consolidation, merger, partnership, joint venture or any other combination
or sell, lease, assign, transfer or otherwise dispose of any assets, whether now
owned or hereafter acquired, in a single transaction or in a series of
transactions or enter into any sale and leaseback transactions, other than:
(a) the sale of inventory in the ordinary course of business;
(b) the sale or other disposition of property no longer used or useful
in the conduct of its business;
(c) any merger in which the Borrower is the legal surviving corporation
if there is no Default or Event of Default after the consummation
thereof;
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(d) the merger, consolidation or transfer of the business or assets of
any of the Borrower's Subsidiaries to the Borrower or to any
Consolidated Subsidiary.
(e) the transfer of an interest in accounts or notes receivable by
(i)(A) Special Services Company to the Borrower and (B) the
Borrower to Bindley Western Funding Corporation and (ii) the
transfer of such assets by Bindley Western Funding Corporation to
a conduit financier for fair market value and with limited
recourse, pursuant to the terms of the Transfer Agreements and
Receivables Purchase Agreement, provided that such transfer
qualifies as a sale under GAAP and that the amount of any related
financing does not exceed an amount equal to Four Hundred Fifty
Million and 00/100 Dollars ($450,000,000.00) less the maximum
principal amount available under the Loans.
(f) the contemplated sale or transfer by the Borrower of its remaining
82.0% ownership in Priority Healthcare Corporation which is to
occur on or before December 31, 1998.
(g) the contemplated sale/leaseback transaction involving the
Borrower's corporate offices located at 8909 Purdue Road,
Indianapolis, Indiana 46268, provided that the net proceeds of
such sale/leaseback transaction are applied to the outstanding
principal balance of the Loans.
7.05 Hazardous Materials. Permit or allow to continue the release or
threatened release of any Hazardous Materials on any premises owned or occupied
by or under lease to the Borrower or any Subsidiary.
7.06 Guaranties; Loans; Advances; Investments. Be a guarantor or surety
of, or otherwise be responsible in any manner with respect to, any undertaking
of any other Person or entity, whether by guaranty agreement or by agreement to
purchase any obligations, stock, assets, goods, or services, or to supply or
advance any funds, assets, goods, or services, or otherwise, other than
obligations under transfers described in Section 7.04(e) hereof. The Borrower
shall not make or permit to exist any loans or advances to any other Person or
entity except for (a) loans and advances existing as of the Closing Date and
disclosed in writing to the Agent and the Banks, (b) extensions of credit or
credit or inventory accommodations to customers or vendors or other
pharmaceutical wholesalers made by the Borrower or any Subsidiary in the
ordinary course of its business as now conducted, (c) reasonable salary advances
to non-executive employees, and other advances to agents and employees for
anticipated expenses to be incurred on behalf of the Borrower or the Subsidiary
in the course of discharging their assigned duties, and (d) limited purpose
loans or advances to executive personnel of the Borrower to enable such persons
to exercise stock options for Borrower's capital stock pursuant to stock plans
previously provided to the Agent, which loans and advances shall not in the
aggregate exceed $7,500,000.00 in outstanding principal.
7.07 Judgments. Except as previously disclosed in writing to the Agent
and the Banks, and existing as of the Closing Date, permit any uninsured
judgment or monetary penalty in an amount equal to or in excess of Ten Million
and No/100 Dollars ($10,000,000.00) rendered against it in any judicial or
administrative proceeding to remain unsatisfied for a period in excess of 45
days unless such judgment or penalty is being contested in good faith by
appropriate proceedings and execution upon such judgment has been stayed, and
unless an appropriate reserve has been established with respect thereto.
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ARTICLE VIII
EVENTS OF DEFAULT
Notwithstanding any other provision herein or in any of the other Loan
Documents, the occurrence and continuation of any of the following events, at
the option of the Majority Banks, except as provided in Section 9.04(d), shall
terminate any obligations on the part of the Banks to make Advances, Competitive
Bid Advances or Swing Line Advances or to continue the Revolving Credit, the
Competitive Bid Facility or the Swing Line and, at the option of the Majority
Banks, shall cause all outstanding principal and accrued and unpaid interest and
all other sums outstanding under or in respect of this Agreement and the Notes
to be immediately due and payable, without notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor, or other
notices or demands of any kind or character, except as hereinafter specified;
provided, however, that the occurrence of any events set forth in Sections 8.05
or 8.06 shall automatically terminate the Banks' Commitments and automatically
accelerate the amounts due hereunder and under the Notes, without notice of
default, presentment or demand for payment, protest or notice of nonpayment or
dishonor, or other notice or demands for payment of any kind or character:
8.01 Nonpayment. The Borrower shall fail to pay within five (5) days of
when due any installment of principal or of interest or any other sum due under
this Agreement in accordance with the terms hereof or of any Note issued under
this Agreement or in any other Loan Document.
8.02 Representation or Warranty. Any representation or warranty herein
or in any of the Loan Documents or any other agreement, instrument or
certificate executed pursuant hereto shall prove to have been false or
misleading in any material respect when made or when deemed to have been made.
8.03 Other Defaults. Other than the covenants as set forth in Sections
6.09, 6.10 and 6.11 and Article VII hereof for which no notice or opportunity to
cure shall be permitted to the Borrower (a) the Borrower shall fail duly or
promptly to perform or observe any of the covenants, agreements or conditions
contained in this Agreement and such default shall continue unremedied for a
period of thirty (30) days after the earlier of (i) Borrower becomes aware of
such default, or (ii) written notice thereof is delivered to the Borrower from
the Agent, or (b) any Default or Event of Default shall have occurred under any
of the other Loan Documents and shall not have been cured within the applicable
grace or cure period, if any.
8.04 Voluntary Bankruptcy. The Borrower shall generally fail to pay or
admit in writing its inability to pay its debts as they come due, or shall file
any petition or action for relief as to itself under any bankruptcy,
reorganization, insolvency or moratorium law, or any other similar law or laws
for the relief of, or relating to, debtors, or shall apply for or consent to a
receiver, trustee or custodian for it or a substantial portion of its property,
or shall make a general assignment for the benefit of creditors.
8.05 Involuntary Bankruptcy. An involuntary petition shall be filed
under any bankruptcy or similar statute against the Borrower, or a custodian,
receiver, trustee, assignee for the benefit of creditors (or other similar
official) shall be appointed to take possession, custody or control of the
properties of the Borrower unless such petition or appointment is set aside or
withdrawn or ceases to be in effect within thirty (30) days from the date of
said filing or appointment.
8.06 Cross Default. Any material breach or default shall have occurred
(after giving effect to any applicable cure period or waiver) under any other
agreement relating to Indebtedness or other material agreement under which the
Borrower or any of its Subsidiaries may be obligated in an amount in excess of
Ten Million and No/100 Dollars ($10,000,000.00) as borrower, guarantor, lessee
or other party if such default permits the holder or any trustee thereof to
cause the acceleration of such Indebtedness prior to the expressed maturity
thereof or the termination of any commitment to lend or permits a lessor or
other party to terminate the applicable lease or other agreement.
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8.07 ERISA. Any Plan of the Borrower shall be terminated within the
meaning of Title IV of ERISA except as permitted by Section 4044(d) of ERISA, or
a trustee shall be appointed by the appropriate United States District Court to
administer any Plan of the Borrower, or the PBGC shall institute proceedings to
terminate any Plan.
8.08 Invalidity of Loan Documents. (a) The validity or effectiveness of
any of the Loan Documents by the party executing such Loan Document is impaired;
(b) any party executing any of the Loan Documents asserts that any of such Loan
Documents is not a legal, valid and binding obligation of the party thereto
enforceable in accordance with its terms; or (c) any Loan Document is amended,
hypothecated, subordinated, terminated or discharged, or if any person is
released from any of its covenants or obligations under any of the Loan
Documents except as permitted by Majority Banks in writing.
ARTICLE IX
RELATION OF BANKS
This Article IX specifies rights and obligations among and between the
Banks and the Agent. The Borrower acknowledges the existence of limitations in
the Agent's authority, but it shall be entitled to rely upon the authority of
the Agent as conferred by this Article IX and otherwise specified in this
Agreement.
9.01 Appointment and Authorization. Each Bank hereby appoints the Agent
to act as its agent and representative in connection with the administration of
this Agreement and for such purpose irrevocably authorizes the Agent to take
such action and to exercise such rights, powers and discretion as are
specifically delegated to the Agent in this Agreement, together with all rights,
powers and discretion as are reasonably incidental thereto. The Borrower and
each Bank agrees that all notices, requests, demands and communication by the
Banks to the Borrower or by the Borrower to the Banks with respect to this
Agreement and the matters contemplated hereby, shall be made only through the
Agent as set forth herein. The Agent may perform any of its functions and duties
under this Agreement by or through agents or its directors, officers or
employees. In performing its functions and duties under this Agreement, the
Agent shall perform its duties as designated hereunder, but the Agent shall not
be deemed to have a fiduciary relationship in respect of, or other
responsibility to, any Bank or to have assumed any relationship of agency or
trust with or for the Borrower, William Bindley, or any of the Borrower's
Consolidated Subsidiaries. The Agent shall not be responsible to the Banks for
any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or received by any of them under this
Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any Loan Document or any
other document referred to or provided for herein or for any failure by the
Borrower to perform any of its obligations hereunder. The Agent may employ
agents and attorneys and shall not be responsible, except as to money or
securities received by it or its authorized agents, for the negligence or
misconduct of any such agents or attorneys selected by it with reasonable care.
Neither the Agent nor any of its directors, officers, employees or agents shall
be reliable or responsible for any action taken or omitted to be taken by it or
them hereunder or in connection herewith, except for its own or their own gross
negligence or willful misconduct.
9.02 Pro Rata Sharing. Prior to the occurrence of a Default, except for
payments received by Agent regarding any Competitive Bid Advances and Swing Line
Advances, all payments of principal and interest on the Revolving Credit are to
be divided Pro Rata among the Banks. The fee payable pursuant to Section 2.07 is
to be divided among the Banks Pro Rata according to each Bank's respective
Commitment. All amounts to be disbursed pursuant to Section 9.06 shall be
advanced Pro Rata by the Banks. Following the occurrence and during the
continuation of a Default, all payments of principal and interest on the Loans
and fees payable pursuant to Section 2.07 are to be divided pro rata among the
Banks based upon each Bank's outstanding and unpaid balances of Advances,
Competitive Bid Advances and Swing Line Advances as of the date of a declaration
of a Default by the Majority Banks.
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9.03 (a) Setoff. In addition to, and without limitation of, any rights
of the Banks or the Agent under applicable law, if the Borrower becomes
insolvent, however evidenced, or any Default occurs, 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 Bank, the Agent or any Bank, the Agent or any Affiliate of any Bank or the
Agent to or for the credit or account of the Borrower may be offset and applied
toward the payment of the Obligations owing to such Bank or the Agent, whether
or not the Obligations, or any part thereof, shall then be due.
(b) Sharing of Setoff. Any Bank which shall receive payment of or on
account of all or part of its share of the Loans, whether voluntary, involuntary
or through the exercise of any right of setoff, counterclaim, banker's lien,
secured claim under any bankruptcy statute or otherwise, in a greater proportion
than the proportionate amount of principal, interest and fees due it under this
Agreement shall purchase immediately prior to such payment participations in the
portions of the Loans held by the other Banks so that all recoveries of
principal, interest and fees shall be shared by the Banks in accordance with the
provisions as set forth in Section 9.02 hereof; except that this provision shall
not apply to any setoff for payment of standard fees for maintaining deposit
accounts. If all or any portion of such excess payment is thereafter recovered
from such Bank, such purchase shall be rescinded and the purchase price restored
to the extent of such recovery, but without interest (except to the extent such
Bank is required to pay interest). All sums received by a Bank through the
exercise of any right of setoff, counterclaim, banker's lien, secured claim
under any bankruptcy statute or otherwise shall be deemed to be first applied to
such Bank's portion of the Indebtedness under this Agreement until payment
thereof in full and any balance remaining thereafter shall be utilized to
purchase participations in the portions of the Loans held by the other Banks so
that all recoveries of principal, interest and fees shall be shared by the Banks
in accordance with the provisions as set forth in Section 9.02 hereof, subject
to the same limitations and protections as set forth above, and any remaining
balance, if any, of such amounts received by a Bank following unconditional
repayment in full of the Loans may then be applied to any other Indebtedness of
the Borrower to such Bank, which Indebtedness does not constitute Loans and is
outside the scope of or not contemplated by this Agreement.
9.04 Approvals. Except as provided in this Section 9.04, upon any
occasion requiring or permitting an approval, consent, election or other action
on the part of the Banks, action shall be taken by the Agent for, on behalf of,
and for the benefit of, all Banks upon the direction of the Majority Banks, and
any such action shall be binding on all Banks. However, unless all Banks agree
in writing, no amendment, modification, consent or waiver shall be effective
which:
(a) increases the amount of the Loans/Aggregate Commitment or changes
the Commitment of any Bank,
(b) reduces the amount of interest, principal or fees owing hereunder
or under the Notes,
(c) extends the fixed date on which any sum is due hereunder or under
the Notes or extends the Termination Date,
(d) waives an Event of Default arising from a failure to pay principal
of or interest on an Advance, a Competitive Bid Advance or a Swing
Line Advance,
(e) changes the provisions of this Section 9.04,
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(f) waives any material condition specified in Article IV,
(g) amends the definition of Majority Banks,
(h) affects the rights, duties or obligations of the Agent, or
(i) amends the provisions of Article VIII.
9.05 Exculpation. The Agent shall not be liable or answerable for
anything whatsoever in connection with this Agreement or any instrument or
agreement required hereunder, including responsibility with respect to the
execution, construction or enforcement of this Agreement or any such instrument
or agreement, except for its willful misconduct or gross negligence, and the
Agent shall have no duties or obligations other than as provided herein and
therein. The Agent shall be entitled to rely on any opinion of counsel
(including counsel for the Borrower) in relation to this Agreement and any
instrument or agreement required hereunder, and upon statements and
communications received from the Borrower, or from any other Person, believed by
it to be authentic, and shall not be liable for any action taken or omitted in
good faith on such reliance.
9.06 Indemnification. Each Bank agrees to indemnify the Agent to the
extent not reimbursed by the Borrower, ratably according to its Pro Rata
interest in the Revolving Credit (or, if there are no outstandings hereunder, in
the Commitments), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of this
Agreement or any instrument or agreement required hereunder or any action taken
or omitted by the Agent in such role under this Agreement or any such instrument
or agreement; provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever resulting from
the Agent's willful misconduct or gross negligence.
9.07 The Agent as Bank. The Agent shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not the
Agent; and the term "Banks" shall include the Agent in its individual capacity.
The Agent and its subsidiaries and Affiliates may accept deposits from, lend
money to, engage in any kind of banking, trust or other business with, the
Borrower or any of its Subsidiaries of Affiliates as if it were not the Agent.
9.08 Notice of Transfer. The Agent and the Borrower may deem and treat
a Bank which is a party to this Agreement as the owner of such Bank's Note or
Notes for all purposes hereof unless and until a written notice of the
assignment or transfer thereof (if any is permitted) executed by such Bank shall
have been received by the Agent and the Borrower.
9.09 Credit Decision. Each Bank represents that it has made and agrees
that it shall continue to make its own independent investigation of the
financial condition and affairs of the Borrower and its own appraisal of the
creditworthiness of the Borrower in connection with the making and the
continuance of the Advances. The Agent has no duty or responsibility, either
initially or on a continuing basis, to provide any Bank with any credit or other
information (other than obtained pursuant to this Agreement) with respect
thereto, whether coming into its possession before the date hereof or at any
time thereafter, unless furnished to the Agent by the Borrower for delivery to
the Banks, or obtained pursuant to this Agreement. The Agent shall promptly
provide the Banks with copies of all notices required by the Agreement to be
provided to the Agent by the Borrower or provided to the Borrower by the Agent.
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9.10 Resignation of the Agent. The Agent may resign at any time by
giving written notice to the Banks and the Borrower. Upon any such resignation,
the Majority Banks with the prior written consent of the Borrower, which consent
of the Borrower shall not be necessary if an Event of Default has occurred and
is continuing at such time, which shall not be unreasonably withheld, shall have
the right to appoint a successor from among the Banks. If no successor shall
have accepted such appointment within forty-five (45) days after the retiring
Agent's giving of notice of resignation, the retiring Agent may, on behalf of
the Banks, appoint a successor thereto with the prior written consent of the
Borrower, which consent shall not be necessary if an Event of Default has
occurred and is continuing at such time, which shall not be unreasonably
withheld, and such successor Agent shall be a bank or trust Borrower organized
under the laws of the United States or any state thereof having a combined
capital and surplus (or owned by a holding Borrower having a combined capital
and surplus) of at least $2,000,000,000.00. Upon the acceptance by such
successor of its appointment hereunder, such successor shall succeed to and
become vested with all the rights and obligations of the retiring Agent, and the
retiring Agent shall be discharged from its obligations under this Agreement
except with respect to any liability with respect to a breach of any obligation
hereunder prior to such resignation. The provisions of this Article shall inure
to the benefit of the retiring Agent as to any actions taken or omitted to be
taken by it while it held such position under this Agreement.
9.11 Reliance by Agent. The Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, telegram, cable or telecopy) received by it in connection with
this Agreement believed by it to be genuine and correct and to have been signed
or sent by or on behalf of the proper person or persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by Agent. As to any matters not expressly provided for by this Agreement, Agent
shall in all cases be fully protected from liability in acting, or in refraining
from acting, hereunder in accordance with instructions signed by the Majority
Banks, and any action taken or failure to act pursuant thereto shall be binding
upon all of the Banks.
9.12 Delegation to Affiliates. Notwithstanding the provisions of
Section 9.10 hereof, the Borrower and the Banks agree that the Agent may
delegate any of its duties under this Agreement to any of its Affiliates. Any
such Affiliate (and such Affiliates's directors, officers, agents and employees)
which performs duties in connection with this Agreement shall be entitled to the
same benefits and protections inuring to the benefit of the Agent pursuant to
this Agreement.
ARTICLE X
MISCELLANEOUS
10.01 Notices. Any communications between the parties hereto or notices
or requests provided herein to be given may be given by mailing the same, first
class postage prepaid, by overnight delivery, by courier or messenger service,
or by telex or electronic transmission, to each party at its address set forth
on the signature pages thereto (with a copy to each address indicated for
notices), or to such other address as any party may in writing hereafter
indicate to the Borrower and the Agent, and which the Agent shall forward to the
other Banks upon receipt thereof by the Agent. Notices shall be effective on the
date sent by electronic transmission and telex and three (3) Banking Days after
the date sent by U.S. mail.
10.02 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective permitted successors and
assigns; provided, however, that Borrower shall not assign this Agreement or any
of its rights hereunder without the prior written consent of each Bank.
10.03 Banks' Obligations Several. The obligations of each Bank under
this Agreement are several. Neither the Agent nor any Bank shall be liable for
the failure of any other Bank to perform its obligations under
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<PAGE> 36
this Agreement. The failure of any Bank to make all or any part of the proceeds
of any Advance, Competitive Bid Advance or Swing Line Advance available to the
Agent for the benefit of Borrower pursuant to this Agreement shall not relieve
any other Bank from the performance of its obligations under this Agreement.
10.04 Participations and Assignments. No Bank may participate, sell,
transfer or assign all or any portion of its rights and obligations under this
Agreement without the prior written consent of the Borrower and the Agent, which
consent shall not be unreasonably withheld, provided that the Borrower's prior
written consent shall not be required (a) for participations, sales, transfers
or assignments by any Bank to an Affiliate of such Bank or (b) following the
occurrence and during the continuation of any Default and provided further that
any such participation, sale, transfer or assignment shall be in an amount not
less than $5,000,000.00, except that any Bank may sell a participation interest
in its Advances to any Person so long as the Bank continues to be the sole
financial institution sending billing or other notices to the Borrower and
entitled to receipt of notices hereunder from the Borrower, the Agent or any of
the Banks, or calling upon the Borrower, the Agent or any of the Banks to
discuss this Agreement, the Commitments or any Advance. A Person purchasing such
a participation shall have all rights of a Bank pursuant to this Agreement
(except as set forth in the immediately preceding sentence and except with
respect to Section 9.04) and a Bank may provide such participant with credit
information received by such Bank from the Borrower or from Agent or which is
otherwise publicly available. The Borrower agrees that any participant permitted
or consented to under this Section 10.04 shall at any time during the pendency
of an Event of Default have the right to set off obligations owed to such
participant and not paid when due against any accounts or other assets of the
Borrower held by, on deposit with or in the possession of such participant. In
connection with any assignment of a Bank's interest under this Agreement which
is not a participation interest, or which would require any modification to the
Loan Documents, the Agent will be entitled to receive an administrative fee of
$3,500.00 from the assigning Bank in connection with such assignment, and the
assigning Bank or its assignee will be responsible for any additional costs,
including reasonable attorneys fees associated with any modification of the Loan
Documents.
10.05 Delays, Waivers and Amendments. No delay or omission by the Agent
or the Banks to exercise any right under this Agreement shall impair any such
right, nor shall it be construed to be a waiver thereof. No waiver of any single
breach or default under this Agreement shall be deemed a waiver of any other
breach or default. Any waiver, modification, amendment, consent or approval
relating to this Agreement or the Notes must be in writing to be effective and
must be signed by or on behalf of the Majority Banks or all the Banks as the
case may be, as provided in Section 9.04.
10.06 Costs and Expenses. The Borrower agrees to pay on demand to the
Agent and to each Bank all costs and expenses incurred by the Agent and each
Bank including, without limitation, reasonable attorneys' and consultants' fees
(a) in connection with the enforcement of this Agreement or any instrument or
agreement required hereunder or in connection with any proposed refinancing or
restructuring of the credit provided in this Agreement in the nature of a
"work-out" and (b) for all filing fees, stamp, registration and other duties and
imposts to which this Agreement and any instrument or agreement required
hereunder may be subject. The Borrower agrees to pay or to reimburse the Agent
upon demand for its reasonable attorneys' fees and other expenses incurred in
connection with the preparation, drafting and negotiation of any amendments,
consents, or waivers hereto. The Borrower shall indemnify the Agent and each
Bank against any and all liabilities and penalties resulting from any delay in
payment, or failure to pay, and such duties and imposts upon written notice from
the Agent that such amounts have been assessed.
10.07 Entire Agreement. This Agreement and any agreement, document or
instrument attached hereto or referred to herein integrate all of the terms and
conditions mentioned herein or incidental hereto, and supersede all oral
negotiations and prior writings in respect to the subject matter hereof. In the
event of any conflict between
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<PAGE> 37
the terms, conditions and provisions of this Agreement and any such agreement,
document or instrument, the terms, conditions and provisions of this Agreement
shall prevail.
10.08 Governing Law. This Agreement and all other Loan Documents
executed in connection herewith shall be governed by and construed in accordance
with the laws of the State of Indiana without reference to conflicts of laws and
principals thereunder.
10.09 Waivers. Each of the Borrower, the Agent, and the Banks hereby
(a) irrevocably waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any such litigation any special, exemplary,
punitive or consequential damages, or damages other than, or in addition to,
actual damages, provided, however, that the foregoing shall not apply to any
transaction subject to the Texas Deceptive Trade Practice Act or governed by
Chapter 6, 6A or 7 of the Texas Consumer Credit Code; (b) certifies that none of
the Agent or the Banks, nor any representative, Agent or counsel for the Agent
or the Banks has represented, expressly or otherwise, or implied, that it would
not, in the event of litigation, seek to enforce the foregoing waivers; and (c)
acknowledges that it has been induced to enter into this Agreement, the other
Loan Documents and the transactions contemplated hereby and thereby by, among
other things, the mutual waivers and certifications contained in this section.
10.10 Section Headings. Section headings are for reference only, and
shall not affect the interpretation or meanings of any provision of this
Agreement.
10.11 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any Instrument or agreement required hereunder.
10.12 Indemnity. The Borrower hereby agrees to indemnify, protect and
hold harmless the Agent, the Banks and their respective officers directors,
agents, employees, attorneys and shareholders from and against all costs and all
actions, claims (whether made or threatened), suits, liabilities, damages and
losses incurred by or imposed on the Agent, the Banks or any such officer,
director, agent, employee, attorney or shareholder in connection with or as a
result of the execution, delivery and performance of this Agreement and the use
of proceeds hereunder, provided, however, that such indemnity shall not apply to
any action by the Borrower against the Banks or any of them; and provided,
further, that the foregoing provision shall not be deemed to limit the
provisions of Section 10.06 hereof. Notwithstanding anything to the contrary in
this Section 10.12, the Borrower shall not be obligated to indemnify any such
Person for any losses, claims, damages, liabilities and expenses incurred by
such Person which have finally been determined to have resulted from gross
negligence or willful misconduct on the part of such Person. Without limiting
the generality of the foregoing, such indemnity shall extend to any and all
costs and expenses whatsoever incurred by the Banks, their officers, directors,
agents, employees, attorneys and shareholders (including, without limitation,
the reasonable cost of counsel, whether staff or otherwise and whether allocated
or out-of-pocket) in connection with investigating, preparing for or defending
against or providing evidence, producing documents or taking any action with
respect to any such action, claim (whether made or threatened and whether or not
such Bank or other indemnified person is a party to such action or claim), suit,
liability, damage or loss whether or not resulting in any liability. Each Bank
may select its own legal counsel in connection with any matters indemnified
against hereunder. This indemnity shall survive the execution, delivery and
consummation of the transactions contemplated by this Agreement. The Borrower's
obligation under this indemnity is absolute and unconditional, enforceable
against it whether or not any Advances, Competitive Bid Advances or Swing Line
Advances are ever made hereunder of any conditions of lending are ever met and
without regard to any act, omission, breach, knowledge, or event by,
attributable to, or in any manner involving any of the Banks. Payment by
Borrower in respect to a claim made by the Agent or any Bank pursuant to this
Section shall be made within fifteen (15) days after demand therefor. If and to
the extent that the foregoing undertaking may be unenforceable for any reason,
Borrower hereby agrees to make the maximum
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<PAGE> 38
contribution to the payment and satisfaction of each of the foregoing amounts
which is permissible under applicable law.
10.13 Supersedure. Upon the execution and delivery of this Agreement by
all parties hereto, this Agreement shall supersede, replace and terminate the
Original Agreement and the Other Agreement.
10.14 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute but one and
the same agreement.
10.15 JURY WAIVER. BORROWER AND BANKS HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED UPON A CONTRACT, TORT OR OTHERWISE) BETWEEN
BORROWER AND BANKS ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY
OTHER LOAN DOCUMENT, OR ANY RELATIONSHIP BETWEEN BANKS AND BORROWER. THIS
PROVISION IS A MATERIAL INDUCEMENT TO BANK TO PROVIDE THE FINANCING DESCRIBED
HEREIN OR IN OTHER LOAN DOCUMENTS.
10.16 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL COURT OR INDIANA
COURT SITTING IN INDIANAPOLIS, INDIANA IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY LOAN DOCUMENTS AND THE 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 A COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
LIMIT THE RIGHT OF THE AGENT OR ANY BANK TO BRING PROCEEDINGS AGAINST THE
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE
BORROWER AGAINST THE AGENT OR ANY BANK, OR ANY AFFILIATE OF THE AGENT OR ANY
BANK 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 INDIANAPOLIS, INDIANA.
*******************************************************************
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<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date and year first above written.
BINDLEY WESTERN INDUSTRIES, INC.
By:
-------------------------------------
Thomas J. Salentine,
Executive Vice President
Address: 8909 Purdue Road
Indianapolis, Indiana 46268
Attn: Thomas J. Salentine
Telephone: (317) 704-4000
Fax: (317) 704-4603
NATIONSBANK, N.A.
By:
-------------------------------------
Title:
----------------------------------
Address: 700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attn: Larry Gordon
Telephone: (713) 247-6619
Fax: (713) 247-6719
KEYBANK NATIONAL ASSOCIATION
By:
-------------------------------------
Title:
----------------------------------
Address: 127 Public Square
Cleveland, Ohio 44114
Attn: Frank J. Jancar
Telephone: (216) 689-4442
Fax: (216) 689-4981
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<PAGE> 40
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:
-------------------------------------
Title:
----------------------------------
Address: P.O. Box 3833
200 South Orange Avenue
Orlando, Florida 32801
Attn: Christopher A. Black
Telephone: (407) 237-2467
Fax: (407) 237-6894
NATIONAL CITY BANK OF INDIANA
By:
-------------------------------------
Title:
----------------------------------
Address: One National City Center,
Suite 200E
Indianapolis, Indiana 46255
Attn: William E. Kennedy
Telephone: (317) 267-7066
Fax: (317) 267-6249
FIFTH THIRD BANK, INDIANA
By:
-------------------------------------
Title:
----------------------------------
Address: 251 North Illinois Street
Suite 1000
Indianapolis, Indiana 46204
Attn: Jonathan O. Speers
Telephone: (317) 383-2424
Fax: (317) 383-2320
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<PAGE> 41
THE NORTHERN TRUST COMPANY
By:
-------------------------------------
Title:
----------------------------------
Address: 50 South LaSalle Street
Floor B-2
Chicago, Illinois 60675
Attn: Candalario Martinez
Telephone: (312) 557-2816
Fax: (312) 444-7028
NBD BANK, N.A.
By:
-------------------------------------
Title:
----------------------------------
Address: One Indiana Square
13th Floor
Indianapolis, Indiana 46266
Attn: Scott A. Dvornik
Telephone: (317) 266-4070
Fax: (317) 266-6042
BANK ONE, INDIANA, NA, as Agent
By:
-------------------------------------
Title:
----------------------------------
Address: 111 Monument Circle, Suite 1921
P.O. Box 7700
Indianapolis, Indiana 46277-0119
Attn: Steven J. Krakoski
Telephone: (317) 321-8354
Fax: (317) 592-5269
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<PAGE> 42
Exhibits:
A - Competitive Bid
B - Competitive Bid Request from Borrower
C - Competitive Bid Request from Agent
D-1 - D-7 - Competitive Loan Notes
E-1 - E-7 - Revolving Notes
F - Swing Line Note
G - Compliance Certificate
Schedule 1 - List of Borrower's Subsidiaries
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<PAGE> 43
EXHIBIT A
FORM OF COMPETITIVE BID
Bank One, Indiana, NA, as Agent
111 Monument Circle, Suite 1921
P.O. Box 7700
Indianapolis, Indiana 46277-0119
Attention:
Dear Sirs:
The undersigned, __________________________, refers to the Third
Amended and Restated Credit Agreement dated effective as of December 28, 1998
(the "Credit Agreement"), among Bindley Western Industries, Inc. (the
"Borrower"), the Banks named therein, and Bank One, Indiana, NA, as Agent.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement. The undersigned hereby
makes a Competitive Bid pursuant to Section 2.04(b) of the Credit Agreement, in
response to the Competitive Bid Request made by the Borrower on
____________________, 19__, and in that connection sets forth below the terms on
which such Competitive Bid is made:
(A) Principal Amount (1)
-------------------------
(B) Competitive Bid Rate
-------------------------
(C) Competitive Bid Interest Period
and Last Day Thereof
-------------------------
(D) Date of Competitive Borrowing
-------------------------
The undersigned hereby confirms that it is prepared to extend credit to
the Borrower upon acceptance by the Borrower of this bid in accordance with
Section 2.04(d) of the Credit Agreement.
Very truly yours,
[NAME OF BANK]
By:
---------------------------------
---------------------------------
(printed name and title)
- --------------------------
(1) Not less than $10,000,000.00 or greater than the available Commitment
for the Bank and in integral multiples of $1,000,000.00. Multiple bids will
be accepted by the Agent. Specify aggregate limitation if the sum of the
individual offers exceeds the amount the Bank is willing to lend.
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<PAGE> 44
EXHIBIT B
FORM OF COMPETITIVE BID REQUEST
Bank One, Indiana, NA, as Agent
111 Monument Circle, Suite 1921
P.O. Box 7700
Indianapolis, Indiana 46277-0119
Attention:_______________________
Dear Sirs:
The undersigned, Bindley Western Industries, Inc. (the "Borrower")
refers to the Third Amended and Restated Credit Agreement dated effective as of
December 28, 1998 (the "Credit Agreement") among the Borrower, the Banks named
therein, and Bank One, Indiana, NA, as Agent. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Credit Agreement. The Borrower hereby gives you notice pursuant to Section
2.04(a) of the Credit Agreement that it requests a Competitive Bid Advance under
the Credit Agreement, and, in that connection, sets forth below the terms on
which such Competitive Borrowing is requested to be made:
(A) Date of Competitive Borrowing
(which is a Banking Day)
---------------------------------
(B) Principal Amount of Competitive
Bid Advance (1)
---------------------------------
(C) Competitive Bid Interest Period
and the last day thereof (2)
---------------------------------
Upon acceptance of any or all of the Competitive Bids offered by the
Banks in response to this request, the Borrower shall be deemed to have
represented and warranted that the conditions to lending specified in Sections
4.01 and 2.04 of the Credit Agreement have been satisfied.
Very truly yours,
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
(printed name and title)
- ------------------------------
(1) Not less than $10,000,000.00 or greater than the Aggregate Commitment
and in integral multiples of $1,000,000.00.
(2) Which shall end not later than the Termination Date.
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<PAGE> 45
EXHIBIT C
FORM OF NOTICE OF COMPETITIVE BID REQUEST
- ---------------------------
- ---------------------------
- ---------------------------
(Name of Bank)
Attention:
----------------------
Dear Sirs:
Reference is made to the Third Amended and Restated Credit Agreement
dated effective as of December 28, 1998 (the "Credit Agreement") among Bindley
Western Industries, Inc. (the "Borrower"), the Banks named therein, and Bank
One, Indiana, NA, as Agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to such terms in the Credit
Agreement. The Borrower made a Competitive Bid Request on
___________________________, 199___ pursuant to Section 2.04(a) of the Credit
Agreement, and in that connection you are invited to submit a Competitive Bid by
_________________________. Your Competitive Bid must comply with Section 2.04(b)
of the Credit Agreement and the terms set forth below on which the Competitive
Bid Request was made:
(A) Date of Competitive Borrowing
----------------------------
(B) Principal amount of Competitive
Bid Advance
----------------------------
(C) Competitive Bid Interest Rate
----------------------------
(D) Competitive Bid Interest Period
and the last day thereof
----------------------------
Very truly yours,
BANK ONE, INDIANA, NA, as Agent
By:
---------------------------------
---------------------------------
(printed name and title)
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<PAGE> 46
EXHIBIT D-1
PROMISSORY NOTE
(Competitive Bid Facility)
$_______________ Indianapolis, Indiana
Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of NBD BANK,
N.A. (the "Bank") the principal sum of $______________ or so much of such
Competitive Bid Advance as may be disbursed by the Bank under the terms of the
Credit Agreement described below and remaining outstanding and unpaid, and to
pay interest on the unpaid principal balance of such Competitive Bid Advance
outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Competitive Bid Facility")
incurred or to be incurred by the Maker under a credit facility extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Competitive Bid Facility outstanding from time to
time shall be determined by reference to the books and records of the Bank on
which all Advances under the Competitive Bid Facility and all payments by the
Maker on account of the Competitive Bid Facility shall be recorded. Such books
and records shall be deemed prima facie to be correct as to such matters.
The terms "Competitive Bid Advance," "Maturity Date," and "Banking Day"
are used in this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of this Note outstanding from
time to time prior to and after the Maturity Date for such Competitive Bid
Advance will accrue at the rate or rates provided in the Credit Agreement. Prior
to the Maturity Date for such Competitive Bid Advance, accrued interest on the
outstanding principal balance of this Note shall be due and payable on such
dates as set forth in the Credit Agreement and on the Maturity Date for such
Competitive Bid Advance. After the Maturity Date for such Competitive Bid
Advance, interest shall be due and payable as accrued and without demand.
Interest will be calculated on the basis that an entire year's interest is
earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
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<PAGE> 47
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the Maturity Date for such
Competitive Bid Advance as evidenced by this Note. Reference is made to the
Credit Agreement which provides for acceleration of the maturity of the
Competitive Bid Advance evidenced by this Note upon the happening of Events of
Default as defined therein. All payments made by the Maker hereunder shall be
made for the account of the Bank at the office of Bank One, Indiana, NA located
at 111 Monument Circle, P. O. Box 7700, Indianapolis, Indiana 46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
-----------------------------
Vice President
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<PAGE> 48
EXHIBIT D-2
PROMISSORY NOTE
(Competitive Bid Facility)
$_______________ Indianapolis, Indiana
Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of NATIONSBANK,
N.A. (the "Bank") the principal sum of $______________ or so much of such
Competitive Bid Advance as may be disbursed by the Bank under the terms of the
Credit Agreement described below and remaining outstanding and unpaid, and to
pay interest on the unpaid principal balance of such Competitive Bid Advance
outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Competitive Bid Facility")
incurred or to be incurred by the Maker under a credit facility extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Competitive Bid Facility outstanding from time to
time shall be determined by reference to the books and records of the Bank on
which all Advances under the Competitive Bid Facility and all payments by the
Maker on account of the Competitive Bid Facility shall be recorded. Such books
and records shall be deemed prima facie to be correct as to such matters.
The terms "Competitive Bid Advance," "Maturity Date," and "Banking Day"
are used in this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of this Note outstanding from
time to time prior to and after the Maturity Date for such Competitive Bid
Advance will accrue at the rate or rates provided in the Credit Agreement. Prior
to the Maturity Date for such Competitive Bid Advance, accrued interest on the
outstanding principal balance of this Note shall be due and payable on such
dates as set forth in the Credit Agreement and on the Maturity Date for such
Competitive Bid Advance. After the Maturity Date for such Competitive Bid
Advance, interest shall be due and payable as accrued and without demand.
Interest will be calculated on the basis that an entire year's interest is
earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
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<PAGE> 49
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the Maturity Date for such
Competitive Bid Advance as evidenced by this Note. Reference is made to the
Credit Agreement which provides for acceleration of the maturity of the
Competitive Bid Advance evidenced by this Note upon the happening of Events of
Default as defined therein. All payments made by the Maker hereunder shall be
made for the account of the Bank at the office of Bank One, Indiana, NA located
at 111 Monument Circle, P. O. Box 7700, Indianapolis, Indiana 46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
-----------------------------------
Vice President
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<PAGE> 50
EXHIBIT D-3
PROMISSORY NOTE
(Competitive Bid Facility)
$_______________ Indianapolis, Indiana
Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of KEYBANK
NATIONAL ASSOCIATION, N.A. (the "Bank") the principal sum of $______________ or
so much of such Competitive Bid Advance as may be disbursed by the Bank under
the terms of the Credit Agreement described below and remaining outstanding and
unpaid, and to pay interest on the unpaid principal balance of such Competitive
Bid Advance outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Competitive Bid Facility")
incurred or to be incurred by the Maker under a credit facility extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Competitive Bid Facility outstanding from time to
time shall be determined by reference to the books and records of the Bank on
which all Advances under the Competitive Bid Facility and all payments by the
Maker on account of the Competitive Bid Facility shall be recorded. Such books
and records shall be deemed prima facie to be correct as to such matters.
The terms "Competitive Bid Advance," "Maturity Date," and "Banking Day"
are used in this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of this Note outstanding from
time to time prior to and after the Maturity Date for such Competitive Bid
Advance will accrue at the rate or rates provided in the Credit Agreement. Prior
to the Maturity Date for such Competitive Bid Advance, accrued interest on the
outstanding principal balance of this Note shall be due and payable on such
dates as set forth in the Credit Agreement and on the Maturity Date for such
Competitive Bid Advance. After the Maturity Date for such Competitive Bid
Advance, interest shall be due and payable as accrued and without demand.
Interest will be calculated on the basis that an entire year's interest is
earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-50-
<PAGE> 51
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the Maturity Date for such
Competitive Bid Advance as evidenced by this Note. Reference is made to the
Credit Agreement which provides for acceleration of the maturity of the
Competitive Bid Advance evidenced by this Note upon the happening of Events of
Default as defined therein. All payments made by the Maker hereunder shall be
made for the account of the Bank at the office of Bank One, Indiana, NA located
at 111 Monument Circle, P. O. Box 7700, Indianapolis, Indiana 46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
-------------------------------
Vice President
-51-
<PAGE> 52
EXHIBIT D-4
PROMISSORY NOTE
(Competitive Bid Facility)
$_______________ Indianapolis, Indiana
Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of SUNTRUST
BANK, CENTRAL FLORIDA, N.A. (the "Bank") the principal sum of $______________ or
so much of such Competitive Bid Advance as may be disbursed by the Bank under
the terms of the Credit Agreement described below and remaining outstanding and
unpaid, and to pay interest on the unpaid principal balance of such Competitive
Bid Advance outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Competitive Bid Facility")
incurred or to be incurred by the Maker under a credit facility extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Competitive Bid Facility outstanding from time to
time shall be determined by reference to the books and records of the Bank on
which all Advances under the Competitive Bid Facility and all payments by the
Maker on account of the Competitive Bid Facility shall be recorded. Such books
and records shall be deemed prima facie to be correct as to such matters.
The terms "Competitive Bid Advance," "Maturity Date," and "Banking Day"
are used in this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of this Note outstanding from
time to time prior to and after the Maturity Date for such Competitive Bid
Advance will accrue at the rate or rates provided in the Credit Agreement. Prior
to the Maturity Date for such Competitive Bid Advance, accrued interest on the
outstanding principal balance of this Note shall be due and payable on such
dates as set forth in the Credit Agreement and on the Maturity Date for such
Competitive Bid Advance. After the Maturity Date for such Competitive Bid
Advance, interest shall be due and payable as accrued and without demand.
Interest will be calculated on the basis that an entire year's interest is
earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-52-
<PAGE> 53
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the Maturity Date for such
Competitive Bid Advance as evidenced by this Note. Reference is made to the
Credit Agreement which provides for acceleration of the maturity of the
Competitive Bid Advance evidenced by this Note upon the happening of Events of
Default as defined therein. All payments made by the Maker hereunder shall be
made for the account of the Bank at the office of Bank One, Indiana, NA located
at 111 Monument Circle, P. O. Box 7700, Indianapolis, Indiana 46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
-----------------------------
Vice President
-53-
<PAGE> 54
EXHIBIT D-5
PROMISSORY NOTE
(Competitive Bid Facility)
$_______________ Indianapolis, Indiana
Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of NATIONAL CITY
BANK OF INDIANA (the "Bank") the principal sum of $______________ or so much of
such Competitive Bid Advance as may be disbursed by the Bank under the terms of
the Credit Agreement described below and remaining outstanding and unpaid, and
to pay interest on the unpaid principal balance of such Competitive Bid Advance
outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Competitive Bid Facility")
incurred or to be incurred by the Maker under a credit facility extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Competitive Bid Facility outstanding from time to
time shall be determined by reference to the books and records of the Bank on
which all Advances under the Competitive Bid Facility and all payments by the
Maker on account of the Competitive Bid Facility shall be recorded. Such books
and records shall be deemed prima facie to be correct as to such matters.
The terms "Competitive Bid Advance," "Maturity Date," and "Banking Day"
are used in this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of this Note outstanding from
time to time prior to and after the Maturity Date for such Competitive Bid
Advance will accrue at the rate or rates provided in the Credit Agreement. Prior
to the Maturity Date for such Competitive Bid Advance, accrued interest on the
outstanding principal balance of this Note shall be due and payable on such
dates as set forth in the Credit Agreement and on the Maturity Date for such
Competitive Bid Advance. After the Maturity Date for such Competitive Bid
Advance, interest shall be due and payable as accrued and without demand.
Interest will be calculated on the basis that an entire year's interest is
earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-54-
<PAGE> 55
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the Maturity Date for such
Competitive Bid Advance as evidenced by this Note. Reference is made to the
Credit Agreement which provides for acceleration of the maturity of the
Competitive Bid Advance evidenced by this Note upon the happening of Events of
Default as defined therein. All payments made by the Maker hereunder shall be
made for the account of the Bank at the office of Bank One, Indiana, NA located
at 111 Monument Circle, P. O. Box 7700, Indianapolis, Indiana 46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
Vice President
-55-
<PAGE> 56
EXHIBIT D-6
PROMISSORY NOTE
(Competitive Bid Facility)
$_______________ Indianapolis, Indiana
Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of FIFTH THIRD
BANK, INDIANA (the "Bank") the principal sum of $______________ or so much of
such Competitive Bid Advance as may be disbursed by the Bank under the terms of
the Credit Agreement described below and remaining outstanding and unpaid, and
to pay interest on the unpaid principal balance of such Competitive Bid Advance
outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Competitive Bid Facility")
incurred or to be incurred by the Maker under a credit facility extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Competitive Bid Facility outstanding from time to
time shall be determined by reference to the books and records of the Bank on
which all Advances under the Competitive Bid Facility and all payments by the
Maker on account of the Competitive Bid Facility shall be recorded. Such books
and records shall be deemed prima facie to be correct as to such matters.
The terms "Competitive Bid Advance," "Maturity Date," and "Banking Day"
are used in this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of this Note outstanding from
time to time prior to and after the Maturity Date for such Competitive Bid
Advance will accrue at the rate or rates provided in the Credit Agreement. Prior
to the Maturity Date for such Competitive Bid Advance, accrued interest on the
outstanding principal balance of this Note shall be due and payable on such
dates as set forth in the Credit Agreement and on the Maturity Date for such
Competitive Bid Advance. After the Maturity Date for such Competitive Bid
Advance, interest shall be due and payable as accrued and without demand.
Interest will be calculated on the basis that an entire year's interest is
earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-56-
<PAGE> 57
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the Maturity Date for such
Competitive Bid Advance as evidenced by this Note. Reference is made to the
Credit Agreement which provides for acceleration of the maturity of the
Competitive Bid Advance evidenced by this Note upon the happening of Events of
Default as defined therein. All payments made by the Maker hereunder shall be
made for the account of the Bank at the office of Bank One, Indiana, NA located
at 111 Monument Circle, P. O. Box 7700, Indianapolis, Indiana 46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
Vice President
-57-
<PAGE> 58
EXHIBIT D-7
PROMISSORY NOTE
(Competitive Bid Facility)
$_______________ Indianapolis, Indiana
Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of THE NORTHERN
TRUST COMPANY (the "Bank") the principal sum of $______________ or so much of
such Competitive Bid Advance as may be disbursed by the Bank under the terms of
the Credit Agreement described below and remaining outstanding and unpaid, and
to pay interest on the unpaid principal balance of such Competitive Bid Advance
outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Competitive Bid Facility")
incurred or to be incurred by the Maker under a credit facility extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Competitive Bid Facility outstanding from time to
time shall be determined by reference to the books and records of the Bank on
which all Advances under the Competitive Bid Facility and all payments by the
Maker on account of the Competitive Bid Facility shall be recorded. Such books
and records shall be deemed prima facie to be correct as to such matters.
The terms "Competitive Bid Advance," "Maturity Date," and "Banking Day"
are used in this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of this Note outstanding from
time to time prior to and after the Maturity Date for such Competitive Bid
Advance will accrue at the rate or rates provided in the Credit Agreement. Prior
to the Maturity Date for such Competitive Bid Advance, accrued interest on the
outstanding principal balance of this Note shall be due and payable on such
dates as set forth in the Credit Agreement and on the Maturity Date for such
Competitive Bid Advance. After the Maturity Date for such Competitive Bid
Advance, interest shall be due and payable as accrued and without demand.
Interest will be calculated on the basis that an entire year's interest is
earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-58-
<PAGE> 59
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the Maturity Date for such
Competitive Bid Advance as evidenced by this Note. Reference is made to the
Credit Agreement which provides for acceleration of the maturity of the
Competitive Bid Advance evidenced by this Note upon the happening of Events of
Default as defined therein. All payments made by the Maker hereunder shall be
made for the account of the Bank at the office of Bank One, Indiana, NA located
at 111 Monument Circle, P. O. Box 7700, Indianapolis, Indiana 46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
Vice President
-59-
<PAGE> 60
EXHIBIT E - 1
PROMISSORY NOTE
(Revolving Credit)
Indianapolis, Indiana
$37,500,000.00 Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of NBD BANK,
N.A. (the "Bank") the principal sum of Thirty-Seven Million Five Hundred
Thousand and No/100 Dollars ($37,500,000.00) or so much of the unpaid principal
amount of each Advance represented by this Note as may be disbursed by the Bank
under the terms of the Credit Agreement described below and remaining
outstanding and unpaid, and to pay interest on the unpaid principal balance of
each Advance outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Revolving Credit") incurred or
to be incurred by the Maker under a revolving line of credit extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Revolving Credit outstanding from time to time shall
be determined by reference to the books and records of the Bank on which all
Advances under the Revolving Credit and all payments by the Maker on account of
the Revolving Credit shall be recorded. Such books and records shall be deemed
prima facie to be correct as to such matters.
The terms "Advance," "Maturity Date," and "Banking Day" are used in
this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of each Advance outstanding
from time to time prior to and after the Maturity Date for such Advance will
accrue at the rate or rates provided in the Credit Agreement. Prior to the
Maturity Date for such Advance, accrued interest on each Advance shall be due
and payable on such dates as set forth in the Credit Agreement and on the
Maturity Date for such Advance. After the Maturity Date for such Advance,
interest shall be due and payable as accrued and without demand. Interest will
be calculated on the basis that an entire year's interest is earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-60-
<PAGE> 61
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the respective Maturity Date for
each such Advance. Reference is made to the Credit Agreement which provides for
acceleration of the maturity of all Advances evidenced by this Note upon the
happening of Events of Default as defined therein. All payments made by the
Maker hereunder shall be made for the account of the Bank at the office of Bank
One, Indiana, NA, 111 Monument Circle, P.O. Box 7700, Indianapolis, Indiana
46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
Thomas J. Salentine, Executive
Vice President
-61-
<PAGE> 62
EXHIBIT E - 2
PROMISSORY NOTE
(Revolving Credit)
Indianapolis, Indiana
$22,000,000.00 Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of NATIONSBANK,
N.A. (the "Bank") the principal sum of Twenty-Two Million and No/100 Dollars
($22,000,000.00) or so much of the unpaid principal amount of each Advance
represented by this Note as may be disbursed by the Bank under the terms of the
Credit Agreement described below and remaining outstanding and unpaid, and to
pay interest on the unpaid principal balance of each Advance outstanding from
time to time as provided in this Note.
This Note evidences indebtedness (the "Revolving Credit") incurred or
to be incurred by the Maker under a revolving line of credit extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Revolving Credit outstanding from time to time shall
be determined by reference to the books and records of the Bank on which all
Advances under the Revolving Credit and all payments by the Maker on account of
the Revolving Credit shall be recorded. Such books and records shall be deemed
prima facie to be correct as to such matters.
The terms "Advance," "Maturity Date," and "Banking Day" are used in
this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of each Advance outstanding
from time to time prior to and after the Maturity Date for such Advance will
accrue at the rate or rates provided in the Credit Agreement. Prior to the
Maturity Date for such Advance, accrued interest on each Advance shall be due
and payable on such dates as set forth in the Credit Agreement and on the
Maturity Date for such Advance. After the Maturity Date for such Advance,
interest shall be due and payable as accrued and without demand. Interest will
be calculated on the basis that an entire year's interest is earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-62-
<PAGE> 63
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the respective Maturity Date for
each such Advance. Reference is made to the Credit Agreement which provides for
acceleration of the maturity of all Advances evidenced by this Note upon the
happening of Events of Default as defined therein. All payments made by the
Maker hereunder shall be made for the account of the Bank at the office of Bank
One, Indiana, NA, 111 Monument Circle, P.O. Box 7700, Indianapolis, Indiana
46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
Thomas J. Salentine, Executive
Vice President
-63-
<PAGE> 64
EXHIBIT E - 3
PROMISSORY NOTE
(Revolving Credit)
Indianapolis, Indiana
$31,000,000.00 Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of KEYBANK
NATIONAL ASSOCIATION (the "Bank") the principal sum of Thirty-One Million and
No/100 Dollars ($31,000,000.00) or so much of the unpaid principal amount of
each Advance represented by this Note as may be disbursed by the Bank under the
terms of the Credit Agreement described below and remaining outstanding and
unpaid, and to pay interest on the unpaid principal balance of each Advance
outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Revolving Credit") incurred or
to be incurred by the Maker under a revolving line of credit extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Revolving Credit outstanding from time to time shall
be determined by reference to the books and records of the Bank on which all
Advances under the Revolving Credit and all payments by the Maker on account of
the Revolving Credit shall be recorded. Such books and records shall be deemed
prima facie to be correct as to such matters.
The terms "Advance," "Maturity Date," and "Banking Day" are used in
this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of each Advance outstanding
from time to time prior to and after the Maturity Date for such Advance will
accrue at the rate or rates provided in the Credit Agreement. Prior to the
Maturity Date for such Advance, accrued interest on each Advance shall be due
and payable on such dates as set forth in the Credit Agreement and on the
Maturity Date for such Advance. After the Maturity Date for such Advance,
interest shall be due and payable as accrued and without demand. Interest will
be calculated on the basis that an entire year's interest is earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-64-
<PAGE> 65
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the respective Maturity Date for
each such Advance. Reference is made to the Credit Agreement which provides for
acceleration of the maturity of all Advances evidenced by this Note upon the
happening of Events of Default as defined therein. All payments made by the
Maker hereunder shall be made for the account of the Bank at the office of Bank
One, Indiana, NA, 111 Monument Circle, P.O. Box 7700, Indianapolis, Indiana
46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
Thomas J. Salentine, Executive
Vice President
-65-
<PAGE> 66
EXHIBIT E - 4
PROMISSORY NOTE
(Revolving Credit)
Indianapolis, Indiana
$35,000,000.00 Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of SUNTRUST
BANK, CENTRAL FLORIDA, N.A. (the "Bank") the principal sum of Thirty-Five
Million and No/100 Dollars ($35,000,000.00) or so much of the unpaid principal
amount of each Advance represented by this Note as may be disbursed by the Bank
under the terms of the Credit Agreement described below and remaining
outstanding and unpaid, and to pay interest on the unpaid principal balance of
each Advance outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Revolving Credit") incurred or
to be incurred by the Maker under a revolving line of credit extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Revolving Credit outstanding from time to time shall
be determined by reference to the books and records of the Bank on which all
Advances under the Revolving Credit and all payments by the Maker on account of
the Revolving Credit shall be recorded. Such books and records shall be deemed
prima facie to be correct as to such matters.
The terms "Advance," "Maturity Date," and "Banking Day" are used in
this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of each Advance outstanding
from time to time prior to and after the Maturity Date for such Advance will
accrue at the rate or rates provided in the Credit Agreement. Prior to the
Maturity Date for such Advance, accrued interest on each Advance shall be due
and payable on such dates as set forth in the Credit Agreement and on the
Maturity Date for such Advance. After the Maturity Date for such Advance,
interest shall be due and payable as accrued and without demand. Interest will
be calculated on the basis that an entire year's interest is earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-66-
<PAGE> 67
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the respective Maturity Date for
each such Advance. Reference is made to the Credit Agreement which provides for
acceleration of the maturity of all Advances evidenced by this Note upon the
happening of Events of Default as defined therein. All payments made by the
Maker hereunder shall be made for the account of the Bank at the office of Bank
One, Indiana, NA, 111 Monument Circle, P.O. Box 7700, Indianapolis, Indiana
46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
Thomas J. Salentine, Executive
Vice President
-67-
<PAGE> 68
EXHIBIT E - 5
PROMISSORY NOTE
(Revolving Credit)
Indianapolis, Indiana
$20,000,000.00 Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of NATIONAL CITY
BANK OF INDIANA (the "Bank") the principal sum of Twenty Million and No/100
Dollars ($20,000,000.00) or so much of the unpaid principal amount of each
Advance represented by this Note as may be disbursed by the Bank under the terms
of the Credit Agreement described below and remaining outstanding and unpaid,
and to pay interest on the unpaid principal balance of each Advance outstanding
from time to time as provided in this Note.
This Note evidences indebtedness (the "Revolving Credit") incurred or
to be incurred by the Maker under a revolving line of credit extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Revolving Credit outstanding from time to time shall
be determined by reference to the books and records of the Bank on which all
Advances under the Revolving Credit and all payments by the Maker on account of
the Revolving Credit shall be recorded. Such books and records shall be deemed
prima facie to be correct as to such matters.
The terms "Advance," "Maturity Date," and "Banking Day" are used in
this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of each Advance outstanding
from time to time prior to and after the Maturity Date for such Advance will
accrue at the rate or rates provided in the Credit Agreement. Prior to the
Maturity Date for such Advance, accrued interest on each Advance shall be due
and payable on such dates as set forth in the Credit Agreement and on the
Maturity Date for such Advance. After the Maturity Date for such Advance,
interest shall be due and payable as accrued and without demand. Interest will
be calculated on the basis that an entire year's interest is earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-68-
<PAGE> 69
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the respective Maturity Date for
each such Advance. Reference is made to the Credit Agreement which provides for
acceleration of the maturity of all Advances evidenced by this Note upon the
happening of Events of Default as defined therein. All payments made by the
Maker hereunder shall be made for the account of the Bank at the office of Bank
One, Indiana, NA, 111 Monument Circle, P.O. Box 7700, Indianapolis, Indiana
46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
Thomas J. Salentine, Executive
Vice President
-69-
<PAGE> 70
EXHIBIT E - 6
PROMISSORY NOTE
(Revolving Credit)
Indianapolis, Indiana
$9,000,000.00 Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of FIFTH THIRD
BANK, INDIANA (the "Bank") the principal sum of Nine Million and No/100 Dollars
($9,000,000.00) or so much of the unpaid principal amount of each Advance
represented by this Note as may be disbursed by the Bank under the terms of the
Credit Agreement described below and remaining outstanding and unpaid, and to
pay interest on the unpaid principal balance of each Advance outstanding from
time to time as provided in this Note.
This Note evidences indebtedness (the "Revolving Credit") incurred or
to be incurred by the Maker under a revolving line of credit extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Revolving Credit outstanding from time to time shall
be determined by reference to the books and records of the Bank on which all
Advances under the Revolving Credit and all payments by the Maker on account of
the Revolving Credit shall be recorded. Such books and records shall be deemed
prima facie to be correct as to such matters.
The terms "Advance," "Maturity Date," and "Banking Day" are used in
this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of each Advance outstanding
from time to time prior to and after the Maturity Date for such Advance will
accrue at the rate or rates provided in the Credit Agreement. Prior to the
Maturity Date for such Advance, accrued interest on each Advance shall be due
and payable on such dates as set forth in the Credit Agreement and on the
Maturity Date for such Advance. After the Maturity Date for such Advance,
interest shall be due and payable as accrued and without demand. Interest will
be calculated on the basis that an entire year's interest is earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-70-
<PAGE> 71
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the respective Maturity Date for
each such Advance. Reference is made to the Credit Agreement which provides for
acceleration of the maturity of all Advances evidenced by this Note upon the
happening of Events of Default as defined therein. All payments made by the
Maker hereunder shall be made for the account of the Bank at the office of Bank
One, Indiana, NA, 111 Monument Circle, P.O. Box 7700, Indianapolis, Indiana
46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
Thomas J. Salentine, Executive
Vice President
-71-
<PAGE> 72
EXHIBIT E - 7
PROMISSORY NOTE
(Revolving Credit)
Indianapolis, Indiana
$20,000,000.00 Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of THE NORTHERN
TRUST COMPANY (the "Bank") the principal sum of Twenty Million and No/100
Dollars ($20,000,000.00) or so much of the unpaid principal amount of each
Advance represented by this Note as may be disbursed by the Bank under the terms
of the Credit Agreement described below and remaining outstanding and unpaid,
and to pay interest on the unpaid principal balance of each Advance outstanding
from time to time as provided in this Note.
This Note evidences indebtedness (the "Revolving Credit") incurred or
to be incurred by the Maker under a revolving line of credit extended to the
Maker by the Bank under that certain Third Amended and Restated Credit Agreement
dated as of the date of this Note, among the Maker, the Bank, the other banks
party thereto, and Bank One, Indiana, NA, as Agent (as from time to time
amended, supplemented, replaced or otherwise modified, the "Credit Agreement").
The principal amount of the Revolving Credit outstanding from time to time shall
be determined by reference to the books and records of the Bank on which all
Advances under the Revolving Credit and all payments by the Maker on account of
the Revolving Credit shall be recorded. Such books and records shall be deemed
prima facie to be correct as to such matters.
The terms "Advance," "Maturity Date," and "Banking Day" are used in
this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of each Advance outstanding
from time to time prior to and after the Maturity Date for such Advance will
accrue at the rate or rates provided in the Credit Agreement. Prior to the
Maturity Date for such Advance, accrued interest on each Advance shall be due
and payable on such dates as set forth in the Credit Agreement and on the
Maturity Date for such Advance. After the Maturity Date for such Advance,
interest shall be due and payable as accrued and without demand. Interest will
be calculated on the basis that an entire year's interest is earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-72-
<PAGE> 73
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the respective Maturity Date for
each such Advance. Reference is made to the Credit Agreement which provides for
acceleration of the maturity of all Advances evidenced by this Note upon the
happening of Events of Default as defined therein. All payments made by the
Maker hereunder shall be made for the account of the Bank at the office of Bank
One, Indiana, NA, 111 Monument Circle, P.O. Box 7700, Indianapolis, Indiana
46277-0119.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
Thomas J. Salentine, Executive
Vice President
-73-
<PAGE> 74
EXHIBIT F
PROMISSORY NOTE
(Swing Line)
Indianapolis, Indiana
$20,000,000.00 Dated: December 28, 1998
Maturity: December 27, 1999
On or before December 27, 1999, BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation (the "Maker"), promises to pay to the order of NBD BANK,
N.A. (the "Bank") the principal sum of Twenty Million Dollars ($20,000,000.00)
or so much of the unpaid principal amount of each Swing Line Advance represented
by this Note as may be disbursed by the Bank under the terms of the Credit
Agreement described below and remaining outstanding and unpaid, and to pay
interest on the unpaid principal balance of each Swing Line Advance outstanding
from time to time as provided in this Note.
This Note evidences indebtedness (the "Swing Line") incurred or to be
incurred by the Maker under a revolving line of credit extended to the Maker by
the Bank under that certain Third Amended and Restated Credit Agreement dated as
of the date of this Note, among the Maker, the Bank, the other banks party
thereto, and Bank One, Indiana, NA, as Agent (as from time to time amended,
supplemented, replaced or otherwise modified, the "Credit Agreement"). The
principal amount of the Swing Line outstanding from time to time shall be
determined by reference to the books and records of the Bank on which all Swing
Line Advances under the Swing Line and all payments by the Maker on account of
the Swing Line shall be recorded. Such books and records shall be deemed prima
facie to be correct as to such matters.
The terms "Swing Line Advance," "Maturity Date," and "Banking Day" are
used in this Note as defined in the Credit Agreement.
Interest on the unpaid principal balance of each Swing Line Advance
outstanding from time to time prior to and after the Maturity Date for such
Swing Line Advance will accrue at the rate or rates provided in the Credit
Agreement. Prior to the Maturity Date for such Swing Line Advance, accrued
interest on each Swing Line Advance shall be due and payable on such dates as
set forth in the Credit Agreement and on the Maturity Date for such Swing Line
Advance. After the Maturity Date for such Swing Line Advance, interest shall be
due and payable as accrued and without demand. Interest will be calculated on
the basis that an entire year's interest is earned in 360 days.
Notwithstanding any other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum amount of interest which, under applicable law, may be charged hereon to
the Maker, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully sets out the limitations on how interest
accrues hereon. In the event applicable law provides for a rate ceiling, that
ceiling shall be the indicated rate ceiling and shall be used in this Note for
calculating the maximum interest rate at which interest may be charged hereon
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the state in which the principal office of the Bank or any
holder is located, or the laws of the United States, whichever laws allow the
greater interest, as such laws now exist or may be changed or amended or come
into effect in the future.
-74-
<PAGE> 75
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, on the respective Maturity Date for
each such Swing Line Advance. Reference is made to the Credit Agreement which
provides for acceleration of the maturity of all Swing Line Advances evidenced
by this Note upon the happening of Events of Default as defined therein. All
payments made by the Maker hereunder shall be made for the account of the Bank
at the office NBD Bank, N.A., One Indiana Square, Suite 7034, Indianapolis,
Indiana 46266.
All payments on account of this Note shall be applied first to expenses
of collection, next to interest which is due and payable, and only after
satisfaction of all such expenses and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note may be prepaid only upon the conditions and at such times as
provided in the Credit Agreement.
This Note is made under and will be governed by the laws of the State
of Indiana without reference to conflicts of law and principles thereunder.
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
Thomas J. Salentine, Executive
Vice President
-75-
<PAGE> 76
EXHIBIT G
COMPLIANCE CERTIFICATE
I represent that I am the [chief executive officer or chief financial
officer] of BINDLEY WESTERN INDUSTRIES, INC. ("Borrower") and pursuant to the
terms of the Third Amended and Restated Credit Agreement dated effective
December __, 1998 by and among the Borrower and the Banks which are parties
thereto, I certify that:
1. Each of the representations contained in Sections 5.01 through
5.12, inclusive, and 5.15 of the Credit Agreement are true and
correct as of the date of this Officer's Certificate.
2. The financial statements of the Borrower as of , 199 , and for the
fiscal year then ended, and the financial statements as of , 199 ,
and for the partial fiscal year then ended, present fairly the
financial condition of the Borrower and the results of its
operations as of the dates of such statements and for the fiscal
periods then ended, and since the date of the latest of such
statements there has been no material adverse change in its
financial position or its operations.
3. No Default, as such term is defined in the Credit Agreement, has
occurred and is continuing.
4. Computation of Borrower's compliance with each of the financial
covenants as contained in the Credit Agreement is set forth below:
<TABLE>
<CAPTION>
Net Worth (Section 6.09) Current Requirement
--------- -------------------
<S> <C>
1. Total Assets ________
2. Total Liabilities, Reserves and Minority Interest ________
3. Line 1 minus Line 2 ________ $275,000,000
Total Debt to EBITDA (Section 6.10)
1. Total Debt ________
2. EBITDA ________
3. Line 1 divided by Line 2 ________ 3.50 to 1.0
Interest Coverage Ratio (Section 6.11)
1. Net Income (excluding all extraordinary
gains and losses) _______
2. Income Taxes _______
3. Interest Expense _______
4. Line 1 plus Lines 2 and 3 _______
5. Interest Expense (same as Line 3) _______
6. Line 4 divided by Line 5 _______ 2.50 to 1.0
</TABLE>
-76-
<PAGE> 77
BINDLEY WESTERN INDUSTRIES, INC.
By:
------------------------------
------------------------------
(Printed Name and Title)
Date:
----------------------------
-77-
<PAGE> 78
SCHEDULE 1
LIST OF BORROWER'S SUBSIDIARIES EFFECTIVE AS OF DECEMBER 31, 1998
1. BW Food Distributors, Inc. - Salem, New Hampshire
2. BW Transportation Services, Inc. - Indianapolis, Indiana
3. Special Services Company - Orange, Connecticut
4. Priority Healthcare Services Corporation - Indianapolis, Indiana
5. College Park Plaza Associates, Inc. - Indianapolis, Indiana
6. Bindley Western Funding Corporation - Woodland, California (a Delaware
Corporation)
NOTE: All are Indiana corporations except as otherwise noted.
<PAGE> 1
EXHIBIT 4-B
EXECUTION COPY
RECEIVABLES PURCHASE AGREEMENT
Dated as of December 28, 1998
Among
BINDLEY WESTERN FUNDING CORPORATION
as Seller
and
FALCON ASSET SECURITIZATION CORPORATION,
and
THE FINANCIAL INSTITUTIONS PARTY HERETO,
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
-44-
<PAGE> 2
BINDLEY WESTERN FUNDING CORPORATION
RECEIVABLES PURCHASE AGREEMENT
This Receivables Purchase Agreement dated as of December 28, 1998 is among
Bindley Western Funding Corporation, a Delaware corporation (the "Seller"), the
Investors, Falcon Asset Securitization Corporation ("Falcon") and The First
National Bank of Chicago, as Agent. Unless defined elsewhere herein, capitalized
terms used in this Agreement shall have the meanings assigned to such terms in
Exhibit I hereto.
PRELIMINARY STATEMENTS
The Seller desires to transfer and assign Receivable Interests to the Purchasers
from time to time.
Falcon may, in its absolute and sole discretion, purchase Receivable Interests
from the Seller from time to time.
The Investors shall, at the request of the Seller, purchase Receivable Interests
from time to time. In addition, the Investors have agreed to provide a liquidity
facility to Falcon.
The First National Bank of Chicago has been requested and is willing to act as
Agent on behalf of Falcon and the Investors in accordance with the terms hereof.
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility. (a) Upon the terms and subject to the conditions
hereof, the Seller may, at its option, sell and assign Receivable Interests to
the Agent for the benefit of the Purchasers up to four times per calendar month.
Falcon may, at its option, instruct the Agent to purchase on behalf of Falcon,
or if Falcon shall decline to purchase, the Agent shall purchase on behalf of
the Investors, Receivable Interests from time to time during the period from the
date hereof to but not including the Termination Date. The Seller hereby
assigns, transfers and conveys to the Agent for the benefit of the relevant
Purchaser or Purchasers, and the Agent hereby acquires, effective upon the
receipt of the Seller of the Purchase Price therefor, all of the Seller's right,
title and interest in and to the Receivable Interests.
(b) The Seller may, upon at least thirty days' prior notice to the Agent,
terminate in whole or reduce in part ratably among the Investors the unused
portion of the Purchase
<PAGE> 3
Limit; provided that each partial reduction of the Purchase Limit shall be in an
amount equal to $5,000,000 or an integral multiple thereof.
Section 1.2. Making Purchases. (a) The Seller shall provide the Agent with a
purchase notice, in substantially the form of Exhibit IX hereto (each a
"Purchase Notice"), at least (i) three Business Days prior to the date of an
Incremental Purchase in the event the applicable Discount Rate is requested to
be the LIBO Rate, (ii) two Business Days prior to the date of an Incremental
Purchase in the event the applicable Discount Rate is requested to be the CP
Rate and (iii) one Business Day prior to the date of an Incremental Purchase in
the event the applicable Discount Rate is requested to be the Base Rate. Each
Purchase Notice shall, except as set forth below, be irrevocable and shall
specify the requested Purchase Price (which shall not be less than $1,000,000,
and shall be an integral multiple of $100,000) and date of purchase, together
with the duration of the initial Tranche Period and the initial Discount Rate
related thereto. Following receipt of a Purchase Notice, the Agent will
determine whether Falcon agrees to make the purchase. If Falcon declines to make
a proposed purchase, the Seller may cancel the Purchase Notice or the
Incremental Purchase of the Receivable Interests will be made by the Investors.
(b) On the date of each Incremental Purchase, upon
satisfaction of the applicable conditions precedent set forth in Article IV,
Falcon or each Investor, as applicable, shall deposit to the Facility Account,
in immediately available funds, no later than 12:00 noon (Chicago time), an
amount equal to (i) in the case of Falcon, the aggregate Purchase Price of each
Receivable Interests Falcon is then purchasing or (ii) in the case of an
Investor, such Investor's Pro Rata Share of the aggregate Purchase Price of each
of the Receivable Interests the Investors are purchasing.
Section 1.3. Selection of Tranche Periods and Discount Rates. (a) Each
Receivable Interest shall at all times have an associated amount of Capital, a
Discount Rate and Tranche Period applicable to it. Not less than $10,000,000 of
Capital may be allocated to any single Receivable Interest. The Seller shall
request Discount Rates and Tranche Periods for the Receivable Interests of the
Purchasers. The Seller may select the CP Rate (with the concurrence of the
Agent) or the Base Rate for the Receivable Interests of Falcon and the LIBO Rate
or the Base Rate for the Receivable Interests of the Investors. In the case of
any Tranche Period with respect to which either the LIBO Rate or the Base Rate
applies, the Seller shall by 9:00 a.m. (Chicago time), (i) at least three
Business Days prior to the expiration of any then existing Tranche Period with
respect to which the LIBO Rate is being requested as a new Discount Rate and
(ii) at least one Business Day prior to the expiration of any Tranche Period
with respect to which the Base Rate is being requested as a new Discount Rate,
give the Agent irrevocable notice of the new Tranche Period and Discount Rate
for the Receivable Interest associated with such expiring Tranche Period. In the
case of any Tranche Period with respect to which the CP Rate applies, unless the
Agent shall otherwise direct, or the Seller shall otherwise request (i) at least
three Business Days prior to the expiration of such Tranche Period with respect
to which the LIBO Rate is being
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requested as a new Discount Rate and (ii) at least one Business Days prior to
the expiration of such Tranche Period with respect to which the Base Rate is
being requested as a new Discount Rate, a new Tranche Period with respect to
which the CP Rate applies shall automatically commence at the expiration of such
existing Tranche Period. Until the Seller gives notice to the Agent of another
Discount Rate, the initial Discount Rate for any Receivable Interest transferred
to the Investors pursuant to Section 2.1 shall be the Base Rate.
(b) If any Purchaser notifies the Agent that it has determined that funding all
or any portion of any Receivable Interest at a LIBO Rate would violate any
applicable law, rule, regulation, or directive, whether or not having the force
of law, or that (i) deposits of a type and maturity appropriate to match fund
its Receivable Interests at such LIBO Rate are not available or (ii) such LIBO
Rate does not accurately reflect the cost of acquiring or maintaining a
Receivable Interest at such LIBO Rate, then the Agent shall suspend the
availability of such LIBO Rate and require the Seller to select a new Discount
Rate for any Receivable Interest accruing Discount at such LIBO Rate.
Section 1.4. Percentage Evidenced by Receivable Interests. Each Receivable
Interest shall be initially computed on its date of purchase. Thereafter, until
its Liquidation Day, each Receivable Interest shall be automatically recomputed
(or deemed to be recomputed) on each day prior to its Liquidation Day. The
variable percentage represented by any Receivable Interest as computed (or
deemed recomputed) as of the close of business on the day immediately preceding
its Liquidation Day shall remain constant at all times after such Liquidation
Day.
Section 1.5. Dividing or Combining Receivable Interests. The Seller or the Agent
may, upon notice to and consent by the other received at least three Business
Days prior to the end of a Tranche Period for any Receivable Interest, take any
of the following actions with respect to such Receivable Interest: (i) divide
the Receivable Interest into two or more Receivable Interests having aggregate
Capital equal to the Capital of such divided Receivable Interest, (ii) combine
the Receivable Interest with another Receivable Interest with a Tranche Period
ending on the same day, creating a new Receivable Interest having Capital equal
to the Capital of the two Receivable Interests combined or (iii) combine the
Receivable Interest with a Receivable Interest to be purchased on such day by
such Purchaser, creating a new Receivable Interest having Capital equal to the
Capital of the two Receivable Interests combined, provided that, a Receivable
Interest of Falcon may not be combined with a Receivable Interest of the
Investors.
Section 1.6. Reinvestment Purchases. Subject to Section 1.12 and Section 4.2, at
any time that any Collection or Collections are received by the Servicer after
the initial purchase of a Receivable Interest hereunder and on or prior to the
Liquidation Day of such Receivable Interest, the Seller hereby requests and the
Purchasers hereby agree to make, simultaneously with such receipt, a
reinvestment (each a "Reinvestment") with that portion of each and every
Collection received by the Servicer that is part of such
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Receivable Interest, such that after giving effect to such Reinvestment, the
amount of the Capital of such Receivable Interest immediately after any such
receipt and corresponding Reinvestment shall be equal to the amount of the
Capital immediately prior to such receipt.
Section 1.7. Liquidation Settlement Procedures. On the Liquidation Day of a
Receivable Interest and on each day thereafter, and on each day during a
Commitment Reduction Period, the Servicer shall set aside and hold in trust for
the holder of such Receivable Interest, the percentage evidenced by such
Receivable Interest of Collections received on such day. On each Settlement Date
after the occurrence of the Liquidation Day in respect of such Receivable
Interest, the Servicer shall remit to the Agent's account the amounts set aside
pursuant to the preceding sentence, together with any remaining amounts set
aside pursuant to Section 1.8 prior to such day, but not to exceed the sum of
(i) the accrued Discount or Funding Charges for, and Servicing Fee allocable to,
such Receivable Interest, (ii) the Capital of such Receivable Interest, and
(iii) the aggregate of all other amounts then owed hereunder by Seller to the
Purchasers. If there shall be insufficient funds on deposit for the Servicer to
distribute funds in payment in full of the aforementioned amounts, the Servicer
shall distribute funds first, to reimbursement of the Agent's costs of
collection and enforcement of this Agreement, second, to enable the applicable
Purchasers to pay their allocable portion of the accrued Servicing Fee, third,
in reduction of the Capital of the Receivable Interests, fourth, in payment of
all accrued Discount and Funding Charges for the Receivable Interests and fifth,
in payment of all other amounts payable to the Purchasers. Subject to Section
1.12, collections allocated to the Receivable Interests of the Investors shall
be shared ratably by the Investors in accordance with their Pro Rata Shares.
Collections applied to the payment of fees, expenses, Discount, Funding Charges
and all other amounts payable by the Seller to the Agent and the Purchasers
hereunder shall be allocated ratably among the Agent and the Purchasers in
accordance with such amounts owing to each of them. Following the date on which
the Aggregate Unpaids are reduced to zero, the Servicer shall pay to Seller any
remaining Collections set aside and held by the Servicer pursuant to this
Section 1.7.
Section 1.8. Deemed Collections. If on any day the Outstanding Balance of a
Receivable is either (x) reduced as a result of any defective or rejected goods
or services, any Unauthorized Deductions, Adjustments, any cash discount or any
other adjustment by the Seller, the Originator, the Transferor or the Servicer,
(y) reduced or canceled as a result of a setoff in respect of any claim by any
Person (whether such claim arises out of the same or a related transaction or an
unrelated transaction) or (z) reduced or canceled and re-billed, the Seller
shall be deemed to have received on such day a Collection of such Receivable in
the amount of such reduction or cancellation. If on any day any of the
representations or warranties in Article III are no longer true with respect to
a Receivable, the Seller shall be deemed to have received on such day a
Collection of such Receivable in full. If the Seller receives any Collections or
is deemed to receive Collections pursuant to this Section 1.8 or otherwise, the
Seller shall immediately pay such Collections or deemed Collections to the
Servicer and, at all
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times prior to such payment, such Collections shall be held in trust by the
Seller for the exclusive benefit of the Purchasers and the Agent.
Section 1.9. Discount and Funding Charges; Payments and Computations, Etc. (a)
Funding Charges shall accrue for each Receivable Interest for which the CP Rate
applies for each day occurring during the Tranche Period for such Receivable
Interest. Each Receivable Interest for which the CP Rate applies shall be funded
substantially with Pooled Commercial Paper and will accrue Funding Charges each
day based on the Pooled Allocation; provided, however, that each Receivable
Interest funded substantially with Specially Pooled Paper (in accordance with
Section 1.9(b) hereof) will accrue Funding Charges each day based on the
Specially Pooled Allocation. Discount shall accrue for each Receivable Interest
for which either the LIBO Rate or Base Rate applies for each day occurring
during the Tranche Period for such Receivable Interest. On each Settlement Date,
the Seller shall pay to the Agent an amount equal to the accrued and unpaid
Discount and Funding Charges for the immediately preceding Accrual Period in
respect of all Receivable Interests at such time.
(b) If the Seller shall request any Incremental Purchase with respect to which
the applicable Discount Rate is the CP Rate during any Special Pooled Period,
the Capital associated with any such Incremental Purchase shall be deemed to be
funded by Falcon with Specially Pooled Paper, and shall be aggregated by Falcon
with any other Specially Pooled Paper outstanding at the time of such
Incremental Purchase for purposes of determining the Funding Charges applicable
to such Incremental Purchase. Each such Incremental Purchase shall be deemed to
be funded with Specially Pooled Paper until the end of the Special Pooled Period
during which any such Incremental Purchase occurred.
(c) Notwithstanding any limitation on recourse contained in this Agreement, the
Seller shall pay to the Agent, for the account of the relevant Purchasers, such
fees as set forth in the Fee Letter, all amounts payable as Discount, all
amounts payable as Funding Charges, all amounts payable pursuant to Article
VIII, if any, all Servicer costs, if any, payable pursuant to Section 6.2 and on
demand therefor, any Early Collection Fee. If any Person fails to pay any amount
when due hereunder, such Person agrees to pay, on demand, the Default Fee.
(d) All amounts to be paid or deposited by any Person hereunder shall be paid or
deposited in accordance with the terms hereof no later than 12:00 noon (Chicago
time) on the day when due in immediately available funds; if such amounts are
payable to a Purchaser they shall be paid to the Agent, for the account of such
Purchaser, at One First National Plaza, Chicago, Illinois 60670 until otherwise
notified by the Agent. Upon notice to the Seller, the Agent may debit the
Facility Account for all amounts due and payable hereunder. All computations of
Discount, Funding Charges and per annum fees hereunder and under the Fee Letter
shall be made on the basis of a year of 360 days for the actual number of days
elapsed (including the first but excluding the last day). All per annum fees
shall be payable monthly in arrears. If any amount
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hereunder shall be payable on a day which is not a Business Day, such amount
shall be payable on the next succeeding Business Day.
Section 1.10. Seller Interest. The Seller shall ensure that the Receivable
Interests of the Purchasers shall at no time exceed in the aggregate 100%. If on
the Liquidation Day of a Receivable Interest, the aggregate of the Receivable
Interests of the Purchasers exceeds 100%, the Seller shall immediately pay to
the Agent an amount to be applied to reduce the Capital of the Receivable
Interests, such that after giving effect to such payment the aggregate of the
Receivable Interest equals or is less than 100%. Such amount shall be applied to
the reduction of the Capital of the Receivable Interests ratably in accordance
with the percentages of the Receivable Interests. Any amounts received by the
Investors pursuant to the preceding sentence shall be applied ratably in
accordance with their Pro Rata Shares. The Seller hereby grants to the Agent for
the ratable benefit of the Purchasers a security interest in all of its interest
in the Receivables, Related Security, Collections and proceeds thereof to secure
payment of the Aggregate Unpaids, including its indemnity obligations under
Article VIII and all other obligations owed hereunder to the Purchasers.
Section 1.11. Seller's Option to Repurchase. Upon three (3) Business Days' prior
written notice to the Agent, the Seller shall have the option to repurchase all
or any portion of the Receivable Interests of the Purchasers for an amount equal
to (i) the Capital of such Receivable Interests, plus (ii) the accrued and
unpaid Discount and Funding Charges allocable to such Receivable Interests, plus
(iii) the accrued and unpaid Servicing Fee allocable to such Receivable
Interests, plus (iv) any Early Collection Fee, plus (v) all other amounts
payable to the Agent or the Purchasers with respect to such Receivable
Interests.
Section 1.12. Commitment of NBD Bank, N.A.. The initial Commitment of NBD Bank,
N.A. ("NBD") shall be the amount set forth opposite the name of such Investor on
the signature pages to this Agreement. On March 12, 1999 (the "Commitment
Reduction Date"), the Commitment of NBD shall reduce, if such reduction shall
not have occurred prior to such date, to an amount equal to $125,000,000 and the
Purchase Limit shall reduce accordingly (after giving effect to such reduction,
the "Adjusted Purchase Limit"); provided that in the event that the aggregate
Capital of all Receivables Interests on the Commitment Reduction Date shall
exceed the Adjusted Purchase Limit, (i) the Purchase Limit shall nonetheless, at
all times after the Commitment Reduction Date, be an amount equal to the
Adjusted Purchase Limit, subject to further reductions in accordance with the
terms of this Agreement; (ii) no Incremental Purchases or Reinvestments shall be
made hereunder at any time during the period (the "Commitment Reduction Period")
from the Commitment Reduction Date until such later date (the "Commitment
Compliance Date") on which the aggregate Capital of all Receivables Interests
shall be less than the Adjusted Purchase Limit; (iii) at any time during the
Commitment Reduction Period, the Commitment of NBD shall be an amount equal to
the lesser of (A) the amount by which the aggregate Capital of all Receivables
Interests at such time exceeds the aggregate Commitments of all
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Investors other than NBD at such time and (B) $137,000,000; and (iv) if, during
the Commitment Reduction Period, any amounts are to be distributed pursuant to
Section 1.7 by the Agent to the Investors in respect of the Capital of the
Receivables Interests held by the Investors, (A) if no Termination Event shall
have occurred and is then continuing, such distribution shall be made first to
NBD until the later to occur of (1) the date the outstanding Capital in respect
of NBD shall be equal to or less than $125,000,000 and (2) the Commitment
Compliance Date, and thereafter shall be distributed ratably to the Investors in
accordance with the terms of Section 1.7 and (B) if a Termination Event shall
have occurred and is then continuing, such distribution shall be made ratably
among the Investors based upon the Commitments then in effect.
ARTICLE II
LIQUIDITY FACILITY
Section 2.1. Transfer to Investors. Each Investor hereby agrees, subject to
Section 2.4, that immediately upon written notice from Falcon delivered on or
prior to the Liquidity Termination Date, it shall acquire by assignment from
Falcon, without recourse or warranty, its Pro Rata Share of one or more of the
Receivable Interests of Falcon as specified by Falcon. Each Investor shall
promptly pay to the Agent at an account designated by the Agent, for the benefit
of Falcon, its Acquisition Amount. Unless an Investor has notified the Agent
that it does not intend to pay its Acquisition Amount, the Agent may assume that
such payment has been made and may, but shall not be obligated to, make the
amount of such payment available to Falcon in reliance upon such assumption.
Falcon hereby sells and assigns to the Agent for the ratable benefit of the
Investors, and the Agent hereby purchases and assumes from Falcon, effective
upon the receipt by Falcon of the Falcon Transfer Price, the Receivable
Interests of Falcon which are the subject of any transfer pursuant to this
Article II.
Section 2.2. Transfer Price Reduction Discount. If the Adjusted Liquidity Price
is included in the calculation of the Falcon Transfer Price for any Receivable
Interest, each Investor agrees that the Agent shall pay to Falcon the Reduction
Percentage of any Discount or Funding Charges received by the Agent with respect
to such Receivable Interest.
Section 2.3. Payments to Falcon. In consideration for the reduction of the
Falcon Transfer Prices by the Falcon Transfer Price Reductions, effective only
at such time as the aggregate amount of the Capital of the Receivable Interests
of the Investors equals the Falcon Residual, each Investor hereby agrees that
the Agent shall not distribute to the Investors and shall immediately remit to
Falcon any Discount, Funding Charges, Collections or other payments received by
it to be applied pursuant to the terms hereof or otherwise to reduce the Capital
of the Receivable Interests of the Investors.
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Section 2.4. Limitation on Commitment to Purchase from Falcon. Notwithstanding
anything to the contrary in this Agreement, no Investor shall have any
obligation to purchase any Receivable Interest from Falcon, pursuant to Section
2.1 or otherwise, if:
(i) Falcon shall have voluntarily commenced any proceeding or
filed any petition under any bankruptcy, insolvency or similar law
seeking the dissolution, liquidation or reorganization of Falcon or
taken any corporate action for the purpose of effectuating any of the
foregoing; or
(ii) involuntary proceedings or an involuntary petition shall
have been commenced or filed against Falcon by any Person under any
bankruptcy, insolvency or similar law seeking the dissolution,
liquidation or reorganization of Falcon and such proceeding or petition
shall have not been dismissed.
Section 2.5. Defaulting Investors. If one or more Investors defaults in its
obligation to pay its Acquisition Amount pursuant to Section 2.1 (each such
Investor shall be called a "Defaulting Investor" and the aggregate amount of
such defaulted obligations being herein called the "Falcon Transfer Price
Deficit"), then upon notice from the Agent, each Investor other than the
Defaulting Investors (a "Non-Defaulting Investor") shall promptly pay to the
Agent, in immediately available funds, an amount equal to the lesser of (x) such
Non-Defaulting Investor's proportionate share (based upon the relative
Commitments of the Non-Defaulting Investors) of the Falcon Transfer Price
Deficit and (y) the unused portion of such Non-Defaulting Investor's Commitment.
A Defaulting Investor shall forthwith upon demand pay to the Agent for the
account of the Non-Defaulting Investors all amounts paid by each Non-Defaulting
Investor on behalf of such Defaulting Investor, together with interest thereon,
for each day from the date a payment was made by a Non-Defaulting Investor until
the date such Non-Defaulting Investor has been paid such amounts in full, at a
rate per annum equal to the Federal Funds Effective Rate plus 2%. In addition,
without prejudice to any other rights that Falcon may have under applicable law,
each Defaulting Investor shall pay to Falcon forthwith upon demand, the
difference between such Defaulting Investor's unpaid Acquisition Amount and the
amount paid with respect thereto by the non-Defaulting Investors, together with
interest thereon, for each day from the date of the Agent's request for such
Defaulting Investor's Acquisition Amount pursuant to Section 2.1 until the date
the requisite amount is paid to Falcon in full, at a rate per annum equal to the
Federal Funds Effective Rate plus 2%.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Seller Representations and Warranties. The Seller, individually and
in its capacity as Servicer, hereby represents and warrants to the Purchasers
that:
(a) Corporate Existence and Power. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation, and
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has all corporate power and all governmental licenses, authorizations, consents
and approvals required to carry on its business in each jurisdiction in which
the nature of its business requires such authorization.
(b) No Conflict. The execution, delivery and performance by the Seller of this
Agreement and each other Transaction Document, and the Seller's use of the
proceeds of purchases made hereunder, are within its corporate powers, have been
duly authorized by all necessary corporate action, do not contravene or violate
(i) its certificate or articles of incorporation or by-laws, (ii) any law, rule
or regulation applicable to it, (iii) any restrictions under any agreement,
contract or instrument to which it is a party or by which it or any of its
property is bound, or (iv) any order, writ, judgment, award, injunction or
decree binding on or affecting it or its property, and do not result in the
creation or imposition of any Adverse Claim on assets of the Seller or its
Subsidiaries (except as created hereunder); and no transaction contemplated
hereby requires compliance with any bulk sales act or similar law. This
Agreement and each other Transaction Document has been duly authorized, executed
and delivered by the Seller.
(c) Governmental Authorization. Other than the filing of the financing
statements required hereunder, no authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Seller of the
Transaction Documents.
(d) Binding Effect. The Transaction Documents constitute the legal, valid and
binding obligations of the Seller enforceable against the Seller in accordance
with their respective terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or limiting creditors' rights generally.
(e) Accuracy of Information. All information heretofore furnished by the Seller,
the Transferor, the Originator or the Servicer to the Agent or the Purchasers
for purposes of or in connection with this Agreement, any of the other
Transaction Documents or any transaction contemplated hereby or thereby is, and
all such information hereafter furnished by the Seller, the Transferor, the
Originator or the Servicer to the Agent or the Purchasers will be, true and
accurate in every material respect, on the date as of which such information is
stated or certified and does not and will not contain any material misstatement
of fact or omit to state a material fact or any fact necessary to make the
statements contained therein not misleading.
(f) Use of Proceeds. No proceeds of any purchase hereunder will be used (i) for
a purpose which violates, or would be inconsistent with, Regulation T, U or X
promulgated by the Board of Governors of the Federal Reserve System from time to
time or (ii) to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
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(g) Title to Receivables Purchased from the Originator. Each Receivable
transferred to the Seller has been (i) in the case of an Originator Receivable,
purchased by the Transferor from the Originator in accordance with the terms of
the Originator Transfer Agreement, and the Transferor has thereby irrevocably
obtained all legal and equitable title to, and has the legal right to sell and
encumber, such Receivable and the Related Security and (ii) purchased by the
Seller from the Transferor in accordance with the terms of the Transfer
Agreement, and the Seller has thereby irrevocably obtained all legal and
equitable title to, and has the legal right to sell and encumber, such
Receivable and the Related Security. Each such Receivable has been, in the case
of an Originator Receivable, transferred to the Transferor free and clear of any
Adverse Claim, and, transferred to the Seller free and clear of any Adverse
Claim. Without limiting the foregoing, there has been duly filed all financing
statements or other similar instruments or documents necessary under the UCC of
all appropriate jurisdictions (or any comparable law) to perfect the Seller's
ownership interest in such Receivable.
(h) Good Title; Perfection. Immediately prior to each purchase hereunder, the
Seller shall be the legal and beneficial owner of the Receivables and Related
Security with respect thereto, free and clear of any Adverse Claim, except as
created by the Transaction Documents. This Agreement is effective to, and shall,
upon each purchase hereunder, transfer to the relevant Purchaser or Purchasers
(and such Purchaser or Purchasers shall acquire from the Seller) a valid and
perfected first priority undivided percentage ownership interest in each
Receivable existing or hereafter arising and in the Related Security and
Collections with respect thereto, free and clear of any Adverse Claim, except as
created by the Transactions Documents.
(i) Places of Business. The principal places of business and chief executive
office of the Seller and the offices where the Seller keeps all its Records are
located at the address(es) listed on Exhibit II or such other locations notified
to the Agent in accordance with Section 5.2(a) in jurisdictions where all action
required by Section 5.2(a) has been taken and completed. The Seller's Federal
Employer Identification Number is correctly set forth on Exhibit II.
(j) Collection Banks; etc. Except as otherwise notified to the Agent in
accordance with Section 5.2(b), (i) the Seller has instructed, or has caused the
Originator and the Transferor to instruct, all Obligors to pay all Collections
directly to a lock-box or a depository account listed on Exhibit III, (ii) all
proceeds from such lock-boxes are deposited directly by a Collection Bank into a
depository account listed on Exhibit III, (iii) the names and addresses of all
Collection Banks, together with the account numbers of the Collection Accounts
of the Seller at each Collection Bank, are listed on Exhibit III, and (iv) each
Collection Account to which Collections are remitted is, or will be within 30
days of the date hereof, subject to a Collection Account Agreement that is in
full force and effect. The Seller has not granted any Person, other than the
Agent as contemplated by this Agreement, dominion and control of any Collection
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Account, or the right to take dominion and control of any Collection Account at
a future time or upon the occurrence of a future event.
(k) Material Adverse Effect. Since the date of the Seller's incorporation no
event has occurred which would have a Material Adverse Effect.
(l) Names. In the past five years, the Seller has not used any corporate names,
trade names or assumed names other than those listed on Exhibit II.
(m) Actions, Suits. There are no actions, suits or proceedings pending or
threatened against or affecting the Seller or any of its properties. There are
no actions, suits or proceedings pending or threatened, against or affecting,
the Transferor or the Originator, or any of the respective properties of the
Transferor or the Originator, in or before any court, arbitrator or other body,
which are reasonably likely to (i) adversely affect the collectibility of the
Receivables, (ii) materially adversely affect the financial condition of the
Seller, the Transferor or the Originator or (iii) materially adversely affect
the ability of the Seller, the Transferor or the Originator to perform its
obligations under the Transaction Documents. None of the Seller, the Transferor,
or the Originator is in default with respect to any order of any court,
arbitrator or governmental body.
(n) Credit and Collection Policies. With respect to each Receivable, each of the
Seller, the Transferor, the Originator, and the Servicer has complied in all
material respects with, and has not made any material changes in, the Credit and
Collection Policy.
(o) Payments to Transferor and Originator. With respect to each Receivable
transferred to the Seller, the Seller has given reasonably equivalent value to
the Transferor in consideration for such transfer of such Receivable and the
Related Security with respect thereto under the Transfer Agreement and such
transfer was not made for or on account of an antecedent debt. No transfer by
the Transferor to the Seller of any Receivable is or may be voidable under any
section of the Bankruptcy Code. With respect to each Receivable transferred to
the Transferor, the Transferor has given reasonably equivalent value to the
Originator in consideration for such transfer of such Receivable and the Related
Security with respect thereto under the Originator Transfer Agreement and such
transfer was not made for or on account of an antecedent debt. No transfer by
the Originator to the Transferor of any Receivable is or may be voidable under
any section of the Bankruptcy Code.
(p) Ownership of the Seller. The Transferor owns one hundred percent (100%) of
the issued and outstanding capital stock of the Seller. Such capital stock is
validly issued, fully paid and nonassessable and there are no options, warrants
or other rights to acquire securities of the Seller.
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(q) Not an Investment Company. The Seller is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended from time to time,
or any successor statute.
(r) Purpose. The Seller has determined that, from a business viewpoint, the
purchase of the Receivables and related interests thereto from the Transferor
under the Transfer Agreement, and the sale of Receivable Interests to the
Purchasers and the other transactions contemplated herein, are in the best
interests of the Seller.
(s) Other Representations and Warranties. Each of the representations and
warranties of the Originator and the Transferor under each of the other
Transaction Documents is true and correct on and as of the date when made under
such Transaction Document.
(t) Year 2000 Issues. The Seller has made a full and complete assessment of the
Year 2000 Issues and has a realistic and achievable program for remediating the
Year 2000 Issues on a timely basis. Based on such assessment and program, the
Seller does not reasonably anticipate that Year 2000 Issues will have a Material
Adverse Effect.
(u) Minimum Receivables Balance. The Net Receivables Balance is equal to or
greater than the Minimum Receivables Balance.
(v) Eligible Receivables. Each Receivable included in the calculation of Net
Receivables Balance is an Eligible Receivable.
Section 3.2. Investor Representations and Warranties. Each Investor hereby
represents and warrants to the Agent and Falcon that:
(a) Existence and Power. Such Investor is a corporation or a banking association
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, and has all corporate power to
perform its obligations hereunder.
(b) No Conflict. The execution, delivery and performance by such Investor of
this Agreement are within its corporate powers, have been duly authorized by all
necessary corporate action, do not contravene or violate (i) its certificate or
articles of incorporation or association or by-laws, (ii) any law, rule or
regulation applicable to it, (iii) any restrictions under any agreement,
contract or instrument to which it is a party or any of its property is bound,
or (iv) any order, writ, judgment, award, injunction or decree binding on or
affecting it or its property, and do not result in the creation or imposition of
any Adverse Claim on its assets. This Agreement has been duly authorized,
executed and delivered by such Investor.
(c) Governmental Authorization. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by such Investor of
this Agreement.
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(d) Binding Effect. This Agreement constitutes the legal, valid and binding
obligation of such Investor enforceable against such Investor in accordance with
its terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or limiting
creditors' rights generally.
ARTICLE IV
CONDITIONS OF PURCHASES
Section 4.1. Conditions Precedent to Initial Purchase. The initial purchase of a
Receivable Interest under this Agreement is subject to the conditions precedent
that the Agent shall have received on or before the date of such purchase those
documents listed on Schedule A hereto.
Section 4.2. Conditions Precedent to All Purchases and Reinvestments. Each
purchase of a Receivable Interest (other than pursuant to Section 2.1) and each
Reinvestment shall be subject to the further conditions precedent that (a) in
the case of each such purchase, the Servicer shall have delivered to the Agent
on or prior to the date of such purchase, in form and substance satisfactory to
the Agent, all Monthly Reports as and when due under Section 6.5; (b) on the
date of each such purchase or Reinvestment, the following statements shall be
true (and acceptance of the proceeds of such purchase or Reinvestment shall be
deemed a representation and warranty by the Seller that such statements are then
true):
(i) the representations and warranties set forth in
Article III are correct on and as of the date of such
purchase or Reinvestment as though made on and as of
such date;
(ii) no event has occurred, or would result from such
purchase or Reinvestment, that will constitute a
Termination Event, and no event has occurred and is
continuing, or would result from such purchase or
Reinvestment, that would constitute a Potential
Termination Event; and
(iii) the Liquidity Termination Date shall not have
occurred, the aggregate Capital of all Receivable
Interests does not exceed the Purchase Limit and the
aggregate Receivable Interests do not exceed 100%;
and (c) the Agent shall have received such other approvals, opinions or
documents as it may reasonably request.
ARTICLE V
COVENANTS
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Section 5.1. Affirmative Covenants of Seller. Until the date on which the
Aggregate Unpaids have been indefeasibly paid in full, the Seller, individually
and in its capacity as Servicer, hereby covenants that:
(a) Financial Reporting. The Seller will maintain, for itself and each of its
Subsidiaries, a system of accounting established and administered in accordance
with generally accepted accounting principles, and furnish to the Agent:
(i) Annual Reporting. Within 90 days after the close of each of its
fiscal years, financial statements for such fiscal year certified in a
manner acceptable to the Agent by the senior financial officer of the
Seller or such other Person as may be acceptable to the Agent.
(ii) Compliance Certificate; Quarterly Reporting. Within 90 days
after the close of each of its fiscal years and within 45 days after the
close of each of the first three quarterly periods of each fiscal year, a
compliance certificate in substantially the form of Exhibit IV, together
with financial statements for such quarterly periods, signed by the senior
financial officer of the Seller or such other Person as may be acceptable
to the Agent.
(iii) Notices under Transaction Documents. Forthwith upon its
receipt of any notice, request for consent, financial statements,
certification, report or other communication under or in connection with
any Transaction Document from any Person other than the Agent or any
Purchaser, copies of the same.
(iv) Change in Credit and Collection Policy. At least 30 days prior
to the effectiveness of any material change in or amendment to the Credit
and Collection Policy, a copy of the Credit and Collection Policy then in
effect and a notice indicating such change or amendment.
(v) Other Information. Such other information (including
non-financial information) as the Agent or any Purchaser may from time
to time reasonably request.
(b) Notices. The Seller will notify the Agent in writing of any of the following
immediately upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken with respect thereto:
(i) Termination Events or Potential Termination Events. The
occurrence of each Termination Event or each Potential Termination Event,
by a statement of the corporate comptroller or senior financial officer of
the Seller.
(ii) Judgment. The entry of any material judgment or decree against
the Seller.
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(iii) Litigation. The institution of any litigation,
arbitration proceeding or governmental proceeding against the Seller or
which the Seller becomes a party.
(c) Compliance with Laws. The Seller will comply in all respects with all
applicable laws, rules, regulations, orders writs, judgments, injunctions,
decrees or awards to which it may be subject.
(d) Audits. The Seller will furnish to the Agent from time to time such
information with respect to it and the Receivables as the Agent may reasonably
request. The Seller shall, from time to time during regular business hours as
requested by the Agent upon reasonable notice, permit the Agent, or its agents
or representatives (and shall cause the Transferor and the Originator to permit
the Agent or its agents or representatives) at the Seller's expense, (i) to
examine and make copies of and abstracts from all Records in the possession or
under the control of the Seller, the Transferor, or the Originator relating to
Receivables and the Related Security, including, without limitation, the related
Contracts, and (ii) to visit the offices and properties of the Seller, the
Transferor or the Originator for the purpose of examining such materials
described in clause (i) above, and to discuss matters relating to the Seller's,
the Transferor's or the Originator's financial condition or the Receivables and
the Related Security or the Seller's performance hereunder, or the Transferor's
or the Originator's performance under any of the other Transaction Documents, or
the Seller's, the Transferor's or the Originator's performance under the
Contracts with any of the officers or employees of the Seller, the Transferor or
the Originator having knowledge of such matters.
(e) Keeping and Marking of Records and Books.
(i) The Seller will, and will cause the Transferor and the
Originator to, maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate
records evidencing Receivables in the event of the destruction of the
originals thereof), and keep and maintain all documents, books, records
and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records
adequate to permit the immediate identification of each new Receivable
and all Collections of and adjustments to each existing Receivable).
The Seller will, and will cause the Transferor and the Originator to,
give the Agent notice of any material change in the administrative and
operating procedures referred to in the previous sentence.
(ii) The Seller will, and will cause the Transferor and the
Originator to, (a) on or prior to the date hereof, mark its master data
processing records relating to the Receivable Interests with a legend,
acceptable to the Agent, describing the Receivable Interests and (b)
upon the request of the Agent (x) mark each Contract with a legend
describing the Receivable Interests and (y)
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deliver to the Agent all Contracts (including, without limitation, all
multiple originals of any such Contract) relating to the Receivables.
(f) Compliance with Contracts and Credit and Collection Policy. The Seller will,
and will cause the Transferor and the Originator to, timely and fully (i)
perform and comply in all material respects with all provisions, covenants and
other promises required to be observed by it under the Contracts related to the
Receivables, and (ii) comply in all material respects with the Credit and
Collection Policy in regard to each Receivable and the related Contract. The
Seller will, and will cause the Transferor and the Originator to, pay when due
any taxes payable in connection with the Receivables.
(g) Purchase of Receivables from the Transferor. With respect to each Receivable
purchased under the Transfer Agreement, the Seller shall (or shall cause the
Transferor to) take all actions necessary to vest legal and equitable title to
such Receivable and the Related Security irrevocably in the Seller, including,
without limitation, the filing of all financing statements or other similar
instruments or documents necessary under the UCC of all appropriate
jurisdictions (or any comparable law) to perfect the Seller's interest in such
Receivable and such other actions to perfect, protect or more fully evidence the
interest of the Seller as the Agent may reasonable request.
(h) Receivable Interest. The Seller shall take all necessary actions to
establish and maintain a valid and perfected first priority undivided percentage
ownership interest in the Receivables and the Related Security and Collections
with respect thereto, to the full extent contemplated herein, in favor of the
Agent and the Purchasers, including, without limitation, taking such actions to
perfect, protect or more fully evidence the interest of the Agent and the
Purchasers hereunder as the Agent may reasonably request.
(i) Payment to the Transferor and Originator. With respect to any Receivable
purchased by the Seller from the Transferor, such sale shall be effected under,
and in strict compliance with the terms of, the Transfer Agreement, including,
without limitation, the terms relating to the amount and timing of payments to
be made to the Transferor in respect of the purchase price for such Receivable.
With respect to any Receivable purchased by the Transferor from the Originator,
such sale shall be effected under, and in strict compliance with the terms of,
the Originator Transfer Agreement, including, without limitation, the terms
relating to the amount and timing of payments to be made to the Originator in
respect of the purchase price for such Receivable.
(j) Performance and Enforcement of the Transfer Agreement. The Seller shall
timely perform the obligations required to be performed by the Seller, and shall
vigorously enforce the rights and remedies accorded to the Seller, under the
Transfer Agreement. The Seller shall take all actions to perfect and enforce its
rights and interests (and the rights and interests of the Purchasers and the
Agents, as assignees of the Seller) under the Transfer Agreement as the Agent
may from time to time reasonably request,
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including, without limitation, making claims to which it may be entitled under
any indemnity, reimbursement or similar provision contained in the Transfer
Agreement.
(k) Purchasers' Reliance. The Seller acknowledges that the Purchasers are
entering into the transactions contemplated by this Agreement in reliance upon
the Seller's identity as a separate legal entity from the Transferor. Therefore,
from and after the date of execution and delivery of this Agreement, the Seller
shall take all reasonable steps including, without limitation, all steps that
the Agent or any Purchaser may from time to time reasonably request to maintain
the Seller's identity as a separate legal entity and to make it manifest to
third parties that the Seller is an entity with assets and liabilities distinct
from those of the Transferor or the Originator and any Affiliates thereof and
not just a division of the Transferor or the Originator. Without limiting the
generality of the foregoing and in addition to the other covenants set forth
herein, the Seller shall:
(i) conduct its own business in its own name and require that
all full-time employees of the Seller identify themselves as such and
not as employees of the Transferor (including, without limitation, by
means of providing appropriate employees with business or
identification cards identifying such employees as the Seller's
employees);
(ii) compensate all employees, consultants and agents
directly, from the Seller's bank accounts, for services provided to the
Seller by such employees, consultants and agents and, to the extent any
employee, consultant or agent of the Seller is also an employee,
consultant or agent of the Transferor, allocate the compensation of
such employee, consultant or agent between the Seller and the
Transferor on a basis which reflects the services rendered to the
Seller and the Transferor;
(iii) clearly identify its offices (by signage or otherwise)
as its offices and, if such office is located in the offices of the
Transferor, the Seller shall lease such office at a fair market rent;
(iv) have a separate telephone number, which will be answered
only in its name and separate stationary, invoices and checks in its
own name;
(v) conduct all transactions with the Transferor (including,
without limitation, any delegation of its obligations hereunder as
Servicer) strictly on an arm's-length basis, allocate all overhead
expenses (including, without limitation, telephone and other utility
charges) for items shared between the Seller and the Transferor on the
basis of actual use to the extent practicable and, to the extent such
allocation is not practicable, on a basis reasonably related to actual
use;
(vi) at all times have at least one member of its Board of
Directors (an "Independent Director") who is not (A) a director,
officer or employee of the
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Transferor or an Affiliate thereof, (B) a Person related to any officer
or director of the Transferor, (C) a holder (directly or indirectly) of
any securities of the Transferor, or (D) a Person related to a holder
(directly or indirectly) of any voting securities of the Transferor;
and promptly reimburse the Transferor in respect of any losses or
expenses which are claimed by such Independent Director in his or her
capacity as Independent Director and which are paid by the Transferor;
(vii) observe all corporate formalities as a distinct entity,
and ensure that all corporate actions relating to (A) the selection,
maintenance or replacement of the Independent Director, (B) the
dissolution or liquidation of the Seller or (C) the initiation or
participation in, acquiescence in or consent to any bankruptcy,
insolvency, reorganization or similar proceeding involving the Seller,
are duly authorized by unanimous vote of its Board of Directors
(including the Independent Director);
(viii) maintain the Seller's books and records separate from
those of the Transferor and otherwise readily identifiable as its own
assets rather than assets of the Transferor;
(ix) prepare its financial statements separately from those of
the Transferor and insure that any consolidated financial statements of
the Transferor or any Affiliate thereof that include Seller have
detailed notes clearly stating that the Seller is a separate corporate
entity and that its assets will be available first and foremost to
satisfy the claims of the creditors of the Seller;
(x) except as herein specifically otherwise provided, not
commingle funds or other assets of the Seller with those of the
Transferor and not maintain bank accounts or other depository accounts
to which the Transferor is an account party, into which the Transferor
makes deposits or from which the Transferor has the power to make
withdrawals;
(xi) not permit the Transferor to pay any of the Seller's
operating expenses (except pursuant to allocation arrangements that
comply with the requirements of this Section 5.1(k));
(xii) not permit the Seller to be named as an insured on the
insurance policy covering the property of the Transferor or enter into
an agreement with the holder of such policy whereby in the event of a
loss in connection with such property, proceeds are paid to the Seller;
and
(xiii) take such other actions as are necessary on its part to
ensure that the facts and assumptions set forth in the opinion issued
by Baker & Daniels as counsel for the Seller, in connection with the
closing or initial purchase under this Agreement and relating to
substantive consolidation issues, and in the
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certificates accompanying such opinion, remain true and correct in all
material respects at all times.
(l) True Sale. The Seller shall take all such actions as are necessary on its
part to ensure that the facts and assumptions set forth in the opinion issued by
Baker & Daniels as counsel for the Seller, the Transferor and the Originator, in
connection with the closing or initial purchase under this Agreement and
relating to true sale issues under the Originator Transfer Agreement and the
Transfer Agreement, and in the certificates accompanying such opinion, remain
true and correct in all material respects at all times.
(m) Collections. The Seller or the Servicer shall instruct, or cause the
Transferor and the Originator to instruct, all Obligors to pay all Collections
directly to a lock-box or depository account listed on Exhibit III. In the case
of payments remitted to any such lock-box, the Seller or the Servicer shall
cause all proceeds from such lock-box to be deposited directly by a Collection
Bank into a depositary account listed on Exhibit III. Within 30 days of the date
hereof, the Seller shall cause each lock-box and Collection Account to be
subject to a Collection Account Agreement that is in full force and effect. The
Seller shall, subject to the terms of a Collection Account Agreement and the
terms of this Agreement, maintain exclusive dominion and control to each such
lock-box, concentration account and depositary account; neither the Transferor
nor the Originator shall have any interest in, or any dominion or control over,
any such lock-box, concentration account or depositary account. In the case of
any Collections received by the Seller, the Transferor or the Originator, the
Seller shall remit (or shall cause the Transferor or the Originator to remit)
such Collections to a Collection Account not later than the Business Day
immediately following the date of receipt of such Collections, and, at all times
prior to such remittance, the Seller shall itself hold (or, if applicable, shall
cause the Transferor or the Originator to hold) such Collections in trust, for
the exclusive benefit of the Purchasers and the Agent. The Seller shall not (and
shall cause the Transferor and the Originator to not) deposit or otherwise
credit to any Collection Account any check or payment item other than
Collections and payments on the Receivables and Related Security. The Agent may
at any time request that the Seller, and the Seller thereupon promptly shall,
direct all Obligors on Receivables to remit all payments thereon to a new
depository account specified by the Agent.
(n) Net Worth. The Seller shall at all times maintain net worth of not less than
three percent (3%) of the aggregate Capital at such time.
(o) Year 2000 Issues. The Seller will take all actions reasonably necessary to
assure that the Year 2000 Issues will not have a Material Adverse Effect. Upon
the Agent's request, the Seller will provide to the Agent a description of its
Year 2000 program, including updates and progress reports. The Seller will
advise the Agent of any reasonably anticipated Material Adverse Effect as a
result of Year 2000 Issues.
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(p) Ownership of the Seller. The Transferor shall at all times own, free and
clear of all Adverse Claims, 100% of the issued and outstanding capital stock of
the Seller.
(q) Consolidated Net Worth. The Transferor shall at all times maintain a
Consolidated Net Worth of not less than Two Hundred Seventy Five Million and
00/100 dollars ($275,000,000.00), which required minimum amount will increase as
of the end of each fiscal quarter of the Transferor, commencing with the quarter
ending December 31, 1998 by an amount equivalent to the sum of (i) fifty percent
(50.0%) of the Transferor's Consolidated Net Income for such quarter (with no
deduction on account of negative Consolidated Net Income for a fiscal quarter),
plus (ii) one hundred percent (100.0%) of the net proceeds, cash or otherwise,
of all offerings and issuances of additional equity by the Transferor and its
Subsidiaries.
(r) Consolidated Total Debt to Consolidated EBITDA. The Transferor shall at all
times maintain a ratio of Consolidated Total Debt to Consolidated EBITDA for the
period of four (4) consecutive fiscal quarters most recently ended on or prior
to such determination date of not greater than 3.50 to 1.0.
(s) Consolidated Interest Expense Coverage Ratio. During each period of four (4)
consecutive fiscal quarters, the Transferor shall maintain at all times a
Consolidated Interest Expense Coverage Ratio for the period of four (4)
consecutive fiscal quarters most recently ended on or prior to such
determination date of not less than 2.50 to 1.0.
Section 5.2. Negative Covenants of Seller. Until the date on which the Aggregate
Unpaids have been indefeasibly paid in full, the Seller, individually and in its
capacity as Servicer, hereby covenants that:
(a) Name Change, Offices, Records and Books of Accounts. The Seller will not
change its name, identity or corporate structure (within the meaning of Section
9-402(7) of any applicable enactment of the UCC) or relocate its chief executive
office or any office where Records are kept unless it shall have: (i) given the
Agent at least 45 days prior notice thereof and (ii) delivered to the Agent all
financing statements, instruments and other documents requested by the Agent in
connection with such change or relocation.
(b) Change in Payment Instructions to Obligors. The Seller will not add or
terminate any bank as a Collection Bank from those listed in Exhibit III, or
make any change in its instructions to Obligors regarding payments to be made to
the Seller or payments to be made to any Collection Account or Collection Bank,
unless the Agent shall have received, at least 10 days before the proposed
effective date therefor, (i) written notice of such addition, termination or
change and (ii) with respect to the addition of a Collection Account or a
Collection Bank, an executed account agreement and an executed Collection
Account Agreement from such Collection Bank relating thereto; provided, however,
that the Seller may make changes in instructions to Obligors regarding payments
if such new instructions require such Obligor to make payments to
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another existing Collection Account that is subject to a Collection Account
Agreement then in effect.
(c) Modifications to Contracts and Credit and Collection Policy. The Seller will
not, and will not permit the Transferor or the Originator to, make any change to
the Credit and Collection Policy which would be reasonably likely to adversely
affect the collectibility of the Receivables or decrease the credit quality of
any newly created Receivables. The Seller will not, and will not permit the
Transferor or the Originator to, make any material change to the Credit and
Collection Policy without the prior consent of the Agent. Except as provided in
Section 6.2(c), the Seller will not (and will not permit the Servicer, the
Transferor or the Originator to) extend, amend or otherwise modify the terms of
any Receivable or any Contract related thereto other than in accordance with the
Credit and Collection Policy.
(d) Sales, Liens, Etc. The Seller shall not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or grant any option with respect to, or
create or suffer to exist any Adverse Claim upon (including, without limitation,
the filing of any financing statement) or with respect to, any Receivable or
Related Security or Collections in respect thereof, or upon or with respect to
any Contract under which any Receivable arises, or any Collection Account or
assign any right to receive income in respect thereof (other than, in each case,
the creation of the interests therein in favor of the Agent and the Purchasers
provided for herein), and the Seller shall defend the right, title and interest
of the Agent and the Purchasers in, to and under any of the foregoing property,
against all claims of third parties claiming through or under the Seller.
(e) Nature of Business; Other Agreements; Other Indebtedness. The Seller shall
not engage in any business or activity of any kind or enter into any transaction
or indenture, mortgage, instrument, agreement, contract, lease or other
undertaking other than the transactions contemplated and authorized by this
Agreement and the Transfer Agreement. Without limiting the generality of the
foregoing, the Seller shall not create, incur, guarantee, assume or suffer to
exist any indebtedness or other liabilities, whether direct or contingent, other
than (i) as a result of the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business, (ii) the
incurrence of obligations under this Agreement, (iii) the incurrence of
obligations, as expressly contemplated in the Transfer Agreement, to make
payment to the Transferor thereunder for the purchase of Receivables from the
Transferor under such Transfer Agreement, and (iv) the incurrence of operating
expenses in the ordinary course of business of the type otherwise contemplated
in Section 5.1(k) of this Agreement. In the event the Seller shall at any time
borrow a "Revolving Loan" under the Transfer Agreement, the obligations of the
Seller in connection therewith shall be subordinated to the obligations of the
Seller to the Purchasers and the Agent under this Agreement, on such terms as
shall be satisfactory to the Agent.
(f) Amendments to the Transfer Agreement. The Seller shall not, without the
prior written consent of the Agent, (i) cancel or terminate the Transfer
Agreement, (ii) give
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any consent, waiver, directive or approval under the Transfer Agreement, (iii)
waive any default, action, omission or breach under the Transfer Agreement, or
otherwise grant any indulgence thereunder, or (iv) amend, supplement or
otherwise modify any of the terms of the Transfer Agreement.
(g) Amendments to Corporate Documents. The Seller shall not amend its
Certificate of Incorporation or By-Laws in any respect that would impair its
ability to comply with the terms or provisions of any of the Transaction
Documents, including, without limitation, Section 5.1(k) of this Agreement.
(h) Merger. The Seller shall not merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions, and except as otherwise contemplated herein) all or any
material part of its assets (whether now owned or hereafter acquired) to, or
acquire all or any material part of the assets of, any Person.
ARTICLE VI
ADMINISTRATION AND COLLECTION
Section 6.1. Designation of Servicer. (a) The servicing, administration and
collection of the Receivables shall be conducted by such Person (the "Servicer")
so designated from time to time in accordance with this Section 6.1. The Seller
is hereby designated as, and hereby agrees to perform the duties and obligations
of, the Servicer pursuant to the terms of this Agreement. The Agent may at any
time in its sole discretion terminate the Seller as Servicer on notice given by
the Agent to the Seller and may designate as Servicer any Person to succeed the
Seller or any successor Servicer.
(b) The Seller is permitted to delegate, and the Seller hereby advises the
Purchasers and the Agent that it has delegated, to the Transferor, as
subservicer of the Servicer, certain of its duties and responsibilities as
Servicer hereunder. The Seller hereby further advises the Purchasers and the
Agent that the Transferor has delegated, to the Originator as subservicer of the
Transferor, its duties and responsibilities as subservicer with respect to the
Originator Receivables. Notwithstanding the foregoing, (i) the Seller shall be
and remain primarily liable to the Agent and the Purchasers for the full and
prompt performance of all duties and responsibilities of the Servicer hereunder
and (ii) the Agent and the Purchasers shall be entitled to deal exclusively with
the Seller in matters relating to the discharge by the Servicer of its duties
and responsibilities hereunder, and the Agent and the Purchasers shall not be
required to give notice, demand or other communication to any Person other than
the Seller in order for communication to the Servicer and its respective
delegates and subservicers in respect thereof to be accomplished. The Seller, at
all times that it is the Servicer, shall be responsible for providing its
delegates and subservicers with any notice given under this Agreement. The Agent
may at any time in its sole discretion direct the Seller to
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replace any of its delegates or subservicers on notice given by the Agent to the
Seller and may designate as subservicer any Person to succeed such subservicer
or any successor subservicer.
(c) Without the prior written consent of the Required Investors, (i) the Seller
shall not be permitted to delegate any of its duties or responsibilities as
Servicer to any Person other than the Transferor, and then such delegation shall
be limited to the activities of Servicer hereunder, (ii) the Transferor shall
not be permitted to further delegate any of its duties or responsibilities of
the Servicer delegated to it by the Seller to any Person other than the
Originator and (iii) the Originator shall not be permitted to further delegate
to any other Person any of its duties or responsibilities of the Servicer
delegated to it by the Transferor. If the Agent shall designate as Servicer any
Person other than the Seller in accordance with this Section 6.1, all duties and
responsibilities theretofore delegated by the Seller to the Transferor, and by
the Transferor to the Originator may, at the discretion of the Agent, be
terminated forthwith on notice given by the Agent to the Seller.
Section 6.2. Duties of Servicer. (a) The Servicer shall take or cause to be
taken all such actions required to be taken by the Credit and Collection Policy
and all such other reasonable actions as may be necessary or advisable to
collect each Receivable from time to time, all in accordance with applicable
laws, rules and regulations, with reasonable care and diligence, and in
accordance with the Credit and Collection Policy.
(b) The Servicer shall administer the Collections in accordance with the
procedures described herein and in Article I. The Servicer shall set aside and
hold in trust for the account of the Seller and the Purchasers their respective
shares of the Collections of Receivables in accordance with Section 1.7. The
Servicer shall upon the request of the Agent after the occurrence of a
Liquidation Day, segregate, in a manner acceptable to the Agent, all cash,
checks and other instruments received by it from time to time constituting
Collections from the general funds of the Servicer or the Seller prior to the
remittance thereof in accordance with Section 1.7. If the Servicer shall be
required to segregate Collections pursuant to the preceding sentence, the
Servicer shall segregate and deposit with a bank designated by the Agent such
allocable share of Collections of Receivables set aside for the Purchasers on
the first Business Day following receipt by the Servicer of such Collections,
duly endorsed or with duly executed instruments of transfer.
(c) The Servicer, may, in accordance with the Credit and Collection Policy,
extend the maturity of any Receivable or adjust the Outstanding Balance of any
Receivable as the Servicer may determine to be appropriate to maximize
Collections thereof; provided, however, that such extension or adjustment shall
not alter the status of such Receivable as a Delinquent Receivable or Defaulted
Receivable or limit the rights of the Agent or the Purchasers under this
Agreement. Notwithstanding anything to the contrary contained herein, the Agent
shall have the absolute and unlimited right to direct the Servicer to commence
or settle any legal action with respect to any Receivable or to foreclose upon
or repossess any Related Security.
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(d) The Servicer shall hold in trust for the Seller and the Purchasers, in
accordance with their respective Receivable Interests, all Records that evidence
or relate to the Receivables, the related Contracts and Related Security or that
are otherwise necessary or desirable to collect the Receivables and shall, as
soon as practicable upon demand of the Agent, deliver or make available to the
Agent all such Records, at a place selected by the Agent. The Servicer shall, as
soon as practicable following receipt thereof, turn over to the Seller (i) that
portion of Collections of Receivables representing the Seller's undivided
fractional ownership interest therein, less, in the event the Seller is not the
Servicer, all reasonable out-of-pocket costs and expenses of the Servicer of
servicing, administering and collecting the Receivables not otherwise covered by
the Servicing Fee, and (ii) any cash collections or other cash proceeds received
with respect to Indebtedness not constituting Receivables. The Servicer shall,
from time to time at the request of any Purchaser, furnish to the Purchasers
(promptly after any such request) a calculation of the amounts set aside for the
Purchasers pursuant to Section 1.7.
(e) Any payment by an Obligor in respect of any indebtedness owed by it to the
Transferor or the Originator shall, except as otherwise specified by such
Obligor or otherwise required by contract or law and unless otherwise instructed
by the Agent, be applied as a Collection of any Receivable of such Obligor
(starting with the oldest such Receivable) to the extent of any amounts then due
and payable thereunder before being applied to any other receivable or other
obligation of such Obligor.
Section 6.3. Collection Notices. The Agent is authorized at any time to date and
to deliver to the Collection Banks a Collection Notice under any Collection
Account Agreement. The Seller hereby transfers to the Agent for the benefit of
the Purchasers, effective when the Agent delivers any such Collection Notice,
the exclusive ownership and control of the Collection Accounts. In case any
authorized signatory of the Seller whose signature appears on a Collection
Account Agreement shall cease to have such authority before the delivery of such
notice, such Collection Account Agreement shall nevertheless be valid as if such
authority had remained in force. The Seller hereby authorizes the Agent, and
agrees that the Agent shall be entitled to (i) endorse the Seller's name on
checks and other instruments representing Collections, (ii) enforce the
Receivables, the related Contracts and the Related Security and (iii) take such
action as shall be necessary or desirable to cause all cash, checks and other
instruments constituting Collections of Receivables to come into the possession
of the Agent rather than the Seller.
Section 6.4. Responsibilities of the Seller. Anything herein to the contrary
notwithstanding, the exercise by the Agent and the Purchasers of their rights
hereunder shall not release the Servicer or the Seller from any of their duties
or obligations with respect to any Receivables or under the related Contracts.
Neither the Agent nor any of the Purchasers shall have any obligation or
liability with respect to any Receivables or related Contracts, nor shall any of
them be obligated to perform the obligations of the Seller.
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Section 6.5. Reports. On the Reporting Date of each month and at such other
times as the Agent shall request, the Servicer shall prepare and forward to the
Agent a Monthly Report.
Section 6.6. Servicer Fee. In consideration of the Servicer's agreement to
perform the duties and obligations of the Servicer hereunder, the parties hereto
severally agree to pay to the Servicer on each Settlement Date a fee (the
"Servicing Fee") in an amount equal to (i) 0.4375% per annum multiplied by (ii)
the Outstanding Balance of the Receivables at the beginning of the calendar
month during which such Settlement Date occurs. The payment obligation in
respect of the Servicing Fee shall be allocated among the parties hereto ratably
in accordance with their respective interests from time to time in the
Receivables. During the period that the Seller or any of its Affiliates is the
Servicer hereunder, unless a Termination Event shall have occurred and then be
continuing, the Seller shall be permitted to retain an amount from the
Collections on each Settlement Date equal to the Servicing Fee accrued and
payable to such date.
ARTICLE VII
TERMINATION EVENTS
Section 7.1. Termination Event. If any one or more of the following events shall
occur (each a "Termination Event"):
(a) The Seller, the Transferor or the Servicer shall fail (i) to make any
payment or deposit required hereunder and such failure shall remain unremedied
for one Business Day, or (ii) to perform or observe any term, covenant or
agreement hereunder (other than as referred to in clause (i) of this paragraph
(a), and other than the financial covenants set forth in paragraphs (p), (q) and
(r) of Section 5.1) and such failure shall remain unremedied for three Business
Days.
(b) Any representation, warranty, certification or statement made by the Seller,
the Transferor, the Originator, or the Servicer in this Agreement, any other
Transaction Document or in any other document delivered pursuant hereto shall
prove to have been incorrect in any material respect when made or deemed made.
(c) Failure of the Seller, the Transferor, the Originator or the Servicer to pay
any Indebtedness when due or the default by the Seller, the Transferor, the
Originator or the Servicer in the performance of any term, provision or
condition contained in any agreement under which any Indebtedness was created or
is governed, the effect of which 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 Indebtedness of the Seller, the Transferor, the
Originator or the Servicer shall be declared to be due and payable or required
to be prepaid (other than by a regularly scheduled payment) prior to the date of
maturity thereof.
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(d) (i) The Seller, the Transferor, the Originator or the Servicer shall
generally not pay its debts as such debts become due or shall admit in writing
its inability to pay its debts generally or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against
the Seller, the Transferor, the Originator or the Servicer seeking to adjudicate
it bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or any substantial part of
its property or (ii) the Seller, the Transferor, the Originator or the Servicer
shall take any corporate action to authorize any of the actions set forth in
clause (i) above in this subsection (d).
(e) As at the end of any calendar month,
(i) the average of the Delinquency Ratios of the three most
recently ended calendar months shall exceed 28.0%;
(ii) the average of the Loss-to-Liquidation Ratios of the
three most recently ended calendar months shall exceed 2.5%; or
(iii) the average of the Expected Dilution Ratios of the three
most recently ended calendar months shall exceed 4.0%.
(f) The Transferor (i) shall fail to perform or observe any term, covenant or
agreement contained in any other Transaction Document to which it is a party, or
(ii) shall for any reason cease to transfer, or cease to have the legal capacity
or otherwise be incapable of transferring, Receivables under the Transfer
Agreement, or any "Event of Default" shall occur under the Transfer Agreement.
(g) The Originator (i) shall fail to perform or observe any term, covenant or
agreement contained in any other Transaction Document to which it is a party, or
(ii) shall for any reason cease to transfer, or cease to have the legal capacity
or otherwise be incapable of transferring, Receivables under the Originator
Transfer Agreement, or any "Event of Default" shall occur under the Originator
Transfer Agreement.
(h) The aggregate Receivable Interests hereunder shall at any time exceed 100%.
(i) A Change of Control shall occur.
(j) A Material Adverse Effect shall occur.
(k) The Transferor shall fail to observe any of the financial covenants set
forth in paragraphs (p), (q) and (r) of Section 5.1.
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then, and in any such event, the Agent shall at the request, or may with the
consent, of the Required Purchasers by notice to the Seller declare the
Termination Date to have occurred, whereupon the Termination Date shall
forthwith occur, without demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Seller; provided, however, that upon
the occurrence of a Termination Event described in subsection (d) above or of an
actual or deemed entry of an order for relief with respect to the Seller, the
Transferor, the Originator or the Servicer, the Termination Date shall
automatically occur, without demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Seller and the Servicer. Upon the
occurrence of the Termination Date for any reason whatsoever, the Agent and the
Purchasers shall have, in addition to all other rights and remedies under this
Agreement or otherwise, all other rights and remedies provided under the UCC of
all applicable jurisdictions and all other applicable laws, which rights shall
be cumulative. Promptly following the declaration of the Termination Date, the
Agent shall notify the Seller of such declaration in writing and shall confirm
therein that the requisite Purchasers shall have requested or consented to such
declaration (it being understood that no such notice is required in the case of
a Termination Event described in subsection (d) above or of an actual or deemed
entry of an order for relief with respect to the Seller, the Transferor, the
Originator or the Servicer). No action taken by the Agent or the Purchasers
under this Article VII shall limit, modify or otherwise affect the obligations
of any Investor to make any purchase requested by Falcon pursuant to Section 2.1
hereof.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Indemnities by the Seller. Without limiting any other rights which
the Agent or any Purchaser may have hereunder or under applicable law, the
Seller hereby agrees to indemnify the Agent and each Purchaser and their
respective officers, directors, agents and employees (each an "Indemnified
Party") from and against any and all damages, losses, claims, taxes,
liabilities, costs, expenses and for all other amounts payable, including
reasonable attorneys' fees (which attorneys may be employees of the Agent or
such Purchaser) and disbursements (all of the foregoing being collectively
referred to as "Indemnified Amounts") awarded against or incurred by any of them
arising out of or as a result of this Agreement or the acquisition, either
directly or indirectly, by a Purchaser of an interest in the Receivables,
excluding, however:
(a) Indemnified Amounts to the extent final judgment of a court of
competent jurisdiction holds such Indemnified Amounts resulted from
gross negligence or willful misconduct on the part of the Indemnified
Party seeking indemnification;
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(b) Indemnified Amounts to the extent the same includes losses
in respect of Eligible Receivables which are uncollectible on account
of the insolvency, bankruptcy or lack of creditworthiness of the
related Obligor; or
(c) taxes imposed by the United States, by the jurisdiction in
which such Indemnified Party's principal executive office is located,
or by any other jurisdiction in the United States where such
Indemnified Party has established a taxable nexus, on or measured by
the overall net income of such Indemnified Party to the extent that the
computation of such taxes is consistent with the Intended
Characterization;
provided, however, that nothing contained in this sentence shall limit the
liability of the Seller or the Servicer or limit the recourse of the Purchasers
to the Seller or Servicer for amounts otherwise specifically provided to be paid
by the Seller or the Servicer under the terms of this Agreement. Without
limiting the generality of the foregoing indemnification, the Seller shall
indemnify the Agent and the Purchasers for Indemnified Amounts (including,
without limitation, losses in respect of uncollectible receivables, regardless
of whether reimbursement therefor would constitute recourse to the Seller or the
Servicer) relating to or resulting from:
(i) any representation or warranty made by the Seller, the
Transferor, the Originator or, if the Servicer is the
Seller or an Affiliate of the Seller, the Servicer (or
any officers of the Seller, the Transferor, the
Originator or, if the Servicer is the Seller or an
Affiliate of the Seller, the Servicer) under or in
connection with this Agreement, any other Transaction
Document, any Monthly Report or any other information or
report delivered by the Seller, the Transferor, the
Originator or, if the Servicer is the Seller or an
Affiliate of the Seller, the Servicer pursuant hereto,
which shall have been false or incorrect when made or
deemed made;
(ii) the failure by the Seller, the Transferor, the Originator or,
if the Servicer is the Seller or an Affiliate of the
Seller, the Servicer to comply with any applicable law,
rule or regulation with respect to any Receivable or
Contract related thereto, or the nonconformity of any
Receivable or Contract included therein with any such
applicable law, rule or regulation;
(iii) any failure of the Seller, the Transferor, the Originator or,
if the Servicer is the Seller or an Affiliate of the
Seller, the Servicer to perform its duties or
obligations in accordance with the provisions of this
Agreement, any Contract relating to the Receivables, or
any other Transaction Document;
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(iv) any products liability, personal injury or damage suit, or
other similar claim arising out of or in connection with
merchandise, insurance or services which are the subject
of any Contract or any Receivable;
(v) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable (including, without limitation, a
defense based on such Receivable or the related Contract
not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its
terms), or any other claim resulting from the sale of
the merchandise or service related to such Receivable or
the furnishing or failure to furnish such merchandise or
services;
(vi) the commingling of Collections of Receivables at any time with
other funds;
(vii) any investigation, litigation or proceeding related to or
arising from this Agreement or any other Transaction
Document, the transactions contemplated hereby or
thereby, the use of the proceeds of a purchase, the
ownership of the Receivable Interests or any other
investigation, litigation or proceeding relating to the
Seller, the Transferor or the Originator in which any
Indemnified Party becomes involved as a result of any of
the transactions contemplated hereby or thereby (except
to the extent set forth in clause (a) in this Section
8.1);
(viii) any inability to litigate any claim against any Obligor in
respect of any Receivable as a result of such Obligor
being immune from civil and commercial law and suit on
the grounds of sovereignty or otherwise from any legal
action, suit or proceeding;
(ix) any Termination Event described in Section 7.1(d);
(x) the failure to vest and maintain vested in the Agent and the
Purchasers, or to transfer to the Agent and the
Purchasers, legal and equitable title to, and ownership
of, a first priority perfected undivided percentage
ownership (to the extent of the Receivable Interests
contemplated hereunder) in the Receivables, the Related
Security and the Collections, free and clear of any
Adverse Claim;
(xi) any failure to vest and maintain vested in the Seller (except
to the extent further transferred hereunder) legal and
equitable title to, and ownership of, the Receivables,
the Related Security and the Collections from the
Transferor, free and clear of any Adverse
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Claim; or any failure of the Seller to give reasonably
equivalent value to the Transferor under the Transfer
Agreement in consideration of the transfer by the
Transferor of any Receivable; or any attempt by any
Person to void any such transfer under statutory
provisions or common law or equitable action, including,
without limitation, any provision of the Bankruptcy
Code;
(xii) any failure to vest and maintain vested in the Transferor
(except to the extent further transferred to the Seller
under the Transfer Agreement) legal and equitable title
to, and ownership of, the Receivables, the Related
Security and the Collections from the Originator, free
and clear of any Adverse Claim; or any failure of the
Transferor to give reasonably equivalent value to the
Originator under the Originator Transfer Agreement in
consideration of the transfer by the Originator of any
Receivable; or any attempt by any Person to void any
such transfer under statutory provisions or common law
or equitable action, including, without limitation, any
provision of the Bankruptcy Code;
(xiii) the Year 2000 Issue; or
(xiv) the failure of any Receivable included in the calculation of
the Net Receivables Balance as an Eligible Receivable to
be an Eligible Receivable.
Section 8.2. Increased Cost and Reduced Return. If after the date hereof, any
Funding Source shall be charged any fee, expense or increased cost on account of
the adoption of any applicable law, rule or regulation (including any applicable
law, rule or regulation regarding capital adequacy) or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance with any request or directive (whether or
not having the force of law) of any such authority, central bank or comparable
agency (a "Regulatory Change"): (i) which subjects any Funding Source to any
charge or withholding on or with respect to any Funding Agreement or a Funding
Source's obligations under a Funding Agreement, or on or with respect to the
Receivables, or changes the basis of taxation of payments to any Funding Source
of any amounts payable under any Funding Agreement (except for changes in the
rate of tax on the overall net income of a Funding Source) or (ii) which
imposes, modifies or deems applicable any reserve, assessment, insurance charge,
special deposit or similar requirement against assets of, deposits with or for
the account of a Funding Source, or credit extended by a Funding Source pursuant
to a Funding Agreement or (iii) which imposes any other condition the result of
which is to increase the cost to a Funding Source of performing its obligations
under
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a Funding Agreement, or to reduce the rate of return on a Funding Source's
capital as a consequence of its obligations under a Funding Agreement, or to
reduce the amount of any sum received or receivable by a Funding Source under a
Funding Agreement or to require any payment calculated by reference to the
amount of interests or loans held or interest received by it, then, upon demand
by the Agent, the Seller shall pay to the Agent, for the benefit of the relevant
Funding Source, such amounts charged to such Funding Source or compensate such
Funding Source for such reduction.
Section 8.3. Other Costs and Expenses. The Seller shall pay to the Agent and
Falcon on demand all costs and out-of-pocket expenses in connection with the
preparation, execution, delivery and administration of this Agreement and the
other Transaction Documents, the transactions contemplated hereby and the other
documents to be delivered hereunder, including without limitation, the cost of
Falcon's auditors auditing the books, records and procedures of the Seller, fees
and out-of-pocket expenses of legal counsel for Falcon and the Agent (which such
counsel may be employees of Falcon or the Agent) with respect thereto and with
respect to advising Falcon and the Agent as to their respective rights and
remedies under this Agreement. The Seller shall pay to the Agent on demand any
and all costs and expenses of the Agent and the Purchasers, if any, including
reasonable counsel fees and expenses in connection with the enforcement of this
Agreement and the other documents delivered hereunder and in connection with any
restructuring or workout of this Agreement or such documents, or the
administration of this Agreement following a Termination Event. The Seller shall
reimburse Falcon on demand for all other costs and expenses incurred by Falcon
or any shareholder of Falcon ("Other Costs"), including, without limitation, the
cost of auditing Falcon's books by certified public accountants, the cost of
rating the Commercial Paper by independent financial rating agencies, any and
all applicable issuing and paying agent fees and commissions of placement agents
and commercial paper dealers in respect of such Commercial Paper, and the
reasonable fees and out-of-pocket expenses of counsel for Falcon or any counsel
for any shareholder of Falcon with respect to advising Falcon or such
shareholder as to matters relating to Falcon's operations.
Section 8.4. Allocations. Falcon shall allocate the liability for Other Costs
among the Seller and other Persons with whom Falcon has entered into agreements
to purchase interests in receivables ("Other Sellers"). If any Other Costs are
attributable to the Seller and not attributable to any Other Seller, the Seller
shall be solely liable for such Other Costs. However, if Other Costs are
attributable to Other Sellers and not attributable to the Seller, such Other
Sellers shall be solely liable for such Other Costs. All allocations to be made
pursuant to the foregoing provisions of this Article VIII shall be made by
Falcon in its sole discretion and shall be binding on the Seller and the
Servicer.
ARTICLE IX
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THE AGENT
Section 9.1. Authorization and Action. (a) Each Purchaser hereby designates and
appoints First Chicago to act as its agent hereunder and under each other
Transaction Document, and authorizes the Agent to take such actions as agent on
its behalf and to exercise such powers as are delegated to the Agent by the
terms of this Agreement and the other Transaction Documents together with such
powers as are reasonably incidental thereto. The Agent shall not have any duties
or responsibilities, except those expressly set forth herein or in any other
Transaction Document, or any fiduciary relationship with any Purchaser, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Agent shall be read into this Agreement or any
other Transaction Document or otherwise exist for the Agent. In performing its
functions and duties hereunder and under the other Transaction Documents, the
Agent shall act solely as agent for the Purchasers and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for the Seller or any of its successors or assigns. The Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement, any other Transaction Document or
applicable law. The appointment and authority of the Agent hereunder shall
terminate upon the indefeasible payment in full of all Aggregate Unpaids. Each
Purchaser hereby authorizes the Agent to execute each of the Uniform Commercial
Code financing statements, together with such other instruments or documents
determined by the Agent to be necessary or desirable in order to perfect,
evidence or more fully protect the interest of the Purchasers contemplated
hereunder, on behalf of such Purchaser (the terms of which shall be binding on
such Purchaser).
(b) Without limiting the generality of the foregoing, the Agent is authorized
(but not required) to act on behalf of the Purchasers in connection with
providing such instructions, approvals, waivers or consents as may from time to
time be required hereunder or under the Transfer Agreement to permit or
authorize or direct the Seller to take or refrain from taking any action under
the Transfer Agreement; provided that the Agent may at any time, in its sole
discretion, elect to refrain from providing any such instructions, approvals,
waivers or consents until such time as it shall have received the consent
thereto of the Required Investors.
Section 9.2. Delegation of Duties. The Agent may execute any of its duties under
this Agreement and each other Transaction Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
Section 9.3. Exculpatory Provisions. Neither the Agent nor any of its directors,
officers, agents or employees shall be (i) liable for any action lawfully taken
or omitted to be taken by it or them under or in connection with this Agreement
or any other Transaction Document (except for its, their or such Person's own
gross negligence or
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willful misconduct), or (ii) responsible in any manner to any of the Purchasers
for any recitals, statements, representations or warranties made by the Seller
contained in this Agreement, any other Transaction Document or any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement, or any other Transaction Document
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement, or any other Transaction Document or any other
document furnished in connection herewith or therewith, or for any failure of
the Seller to perform its obligations hereunder or thereunder, or for the
satisfaction of any condition specified in Article IV, or for the perfection,
priority, condition, value or sufficiency or any collateral pledged in
connection herewith. The Agent shall not be under any obligation to any
Purchaser to ascertain or to inquire as to the observance or performance of any
of the agreements or covenants contained in, or conditions of, this Agreement or
any other Transaction Document, or to inspect the properties, books or records
of the Seller. The Agent shall not be deemed to have knowledge of any
Termination Event or Potential Termination Event unless the Agent has received
notice from the Seller or a Purchaser.
Section 9.4. Reliance by Agent. The Agent shall in all cases be entitled to
rely, and shall be fully protected in relying, upon any document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Seller), independent accountants
and other experts selected by the Agent. The Agent shall in all cases be fully
justified in failing or refusing to take any action under this Agreement or any
other Transaction Document unless it shall first receive such advice or
concurrence of Falcon or the Required Investors or all of the Purchasers, as
applicable, as it deems appropriate and it shall first be indemnified to its
satisfaction by the Purchasers, provided that unless and until the Agent shall
have received such advice, the Agent may take or refrain from taking any action,
as the Agent shall deem advisable and in the best interests of the Purchasers.
The Agent shall in all cases be fully protected in acting, or in refraining from
acting, in accordance with a request of Falcon or the Required Investors or all
of the Purchasers, as applicable, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Purchasers.
Section 9.5. Non-Reliance on Agent and Other Purchasers. Each Purchaser
expressly acknowledges that neither the Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of the Seller,
shall be deemed to constitute any representation or warranty by the Agent. Each
Purchaser represents and warrants to the Agent that it has and will,
independently and without reliance upon the Agent or any other Purchaser and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of the Seller and
made its own decision to enter
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into this Agreement, the other Transaction Documents and all other documents
related hereto or thereto.
Section 9.6. Reimbursement and Indemnification. The Investors agree to reimburse
and indemnify the Agent and its officers, directors, employees, representatives
and agents ratably according to their Pro Rata Shares, to the extent not paid or
reimbursed by the Seller (i) for any amounts for which the Agent, acting in its
capacity as Agent, is entitled to reimbursement by the Seller hereunder and (ii)
for any other expenses incurred by the Agent, in its capacity as Agent and
acting on behalf of the Purchasers, in connection with the administration and
enforcement of this Agreement and the other Transaction Documents.
Section 9.7. Agent in its Individual Capacity. The Agent and its Affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with the Seller or any Affiliate of the Seller as though the Agent were not the
Agent hereunder. With respect to the acquisition of Receivable Interests
pursuant to this Agreement, the Agent shall have the same rights and powers
under this Agreement as any Purchaser and may exercise the same as though it
were not the Agent, and the terms "Investor," "Purchaser," "Investors" and
"Purchasers" shall include the Agent in its individual capacity.
Section 9.8. Successor Agent. The Agent may, upon five days' notice to the
Seller and the Purchasers, and the Agent will, upon the direction of all of the
Purchasers (other than the Agent, in its individual capacity) resign as Agent.
If the Agent shall resign, then the Required Investors during such five-day
period shall appoint from among the Purchasers a successor agent. If for any
reason no successor Agent is appointed by the Required Investors during such
five-day period, then effective upon the termination of such five day period,
the Purchasers shall perform all of the duties of the Agent hereunder and under
the other Transaction Documents and the Seller shall make all payments in
respect of the Aggregate Unpaids directly to the applicable Purchasers and for
all purposes shall deal directly with the Purchasers. After the effectiveness of
any retiring Agent's resignation hereunder as Agent, the retiring Agent shall be
discharged from its duties and obligations hereunder and under the other
Transaction Documents and the provisions of this Article IX and Article VIII
shall continue in effect for its benefit with respect to any actions taken or
omitted to be taken by it while it was Agent under this Agreement and under the
other Transaction Documents.
ARTICLE X
ASSIGNMENTS; PARTICIPATIONS
Section 10.1. Assignments. (a) The Seller and each Investor hereby agree and
consent to the complete or partial assignment by Falcon of all of its rights
under, interest in, title to and obligations under this Agreement to the
Investors pursuant to Section 2.1 or to any other Person, and upon such
assignment, Falcon shall be released
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from its obligations so assigned. Further, the Seller and each Investor hereby
agree that any assignee of Falcon of this Agreement or all or any of the
Receivable Interests of Falcon shall have all of the rights and benefits under
this Agreement as if the term "Falcon" explicitly referred to such party, and no
such assignment shall in any way impair the rights and benefits of Falcon
hereunder. The Seller shall not have the right to assign its rights or
obligations under this Agreement.
(b) Any Investor may at any time and from time to time assign to one or more
Persons ("Purchasing Investors") all or any part of its rights and obligations
under this Agreement pursuant to an assignment agreement, in a form and
substance satisfactory to the Agent (the "Assignment Agreement",) executed by
such Purchasing Investor and such selling Investor. The consent of Falcon shall
be required prior to the effectiveness of any such assignment. Each assignee of
an Investor must have a short-term debt rating of A-1 or better by S&P and P-1
by Moody's and must agree to deliver to the Agent, promptly following any
request therefor by the Agent or Falcon, an enforceability opinion in form and
substance satisfactory to the Agent and Falcon. Upon delivery of the executed
Assignment Agreement to the Agent, such selling Investor shall be released from
its obligations hereunder to the extent of such assignment. Thereafter the
Purchasing Investor shall for all purposes be an Investor party to this
Agreement and shall have all the rights and obligations of an Investor under
this Agreement to the same extent as if it were an original party hereto and no
further consent or action by the Seller, the Purchasers or the Agent shall be
required.
(c) Each of the Investors agrees that in the event that it shall cease to have a
short-term debt rating of A-1 or better by S&P and P-1 by Moody's (an "Affected
Investor"), such Affected Investor shall be obliged, at the request of Falcon or
the Agent, to assign all of its rights and obligations hereunder to (x) another
Investor or (y) another financial institution nominated by the Agent and
acceptable to Falcon, and willing to participate in this Agreement through the
Liquidity Termination Date in the place of such Affected Investor; provided that
the Affected Investor receives payment in full, pursuant to an Assignment
Agreement, of an amount equal to such Investor's Pro Rata Share of the Capital
and Discount owing to the Investors and all accruing but unpaid fees and other
costs and expenses payable in respect of its Pro Rata Share of the Receivable
Interests.
Section 10.2. Participations. Any Investor may, in the ordinary course of its
business at any time sell to one or more Persons (each a "Participant")
participating interests in its Pro Rata Share of the Receivable Interests of the
Investors, its obligation to pay Falcon its Acquisition Amounts or any other
interest of such Investor hereunder. Notwithstanding any such sale by an
Investor of a participating interest to a Participant, such Investor's rights
and obligations under this Agreement shall remain unchanged, such Investor shall
remain solely responsible for the performance of its obligations hereunder, and
the Seller, Falcon and the Agent shall continue to deal solely and directly with
such Investor in connection with such Investor's rights and obligations under
this Agreement. Each Investor agrees that any agreement between such Investor
and any such Participant in respect of such participating interest shall not
restrict such
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Investor's right to agree to any amendment, supplement, waiver or modification
to this Agreement, except for any amendment, supplement, waiver or modification
described in clause (i) of Section 11.1(b).
ARTICLE XI
MISCELLANEOUS
Section 11.1. Waivers and Amendments. (a) No failure or delay on the part of the
Agent or any Purchaser in exercising any power, right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other further exercise
thereof or the exercise of any other power, right or remedy. The rights and
remedies herein provided shall be cumulative and nonexclusive of any rights or
remedies provided by law. Any waiver of this Agreement shall be effective only
in the specific instance and for the specific purpose for which given.
(b) No provision of this Agreement may be amended, supplemented, modified or
waived except in writing in accordance with the provisions of this Section
11.1(b). Falcon, the Seller and the Agent, at the direction of the Required
Investors, may enter into written modifications or waivers of any provisions of
this Agreement, provided, however, that no such modification or waiver shall:
(i) without the consent of each affected Purchaser, (A) extend the
Liquidity Termination Date or the date of any payment or deposit of
Collections by the Seller or the Servicer, (B) reduce the rate or
extend the time of payment of Discount or Funding Charges (or any
component thereof), (C) reduce any fee payable to the Agent for the
benefit of the Purchasers, (D) except pursuant to Article X hereof,
change the amount of the Capital of any Purchaser, an Investor's Pro
Rata Share or an Investor's Commitment, (E) amend, modify or waive any
provision of the definition of Required Investors or this Section
11.1(b), (F) consent to or permit the assignment or transfer by the
Seller of any of its rights and obligations under this Agreement, (G)
change the definition of "Dilution Reserve Percentage,"
"Discount/Servicing Reserve Percentage," "Eligible Receivable," or
"Loss Reserve Percentage," or (H) amend or modify any defined term (or
any defined term used directly or indirectly in such defined term) used
in clauses (A) through (H) above in a manner which would circumvent the
intention of the restrictions set forth in such clauses; or
(ii) without the written consent of the then Agent, amend, modify
or waive any provision of this Agreement if the effect thereof is to
affect the rights or duties of such Agent.
Notwithstanding the foregoing, (i) without the consent of the Investors, the
Agent may, with the consent of the Seller, amend this Agreement solely to add
additional Persons as Investors hereunder and (ii) without the consent of the
Seller, the Agent, the Required Investors and Falcon may enter into amendments
to modify any of the terms
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or provisions of Article II, Article IX, Article X, Section 11.13 or any other
provision of this Agreement, provided that such amendment has no negative impact
upon the Seller. Any modification or waiver made in accordance with this Section
11.1 shall apply to each of the Purchasers equally and shall be binding upon the
Seller, the Purchasers and the Agent.
Section 11.2. Notices. Except as provided below, all communications and notices
provided for hereunder shall be in writing (including bank wire, telecopy or
electronic facsimile transmission or similar writing) and shall be given to the
other parties hereto at their respective addresses or telecopy numbers set forth
on the signature pages hereof. The Seller hereby authorizes the Agent to effect
purchases and Tranche Period and Discount Rate selections based on telephonic
notices made by any Person whom the Agent in good faith believes to be acting on
behalf of the Seller. The Seller agrees to deliver promptly to the Agent a
written confirmation of each telephonic notice signed by an authorized officer
of the Seller. However, the absence of such confirmation shall not affect the
validity of such notice. If the written confirmation differs from the action
taken by the Agent, the records of the Agent shall govern absent manifest error.
Section 11.3. Ratable Payments. If any Purchaser, whether by setoff or
otherwise, has a payment made to it with respect to any portion of the Aggregate
Unpaids owing to such Purchaser (other than payments received pursuant to
Section 8.2 or 8.3) in a greater proportion than that received by any other
Purchaser entitled to receive a ratable share of such Aggregate Unpaids, such
Purchaser agrees, promptly upon demand, to purchase for cash without recourse or
warranty a portion of the Aggregate Unpaids held by the other Purchasers so that
after such purchase each Purchaser will hold its ratable proportion of the
Aggregate Unpaids; provided that if all or any portion of such excess amount is
thereafter recovered from such Purchaser, such purchase shall be rescinded and
the purchase price restored to the extent of such recovery, but without
interest.
Section 11.4. Protection of Ownership Interests of the Purchasers. (a) The
Seller agrees that from time to time, at its expense, it will promptly execute
and deliver all instruments and documents, and take all actions which the Agent
determines to be reasonable that may be necessary or desirable, or that the
Agent determines to be reasonable and requests, to perfect, protect or more
fully evidence the Receivable Interests, or to enable the Agent or the
Purchasers to exercise and enforce their rights and remedies hereunder. The
Agent may, or the Agent may direct the Seller to, notify the Obligors of
Receivables, at any time and at the Seller's expense, of the ownership interests
of the Purchasers under this Agreement and may also direct that payments of all
amounts due or that become due under any or all Receivables be made directly to
the Agent or its designee. The Seller shall, at any Purchaser's request,
withhold the identity of such Purchaser in any such notification.
(b) If the Seller or the Servicer fails to perform any of its obligations
hereunder, the Agent or any Purchaser may (but shall not be required to)
perform, or cause
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performance of, such obligation; and the Agent's or such Purchaser's costs and
expenses incurred in connection therewith shall be payable by the Seller (if the
Servicer that fails to so perform is the Seller or an Affiliate thereof) as
provided in Section 8.3, as applicable. The Seller and the Servicer each
irrevocably authorizes the Agent at any time and from time to time in the sole
discretion of the Agent, and appoints the Agent as its attorney-in-fact, to act
on behalf of the Seller and the Servicer (i) to execute on behalf of the Seller
as debtor and to file financing statements necessary or desirable in the Agent's
sole discretion to perfect and to maintain the perfection and priority of the
interest of the Purchasers in the Receivables and (ii) to file a carbon,
photographic or other reproduction of this Agreement or any financing statement
with respect to the Receivables as a financing statement in such offices as the
Agent in its sole discretion deems necessary or desirable to perfect and to
maintain the perfection and priority of the interests of the Purchasers in the
Receivables. This appointment is coupled with an interest and is irrevocable.
Section 11.5. Confidentiality. (a) The Seller shall maintain and shall cause
each of its employees and officers to maintain the confidentiality of this
Agreement and the other Transaction Documents and the other confidential
proprietary information with respect to the Agent and Falcon and their
respective businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein and therein,
except that the Seller and its officers and employees may disclose such
information to the Seller's external accountants and attorneys and as required
by any applicable law or order of any judicial or administrative proceeding. In
addition, the Seller may disclose any such nonpublic information pursuant to any
law, rule, regulation, direction, request or order of any judicial,
administrative or regulatory authority or proceedings (whether or not having the
force or effect of law).
(b) The Agent, the Investors and Falcon shall maintain and shall cause each of
its employees and officers to maintain the confidentiality of this Agreement and
the other Transaction Documents and the other confidential proprietary
information with respect to the Seller, the Transferor, and the Originator and
their businesses obtained by them in connection with the structuring,
negotiating and execution of the transactions contemplated herein and therein.
Anything herein to the contrary notwithstanding, the Seller hereby consents to
the disclosure of any nonpublic information with respect to it (i) to the Agent,
the Investors or Falcon by each other, (ii) by the Agent or the Purchasers to
any prospective or actual assignee or participant of any of them or (iii) by the
Agent to any rating agency, Commercial Paper dealer or provider of a surety,
guaranty or credit or liquidity enhancement to Falcon or any entity organized
for the purpose of purchasing, or making loans secured by, financial assets for
which First Chicago acts as the administrative agent and to any officers,
directors, employees, outside accountants and attorneys of any of the foregoing.
In addition, the Purchasers and the Agent may disclose any such nonpublic
information pursuant to any law, rule, regulation, direction, request or order
of any judicial, administrative or regulatory authority or proceedings (whether
or not having the force or effect of law).
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Section 11.6. Bankruptcy Petition. The Seller, the Agent and each Investor
hereby covenants and agrees that, prior to the date which is one year and one
day after the payment in full of all outstanding senior Indebtedness of Falcon,
it will not institute against, or join any other Person in instituting against,
Falcon any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United States or
any state of the United States.
Section 11.7. Limitation of Liability. Except with respect to any claim arising
out of the willful misconduct or gross negligence of Falcon, the Agent or any
Investor, no claim may be made by the Seller, the Servicer or any other Person
against Falcon, the Agent or any Investor or their respective Affiliates,
directors, officers, employees, attorneys or agents for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or any other theory of liability arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event occurring in
connection therewith; and the Seller hereby waives, releases, and agrees not to
sue upon any claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
SECTION 11.8. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
SECTION 11.9. CONSENT TO JURISDICTION. THE SELLER HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY THE SELLER PURSUANT TO THIS
AGREEMENT AND THE SELLER 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 PURCHASER TO BRING PROCEEDINGS AGAINST THE SELLER IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY THE SELLER AGAINST THE AGENT OR ANY
PURCHASER OR ANY AFFILIATE OF THE AGENT OR A PURCHASER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY THE SELLER PURSUANT TO THIS AGREEMENT
SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
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SECTION 11.10. WAIVER OF JURY TRIAL. THE AGENT, THE SELLER AND EACH PURCHASER
HEREBY WAIVES 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 THIS AGREEMENT, ANY DOCUMENT
EXECUTED BY THE SELLER PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER OR THEREUNDER.
Section 11.11. Integration; Survival of Terms. (a) This Agreement, the
Collection Account Agreements and the Fee Letter contain the final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.
(b) The provisions of Article VIII and Section 11.6 shall survive any
termination of this Agreement.
Section 11.12. Counterparts; Severability. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same Agreement. Any
provisions of this Agreement which are prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Section 11.13. First Chicago Roles. Each of the Investors acknowledges that
First Chicago acts, or may in the future act, (i) as administrative agent for
Falcon, (ii) as issuing and paying agent for the Commercial Paper, (iii) to
provide credit or liquidity enhancement for the timely payment for the
Commercial Paper and (iv) to provide other services from time to time for Falcon
(collectively, the "First Chicago Roles"). Without limiting the generality of
this Section 11.13, each Investor hereby acknowledges and consents to any and
all First Chicago Roles and agrees that in connection with any First Chicago
Role, First Chicago may take, or refrain from taking, any action which it, in
its discretion, deems appropriate, including, without limitation, in its role as
administrative agent for Falcon, the giving of notice to the Agent of a
mandatory purchase pursuant to Section 2.1.
Section 11.14. Characterization. If the conveyance by the Seller to the
Purchasers of interests in Receivables hereunder shall be characterized as a
secured loan and not a sale, it is the intention of the parties hereto that this
Agreement shall constitute a security agreement under applicable law, and that
the Seller shall be deemed to have granted to the Agent for the ratable benefit
of the Purchasers a duly perfected security interest in all of the Seller's
right, title and interest in, to and under the Receivables, the
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Collections, each Collection Account, all Related Security, all payments on or
with respect to such Receivables, all other rights relating to and payments made
in respect of the Receivables, and all proceeds of any thereof prior to all
other liens on and security interests therein to secure the payment of the
Aggregate Unpaids, including the indemnity obligations of the Seller under
Article VIII, the payment and reimbursement by the Seller to the Purchasers of
all Capital hereunder, and the payment of all other obligations owed hereunder
to the Agent and the Purchasers. After a Termination Event, the Agent and the
Purchasers shall have, in addition to the rights and remedies which they may
have under this Agreement, all other rights and remedies provided to a secured
creditor after default under the UCC and other applicable law, which rights and
remedies shall be cumulative.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.
BINDLEY WESTERN FUNDING CORPORATION
By:
Name:_______________________
Title:_______________________
FALCON ASSET SECURITIZATION
CORPORATION
By:
Authorized Signatory
c/o The First National Bank
of Chicago, as Agent
Suite 0596, 21st Floor
Chicago, Illinois 60670
Fax: (312) 732-4487
THE FIRST NATIONAL BANK OF CHICAGO, as Agent
By:
Title:
The First National Bank of Chicago
Suite 0596, 21st Floor
One First National Plaza
Chicago, Illinois 60670
Fax: (312) 732-4487
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INVESTORS:
Commitment
$[___,000,000] NBD BANK, N.A., as an Investor
By:
Title:
[Address]
Fax: [_________]
[$___,000,000] TOTAL COMMITMENT
*Subject to Section 1.12.
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EXHIBIT I
DEFINITIONS
As used in this Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Accrual Period" means the period from (and including) the first day of each
calendar month to (and including) the last day of such calendar month, provided
that the initial Accrual Period hereunder means the period from (and including)
the date of the initial purchase hereunder to (and including) the last day of
the calendar month during which the date of such initial purchase occurs.
"Acquisition Amount" means, on the date of any purchase from Falcon of
Receivable Interests pursuant to Section 2.1, (i) with respect to each Investor
other than NBD, the lesser of (a) such Investor's Pro Rata Share of the Falcon
Transfer Price and (b) such Investor's unused Commitment and (ii) with respect
to NBD, the difference between (a) the Falcon Transfer Price and (b) the
aggregate amount payable by all other Investors on such date pursuant to clause
(i) above.
"Adjusted Liquidity Price" means, in determining the Falcon Transfer Price for
any Receivable Interest, an amount equal to
RI DC + NDR
----
1+ (.50 x LR)
where:
RI = the undivided percentage interest evidenced by
such Receivable Interest.
DC = the Deemed Collections.
NDR= the Outstanding Balance of all Receivables that
are not more than 60 days past due.
LR = the Loss Reserve Percentage.
Each of the foregoing shall be determined from the most recent Monthly Report
received from the Servicer.
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"Adjustment" means a credit given to an Obligor by the Transferor or the
Originator for a prior Unauthorized Deduction taken by such Obligor.
"Adverse Claim" means a lien, security interest, charge or encumbrance, or other
right or claim in, of or on any Person's assets or properties in favor of any
other Person.
"Affiliate" means any Person directly or indirectly controlling, controlled by,
or under direct or indirect common control with, another Person or any
Subsidiary of such other Person. A Person shall be deemed to control another
Person if the controlling Person owns 10% or more of any class of voting
securities 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.
"Agent" means First Chicago in its capacity as agent for the Purchasers pursuant
to Article IX, and not in its individual capacity as an Investor, and any
successor Agent appointed pursuant to Article IX.
"Aggregate Unpaids" means, at any time, an amount equal to the sum of all
accrued and unpaid Discount, accrued and unpaid Funding Charges, accrued and
unpaid Servicing Fee, Capital and all other amounts owed (whether due or
accrued) hereunder or under the Fee Letter to the Agent and the Purchasers at
such time.
"Agreement" means this Receivables Purchase Agreement, as it may be amended or
modified and in effect from time to time.
"Allocated Commercial Paper" means Commercial Paper notes issued by Falcon for a
tenor and in an amount specially requested by any Person in connection with a
Receivable Purchase Facility then being made available by Falcon (or by any
agent on behalf of Falcon).
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C. ss.ss.101
et seq., as amended.
"Base Rate" means, (i) prior to the occurrence of a Termination Event, a rate
per annum equal to the corporate base rate, prime rate or base rate of interest,
as applicable, announced by the Reference Bank from time to time, changing when
and as such rate changes, and (ii) at all times after the occurrence of a
Termination Event, such rate plus 2% per annum.
"Business Day" means any day on which banks are not authorized or required to
close in New York, New York or Chicago, Illinois and The Depository Trust
Company of New York is open for business, and, if the applicable Business Day
relates to any computation or payment to be made with respect to the LIBO Rate,
any day on which dealings in dollar deposits are carried on in the London
interbank market.
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"Capital" of any Receivable Interest means, at any time, the Purchase Price of
such Receivable Interest, minus the sum of the aggregate amount of Collections
and other payments received by the Agent which in each case are applied to
reduce such Capital; provided that such Capital shall be restored in the amount
of any Collections or payments so received and applied if at any time the
distribution of such Collections or payments are rescinded or must otherwise be
returned for any reason.
"Change of Control" means (i) 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 20% or more of the outstanding shares of voting stock of the
Servicer or the Transferor; or (ii) the Transferor shall cease to own, free and
clear of all Adverse Claims, all of the outstanding shares of voting stock of
the Seller or the Originator on a fully diluted basis.
"Charged-Off Receivable" means a Receivable: (i) as to which the Obligor thereof
has taken any action, or suffered any event to occur, of the type described in
Section 7.1(d) (as if references to the Seller therein refer to such Obligor);
(ii) as to which the Obligor thereof, if a natural person, is deceased, (iii)
which, consistent with the Credit and Collection Policy, would be written off
the Seller's books as uncollectible, or (iv) which has been identified by the
Seller as uncollectible.
"Collection Account" means each concentration account, depositary account,
lock-box account or similar account in which any Collections are collected or
deposited.
"Collection Account Agreement" means, in the case of any actual or proposed
Collection Account, an agreement in substantially the form of Exhibit V hereto.
"Collection Bank" means, at any time, any of the banks or other financial
institutions holding one or more Collection Accounts.
"Collection Notice" means a notice, in substantially the form of the Collection
Notice contained in Annex A to Exhibit V hereto, from the Agent to a Collection
Bank.
"Collections" means, with respect to any Receivable, all cash collections and
other cash proceeds in respect of such Receivable, including, without
limitation, all cash proceeds of Related Security with respect to such
Receivable and all amounts payable to the Purchasers by the Seller pursuant to
Section 1.8.
"Commercial Paper" means promissory notes of Falcon issued by Falcon in the
commercial paper market.
"Commitment" means, for each Investor, the commitment of such Investor to
purchase its Pro
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Rata Share of Receivable Interests from (i) the Seller and (ii) Falcon, such Pro
Rata Share not to exceed, in the aggregate, the amount set forth opposite such
Investor's name on the signature pages of this Agreement, as such amount may be
modified in accordance with the terms hereof.
"Commitment Compliance Period", "Commitment Reduction Date" and "Commitment
Reduction Period" shall have the respective meanings set forth in Section 1.12.
"Concentration Limit" means, at any time, for any Obligor, a percentage of the
aggregate Outstanding Balance of all Eligible Receivables at such time equal to
the product of .33 multiplied by the Loss Reserve Percentage at such time, or
such greater or lesser amount (which may be zero) (a "Special Concentration
Limit") for such Obligor designated by the Agent at any time on not less than
ten (10) Business Days' prior written notice to the Seller; provided, that in
the case of an Obligor and any Affiliate of such Obligor, the Concentration
Limit shall be calculated as if such Obligor and such Affiliate are one Obligor.
"Consolidated" means: (a) when used herein with reference to financial
statements, ratios, assets or liabilities, that any calculations have been made
by consolidating the assets and liabilities of the Transferor and its
consolidated Subsidiaries after eliminating all intercompany items and making
such adjustments as required by generally accepted accounting principals in the
United States; and (b) when used herein with reference to a Subsidiary of the
Transferor, a Subsidiary whose financial statements have been or, in accordance
with generally accepted accounting principals in the United States, are required
to be, presented together on a consolidated basis with those of the Transferor.
"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, 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 application for a letter of credit.
"Contract" means, with respect to any Receivable, any and all instruments,
agreements, leases, invoices or other writings pursuant to which such Receivable
arises or which evidences such Receivable, including, without limitation, the
applicable Obligor acknowledgments and acceptances and related purchase orders.
"CP Rate" means, in respect of any Accrual Period, the rate per annum which
reflects all Funding Charges accruing during such Accrual Period.
"Credit and Collection Policy" means the Seller's credit and collection policies
and practices relating to Contracts and Receivables existing on the date hereof
and
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summarized in Exhibit VI hereto, as modified from time to time in accordance
with this Agreement.
"Deemed Collections" means the aggregate of all amounts owing to Falcon pursuant
to Sections 1.8 and 8.1.
"Default Fee" means with respect to any amount due and payable by any Person
hereunder or under the Fee Letter, an amount equal to the greater of (i) $1,000
and (ii) interest on any such amount at a rate per annum equal to 2% above the
Base Rate, provided, however, that such interest rate will not at any time
exceed the maximum rate permitted by applicable law.
"Default Ratio" means, as of the last day of any month, a percentage equal to
(i) the aggregate Outstanding Balance of all Defaulted Receivables, plus the
aggregate Outstanding Balance of all Receivables less than 61 days past due that
became Charged-off Receivables during such month, divided by (ii) the aggregate
Originator Sales during the calendar month which ended three months prior to the
most recently ended calendar month.
"Defaulted Receivable" means a Receivable as to which any payment, or part
thereof, remains unpaid for more than 60 days and less than 91 days from the
original due date for such payment; provided that for purposes of any Receivable
originated by the J.E. Goold division of the Transferor, "Defaulted Receivable"
means a Receivable as to which any payment, or part thereof, remains unpaid for
more that 60 days and less than 75 days from the original due date for such
payment.
"Delinquency Ratio" means, at any time, a percentage equal to (i) the aggregate
Outstanding Balance of all Receivables that were Delinquent Receivables at such
time, divided by (ii) the aggregate Outstanding Balance of all Receivables at
such time.
"Delinquent Receivable" means a Receivable as to which any payment, or part
thereof, remains unpaid for more than 30 days from the original due date.
"Designated Obligor" means an Obligor indicated by the Agent to the Seller in
writing.
"Dilution Ratio" means, at any time, a percentage equal to (i) the aggregate
amount of Dilutions which occurred during the month then most recently ended,
divided by (ii) the aggregate Originator Sales during the calendar month which
ended one month prior to the most recently ended calendar month.
"Dilution Reserve Percentage" means as of the last day of any month, a
percentage equal to the greater of (a) 5% and (b) the following:
ED + (2 x DS)
where:
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ED = the Expected Dilution Ratio at such time
DS = the Dilution Spike Ratio at such time
"Dilutions" means, at any time, the aggregate amount of reductions in the
Outstanding Balances of the Receivables as a result of any setoff, discount,
adjustment or otherwise, including, without limitation, Unauthorized Deductions,
other than (i) cash Collections on account of the Receivables, (ii) charge-offs
and (iii) Adjustments.
"Dilution Spike Ratio" means, as of any date, the highest Dilution Ratio in
respect of any of the three months most recently ended.
"Discount" means, for each Receivable Interest for any Tranche Period in respect
of which the LIBO Rate or the Base Rate applies:
DR~x~C~x~AD over 360
where:
DR = the Discount Rate for such Receivable Interest
for such Tranche Period;
C = the Capital of such Receivable Interest during
such Tranche Period; and
AD = the actual number of days elapsed during such
Tranche Period;
provided, that no provision of this Agreement shall require the payment or
permit the collection of Discount in excess of the maximum permitted by
applicable law; and provided, further, that Discount for any Tranche Period
shall not be considered paid by any distribution to the extent that at any time
all or a portion of such distribution is rescinded or must otherwise be returned
for any reason.
"Discount Rate" means the CP Rate, the LIBO Rate or the Base Rate, as
applicable.
"Discount/Servicing Reserve Percentage" means, on any date, an amount equal to
2.0%.
"Early Collection Fee" means, for any Receivable Interest which has its Capital
reduced, or its Tranche Period terminated prior to the date on which it was
originally scheduled to end, the excess, if any, of (i) the Discount or Funding
Charges that would have accrued during the remainder of the Tranche Period
subsequent to the date of such reduction or termination on the Capital of such
Receivable Interest if such reduction or termination had not occurred, over (ii)
the sum of (a) to the extent all or a portion of such Capital is allocated to
another Receivable Interest, the Discount or Funding
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Charges actually accrued during such period on such Capital for the new
Receivable Interest, and (b) to the extent such Capital is not allocated to
another Receivable Interest, the income, if any, actually received during such
period by the holder of such Receivable Interest from investing the portion of
such Capital not so allocated. In the event that the amount referred to in
clause (ii) exceeds the amount referred to in clause (i), the relevant Purchaser
or Purchasers agree to pay to the Seller the amount of such excess.
"EBITDA" means the Transferor's (on a FIFO basis) earnings before interest
expense, taxes, depreciation and amortization expense excluding any one-time
gains or losses from asset dispositions; provided, however, that such amount
shall exclude any earnings and expenses attributable to Priority Healthcare
Corporation.
"Eligible Receivable" means, at any time, a Receivable:
(i) the Obligor of which (a) if a natural person, is a
resident of the United States or, if a corporation or other business
organization, is organized under the laws of the United States or any
political subdivision thereof and has its chief executive office in the
United States; (b) is not an Affiliate of any of the parties hereto;
and (c) is not a Designated Obligor,
(ii) the Obligor of which is not the Obligor of any
Charged-Off Receivable,
(iii) with respect to the related Obligor of such Receivable,
not more than 25% of the aggregate Outstanding Balance net of any
Unauthorized Deductions of such Obligor's Receivables is more than 90
days past due,
(iv) which is not a Defaulted Receivable, a Charged-Off
Receivable, a Delinquent Receivable or a Finance Charge Receivable,
(v) which by its terms is due and payable in full within 60
days of the original billing date therefor, has not been re-billed
(including, without limitation, a re-bill due to an Unauthorized
Deduction) or re-written and has not had its payment terms extended,
(vi) which is an account receivable representing all or part
of the sales price of merchandise, insurance and services within the
meaning of Section 3(c)(5) of the Investment Company Act of 1940, as
amended,
(vii) which is an "account" within the meaning of Section
9-106 of the UCC of all applicable jurisdictions, and which is not
under any circumstances evidenced by a note or other instrument,
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(viii) which is denominated and payable only in United States
dollars in the United States,
(ix) which arises under a Contract in substantially the form
of one of the form contracts set forth on Exhibit VII hereto or
otherwise approved by the Agent in writing, which, together with such
Receivable, is in full force and effect and constitutes the legal,
valid and binding obligation of the related Obligor enforceable against
such Obligor in accordance with its terms subject to no offset,
counterclaim or other defense,
(x) which arises under a Contract which (a) does not require
the Obligor under such Contract to consent to the transfer, sale or
assignment of the rights and duties of the Transferor or the
Originator, as applicable, or any of its assignees under such Contract
and (b) does not contain a confidentiality provision that purports to
restrict the ability of the Agent or any Purchaser to exercise its
rights under this Agreement, including, without limitation, its right
to review the Contract,
(xi) which arises under a Contract that contains an obligation
to pay a specified sum of money, contingent only upon the sale of goods
or the provision of services by the Transferor or the Originator, as
applicable, and such Contract is in a form acceptable to the Agent,
(xii) which is not subject to any right of rescission,
set-off, counterclaim, any other defense (including defenses arising
out of violations of usury laws) of the applicable Obligor or the
Transferor or the Originator, as applicable, or any other Adverse
Claim, and the Obligor thereon holds no right as against the Transferor
or the Originator, as applicable to cause the Transferor or the
Originator to repurchase the goods or merchandise the sale of which
shall have given rise to such Receivable,
(xiii) as to which the Transferor or the Originator, as
applicable, has satisfied and fully performed all obligations on its
part with respect to such Receivable required to be fulfilled by it,
and no further action is required to be performed by any Person with
respect thereto other than payment thereon by the applicable Obligor,
(xiv) all right, title and interest to and in which has been
(i) in the case of an Originator Receivable, validly transferred by the
Originator directly to the Transferor under and in accordance with the
Originator Transfer Agreement, and the Transferor has good and
marketable title thereto free and clear of any Adverse Claim and (ii)
validly transferred by the Transferor directly to the Seller under and
in accordance with the Transfer Agreement, and the Seller has good and
marketable title thereto free and clear of any Adverse Claim,
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(xv) which, together with the Contract related thereto, does
not contravene any law, rule or regulation applicable thereto
(including, without limitation, any law, rule and regulation relating
to truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy) and
with respect to which no part of the Contract related thereto is in
violation of any such law, rule or regulation,
(xvi) which satisfies all applicable requirements of the
Credit and Collection Policy,
(xvii) which was generated in the ordinary course of the
Transferor's or the Originator's, as applicable, business and is of the
type generated as of the date hereof,
(xviii) which arises solely from the sale or the provision of
services to the related Obligor by the Transferor or the Originator, as
applicable, and not by any other Person (in whole or in part), and
(xix) as to which the Agent has not notified the Seller that
the Agent has determined that such Receivable or class of Receivables
is not acceptable as an Eligible Receivable, including, without
limitation, because such Receivable arises under a Contract that is not
acceptable to the Agent.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
"Expected Dilution Ratio" means, as of any date, the average of the Dilution
Ratios in respect of the three immediately preceding months.
"Facility Account" means the Seller's Account No. 5690838 at First Chicago.
"Facility Termination Date" means December 28, 2003.
"Falcon Residual" means the sum of the Falcon Transfer Price Reductions.
"Falcon Transfer Price" means, with respect to the assignment by Falcon of one
or more Receivable Interests to the Agent for the benefit of the Investors
pursuant to Section 2.1, the sum of (i) the lesser of (a) the Capital of each
Receivable Interest and (b) the Adjusted Liquidity Price of each Receivable
Interest and (ii) all accrued and unpaid Discount and Funding Charges for such
Receivable Interests.
"Falcon Transfer Price Reduction" means in connection with the assignment of a
Receivable Interest by Falcon to the Agent for the benefit of the Investors, the
positive difference between (i) the Capital of such Receivable Interest and (ii)
the Adjusted Liquidity Price for such Receivable Interest.
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"Federal Funds Effective Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period equal to (a) the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the preceding Business Day) by
the Federal Reserve Bank of New York in the Composite Closing Quotations for
U.S. Governments Securities; or (b) if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10:30
a.m. (Chicago time) for such day on such transactions received by the Reference
Bank from three federal funds brokers of recognized standing selected by it.
"Federal Government Obligor" means an Obligor which is the federal government or
a governmental subdivision or agency of the federal government.
"Federal Government Obligor Limit" means 5% of the aggregate Outstanding Balance
of all Eligible Receivables.
"Fee Letter" means that certain letter agreement dated as of the date hereof
between the Seller and the Agent, as it may be amended or modified and in effect
from time to time.
"Finance Charges" means, with respect to a Contract, any finance, interest, late
payment charges or similar charges owing by an Obligor pursuant to such
Contract.
"Finance Charge Receivable" means a Receivable for the obligation to pay a
Finance Charge.
"First Chicago" means The First National Bank of Chicago in its individual
capacity and its successors.
"Funding Agreement" means this Agreement and any agreement or instrument
executed by any Funding Source with or for the benefit of Falcon.
"Funding Charges" means (i) in respect of each Receivable Interest funded
substantially with Pooled Commercial Paper, the Pooled Funding Charges, and (ii)
in respect of each Receivable Interest funded substantially with Specially
Pooled Paper, the Special Funding Charges.
"Funding Source" means (i) any Investor or (ii) any insurance company, bank or
other financial institution providing liquidity, credit enhancement or back-up
purchase support or facilities to Falcon.
"Government Obligor" means an Obligor which is a government or a governmental
subdivision or agency.
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"Incremental Purchase" means a purchase of one or more Receivable Interests
which increases the total outstanding Capital hereunder.
"Indebtedness" of a Person means such Person's (i) obligations for borrowed
money, (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 which are evidenced by notes, acceptances, or other instruments, (v)
capitalized lease obligations, (vi) net liabilities under interest rate swap,
exchange or cap agreements, (vii) Contingent Obligations and (viii) liabilities
in respect of unfunded vested benefits under plans covered by Title IV of ERISA.
"Intended Characterization" means, for income tax purposes, the characterization
of the acquisition by the Purchasers of Receivable Interests as a loan or loans
by the Purchasers to the Seller secured by the Receivables, the Related Security
and the Collections.
"Interest Expense Coverage Ratio" means the ratio of net income (excluding all
extraordinary gains and losses and without giving effect to FASB 106 and
excluding any net income attributable to Priority Healthcare Corporation), plus
income tax and interest expense (including the allowance for interest used in
computing net lease rental payments under financing leases) for such period over
interest payments due on all indebtedness during such period (including the
allowance for interest used in computing net lease rental payments under
financing leases), all determined on a Consolidated basis.
"Investor Fee" means, for each Investor, a fee agreed to in writing by the Agent
or Falcon and such Investor.
"Investors" means the financial institutions listed on the signature pages of
this Agreement under the heading "Investors" and their respective successors and
assigns.
"LIBO Rate" means the rate per annum equal to the sum of (i) (a) the rate at
which deposits in U.S. Dollars are offered by the Reference Bank to first-class
banks in the London interbank market at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of the relevant Tranche Period, such
deposits being in the approximate amount of the Capital of the Receivable
Interest to be funded or maintained, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Tranche Period plus (ii)
1.25% per annum. The LIBO Rate shall be rounded, if necessary, to the next
higher 1/16 of 1%.
"Liquidation Day" means, for any Receivable Interest, the earliest to occur of
(i) the day on which the conditions precedent set forth in Section 4.2 are not
satisfied, (ii) any
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Business Day so designated by the Seller or Falcon after the occurrence of the
Termination Date and (iii) the Business Day immediately prior to the occurrence
of a Termination Event set forth in Section 7.1(d).
"Liquidity Termination Date" means December 27, 1999.
"Loss Horizon Ratio" means, as of the last day of any month, a percentage equal
to (i) the aggregate Originator Sales during the two most recently ended
calendar months divided by (ii) the aggregate Outstanding Balance of all
Eligible Receivables at such time.
"Loss Ratio" means, at any time, a percentage equal to the highest three month
rolling average of the Default Ratios during the twelve most recently ended
calendar months.
"Loss Reserve Percentage" means, at any time, the greater of (i) the Loss Ratio
times the Loss Horizon Ratio times 2 and (ii) 15%.
"Loss-to-Liquidation Ratio" means, as of the last day of any month, a percentage
equal to (i) the aggregate Outstanding Balance of all Defaulted Receivables plus
the aggregate Outstanding Balance of all Receivables less than 61 days past due
which became Charged-off Receivables during such month, divided by (ii) the
aggregate Collections received during such month.
"Material Adverse Effect" means a material adverse effect on (i) the financial
condition, business or operations of the Seller, the Transferor or the
Originator, (ii) the ability of the Seller, the Transferor or the Originator to
perform its obligations under any Transaction Document, (iii) the legality,
validity or enforceability of this Agreement, any Transaction Document or any
Collection Account Agreement or Collection Notice relating to a Collection
Account into which a material portion of Collections are deposited, (iv) any
Purchaser's interest in the Receivables generally or in any significant portion
of the Receivables, the Related Security or the Collections with respect
thereto, or (v) the collectibility of the Receivables generally (other than due
to general economic developments in the industry of the Transferor and the
Originator) or of any material portion of the Receivables.
"Minimum Receivables Balance" means, at any time, an amount equal to the
aggregate Capital of the Receivable Interests divided by (i) 1 minus (ii) the
sum, expressed as a decimal, of the Loss Reserve Percentage, the
Discount/Servicing Reserve Percentage and the Dilution Reserve Percentage.
"Monthly Report" means a report, in substantially the form of Exhibit VIII
hereto (appropriately completed), furnished by the Servicer to the Agent
pursuant to Section 6.5.
"Moody's" means Moody's Investors Service, Inc., and any successor thereto.
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"NBD" means NBD Bank, N.A. in its individual capacity and its successors.
"Net Federal Government Obligor Balance" means the lesser of (i) the aggregate
Outstanding Balance of all Eligible Receivables for which the Obligor is a
Federal Government Obligor and (ii) the Federal Government Obligor Limit of the
aggregate Outstanding Balance of all Eligible Receivables.
"Net Income" means with reference to any period, the net income (or loss) of the
Transferor and its Consolidated Subsidiaries computed for such period on a
consolidated basis consistently applied, in accordance with GAAP.
"Net Receivables Balance" means, at any time, the aggregate Outstanding Balance
of the Eligible Receivables at such time reduced by (i) the aggregate amount by
which the Outstanding Balance of all Eligible Receivables of each Obligor and
its Affiliates exceeds the Concentration Limit for such Obligor, (ii) the
aggregate amount by which the Outstanding Balance of all Eligible Receivables
for which the Obligor is a Federal Government Obligor exceeds the Federal
Government Obligor Limit and (iii) the aggregate amount by which the sum of (a)
the Outstanding Balance of all Eligible Receivables for which the Obligor is a
Government Obligor other than a Federal Government Obligor, plus (b) the Net
Federal Government Obligor Balance, exceeds the Total Government Obligor Limit.
"Net Worth" means total assets minus total liabilities of the Transferor and its
Consolidated Subsidiaries, computed on a consolidated basis consistently
applied, in accordance with generally accepted accounting principals in the
United States.
"Obligor" means a Person obligated to make payments pursuant to a Contract.
"Originator" means Special Services Company, an Indiana corporation.
"Originator Receivable" means a Receivable sold to the Transferor by the
Originator pursuant to the Originator Transfer Agreement.
"Originator Sales" means, in respect of any period, aggregate sales by the
Transferor and the Originator that shall have given rise to Receivables in
accordance with generally accepted accounting principles.
"Originator Transfer Agreement" means that certain Originator Transfer Agreement
of even date herewith between the Transferor, as buyer, and the Originator, as
seller, as the same may be amended, restated, supplemented or otherwise modified
from time to time.
"Other Costs" has the meaning assigned to that term in Section 8.3.
"Outstanding Balance" of any Receivable at any time means the then outstanding
principal balance thereof, which shall exclude Finance Charges.
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"Person" means an individual, partnership, corporation (including a business
trust), joint stock company, trust, unincorporated association, joint venture or
other entity, or a government or any political subdivision or agency thereof.
"Pooled Allocation" means, for each Receivable Interest funded substantially
with Pooled Commercial Paper, an amount each day equal to the product of (i) the
Pooled Percentage Share of such Receivable Interest on such day multiplied by
(ii) the aggregate amount of Pooled Funding Charges for such day.
"Pooled Commercial Paper" means Commercial Paper notes of Falcon except (A)
Allocated Commercial Paper, and (B) Specially Pooled Paper.
"Pooled Funding Charges" means, for each day, the sum of (i) discount accrued on
Pooled Commercial Paper on such day, plus (ii) any and all accrued commissions
in respect of placement agents and Commercial Paper dealers in respect of such
Pooled Commercial Paper for such day, plus (iii) issuing and paying agent fees
incurred on such Pooled Commercial Paper for such day, plus (iv) other costs
associated with funding small or odd-lot amounts with respect to all Receivable
Purchase Facilities which are funded by Pooled Commercial Paper for such day,
minus (v) any accrual of income net of expenses received on such day from
investment of collections received under all Receivable Purchase Facilities
funded with Pooled Commercial Paper, minus (vi) any payment received on such day
net of expenses in respect of broken funding costs related to the prepayment of
any Receivables Interest of Falcon pursuant to the terms of any Receivable
Purchase Facilities funded substantially with Pooled Commercial Paper.
"Pooled Percentage Share" means, for each Receivable Interest funded
substantially with Pooled Commercial Paper, a fraction (expressed as a
percentage) the numerator of which is equal to the Capital associated with such
Receivable Interest and the denominator of which is equal to the aggregate
amount of all outstanding capital associated with receivable interests (or
comparable terms used in any Receivable Purchase Facility) held by Falcon which
is funded substantially with Pooled Commercial Paper.
"Potential Termination Event" means an event which, with the passage of time or
the giving of notice, or both, would constitute a Termination Event.
"Pro Rata Share" means, for each Investor, the Commitment of such Investor
divided by the Purchase Limit, adjusted as necessary to give affect to the
application of the terms of Section 2.5.
"Purchase Limit" means the aggregate of the Commitments of the Investors
hereunder.
"Purchase Notice" has the meaning assigned to that term in Section 1.2.
"Purchase Price" means, with respect to any Incremental Purchase of a Receivable
Interest, the amount paid to the Seller for such Receivable Interest.
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"Purchaser" means Falcon or an Investor, as applicable.
"Receivable" means the indebtedness and other obligations owed (at the time it
arises, and before giving effect to any transfer or conveyance contemplated
under the Originator Transfer Agreement, the Transfer Agreement or hereunder) to
the Transferor or the Originator, as applicable, whether constituting an
account, chattel paper, instrument or general intangible, arising in connection
with the sale of goods or the rendering of services by the Transferor or the
Originator, as applicable, and includes, without limitation, the obligation to
pay any Finance Charges with respect thereto. Indebtedness and other rights and
obligations arising from any one transaction, including, without limitation,
indebtedness and other rights and obligations represented by an individual
invoice, shall constitute a Receivable separate from a Receivable consisting of
the indebtedness and other rights and obligations arising from any other
transaction.
"Receivable Interest" means, at any time, an undivided percentage ownership
interest associated with a designated amount of Capital, Discount Rate and
Tranche Period selected pursuant to Section 1.3 in (i) all Receivables arising
prior to the time of the most recent computation or recomputation of such
undivided interest pursuant to Section 1.4, (ii) all Related Security with
respect to such Receivables, and (iii) all Collections with respect to, and
other proceeds of, such Receivables. Such undivided percentage interest in the
Receivables shall equal:
C
----
NRB - (R * NRB)
where:
C = the Capital of such Receivable Interest.
R = the sum, expressed as a decimal, of the
Loss Reserve Percentage, the
Discount/Servicing Reserve Percentage and
the Dilution Reserve Percentage.
NRB = the Net Receivables Balance.
"Receivable Purchase Facility" means any receivables purchase agreement or other
similar contracted arrangement to which Falcon is a party relating to the
transfer, purchase or funding of receivables or other financial assets.
"Records" means, with respect to any Receivable, all Contracts and other
documents, books, records and other information (including, without limitation,
computer programs, tapes, disks, punch cards, data processing software and
related property and
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rights) relating to such Receivable, any Related Security therefor and the
related Obligor.
"Reduction Percentage" means, for any Receivable Interest acquired by the
Investors from Falcon for less than the Capital of such Receivable Interest, a
percentage equal to a fraction the numerator of which is the Falcon Transfer
Price Reduction for such Receivable Interest and the denominator of which is the
Capital of such Receivable Interest.
"Reference Bank" means First Chicago or such other bank as the Agent shall
designate with the consent of the Seller.
"Reinvestment" has the meaning assigned to that term in Section 1.6.
"Related Security" means, with respect to any Receivable:
(i) all of the Seller's interest in the inventory
and goods (including returned or repossessed inventory or goods), if
any, the financing or lease of which by the Transferor or the
Originator, as applicable, gave rise to such Receivable, and all
insurance contracts with respect thereto,
(ii) all other security interests or liens and
property subject thereto from time to time, if any, purporting to
secure payment of such Receivable, whether pursuant to the Contract
related to such Receivable or otherwise, together with all financing
statements and security agreements describing any collateral securing
such Receivable,
(iii) all guaranties, letters of credit, insurance
and other agreements or arrangements of whatever character from time to
time supporting or securing payment of such Receivable whether pursuant
to the Contract related to such Receivable or otherwise,
(iv) all service contracts and other contracts and
agreements associated with such Receivables,
(v) all Records related to such Receivables,
(vi) all of the Seller's right, title and interest
in, to and under the Transfer Agreement, the Originator Transfer
Agreement and each instrument, document or agreement executed in
connection therewith in favor of or otherwise for the benefit of the
Seller; and
(vii) all proceeds of any of the foregoing.
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"Reporting Date" means the 15th calendar day of each month or, if such day is
not a Business Day, the next following calendar day that is a Business Day.
"Required Investors" means, at any time, Investors with Commitments in excess of
66-2/3% of the Purchase Limit; provided, however that if the Commitment of NBD
or any of its Affiliates (including, without limitation, First Chicago) is
included in the calculation for purposes of this definition, then "Required
Investors" shall mean Investors with Commitments in excess of 66-2/3% of the
Purchase Limit plus at least two (2) Investors other than NBD or any of its
Affiliates (including, without limitation, First Chicago).
"Reserve Requirement" means the maximum aggregate reserve requirement (including
all basic, supplemental, marginal and other reserves) which is imposed against
the Reference Bank in respect of Eurocurrency liabilities, as defined in
Regulation D of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, or any successor thereto.
"Section" means a numbered section of this Agreement, unless another document is
specifically referenced.
"Seller Interest" means, at any time, an undivided percentage ownership interest
of the Seller in the Receivables, Related Security and all Collections with
respect thereto equal to (i) one, minus (ii) the aggregate of the Receivable
Interests.
"Servicer" means at any time the Person (which may be the Agent) then authorized
pursuant to Section 6.1 to service, administer and collect Receivables.
"Servicing Fee" has the meaning specified in Section 6.6.
"Settlement Date" means (i) the 15th day of each calendar month, or if such 15th
day is not a Business Day, the next succeeding Business Day, and (ii) during the
Commitment Reduction Period, or at any time from and after the Termination Date
or the occurrence of any Termination Event, each additional day designated as
such by the Agent.
"Special Concentration Limit" means, at any time, for each of Eckerd
Corporation, CVS Corporation, NCS Healthcare, Inc. and Peyton's, 10% of the
aggregate Outstanding Balance of all Eligible Receivables.
"Special Funding Charges" means, for each day, the sum of (i) discount accrued
on Specially Pooled Paper on such day, plus (ii) any and all accrued commissions
in respect of placement agents and Commercial Paper dealers in respect of such
Specially Pooled Paper for such day, plus (iii) issuing and paying agent fees
incurred on such Specially Pooled Paper for such day, plus (iv) other costs
associated with funding small or odd-lot
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amounts with respect to all Receivable Purchase Facilities which are funded by
Specially Pooled Paper for such day, minus (v) any accrual of income net of
expenses received on such day from investment of collections received under all
Receivable Purchase Facilities funded with Specially Pooled Paper, minus (vi)
any payment received on such day net of expenses in respect of broken funding
costs related to the prepayment of any Receivable Interest of Falcon pursuant to
the terms of any Receivable Purchase Facility funded substantially with
Specially Pooled Paper.
"Special Percentage Share" means, for each Receivable Interest funded
substantially with Specially Pooled Paper, a fraction (expressed as a
percentage) the numerator of which is equal to the Capital associated with
such Receivable Interest and the denominator of which is equal to the aggregate
amount of all outstanding capital associated with receivable interests (or
comparable terms used in any Receivable Purchase Facility) held by Falcon which
is funded substantially with Specially Pooled Paper.
"Special Pooled Period" means any period commencing on (i) each March 15th and
ending on the following April 5th, (ii) each June 15th and ending on the
following July 5th, (iii) each September 15th and ending on the following
October 5th, or (iv) each December 15th and ending on the following January 5th.
If the last day of any Special Pooled Period shall not be a Business Day, the
last day of such Special Pooled Period shall be the next succeeding Business
Day.
"Specially Pooled Allocation" means, for each Receivable Interest funded
substantially with Specially Pooled Paper, an amount each day equal to the
product of (i) the Special Percentage Share of such Receivable Interest on such
day multiplied by the (ii) the aggregate amount of Special Funding Charges for
such day.
"Specially Pooled Paper" means the aggregate of all Commercial Paper notes of
Falcon issued during any Special Pooled Period and allocated by the Agent to
Specially Pooled Paper in accordance with Section 1.9(b) hereof. Specially
Pooled Paper will not include Pooled Commercial Paper or Allocated Commercial
Paper at any time.
"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, 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 Seller.
"Termination Date" means, the earliest of (i) the Facility Termination Date,
(ii) the Liquidity Termination Date, (iii) the date of the declaration or
automatic occurrence of the Termination Date pursuant to Section 7.1 and (iv)
the date designated by the Seller or the Transferor upon 30 Business Days' prior
written notice to the Agent; provided that, solely with respect to any
Receivable Interest of Falcon, "Termination Date" shall
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in addition be any date designated by Falcon as such in a notice given to the
Seller and the Agent.
"Termination Event" has the meaning specified in Article VII.
"Total Debt" means all outstandings for borrowed money exclusive of the debt
associated with the transactions contemplated hereunder.
"Total Government Obligor Limit" means 10% of the aggregate Outstanding Balance
of all Eligible Receivables.
"Tranche Period" means, with respect to any Receivable Interest:
(a) if the Discount Rate with respect to such Receivable Interest is
the CP Rate, the Accrual Period;
(b) if Discount for such Receivable Interest is calculated on the basis
of the LIBO Rate, a period of one, two or three months, or such other period
as may be mutually agreeable to the Agent and the Seller, commencing on a
Business Day selected by the Seller or the Agent pursuant to this Agreement.
Such Tranche Period shall end on the day in the applicable succeeding
calendar month which corresponds numerically to the beginning day of such
Tranche Period, provided, however, that if there is no such numerically
corresponding day in such succeeding month, such Tranche Period shall end on
the last Business Day of such succeeding month; and
(c) if Discount for such Receivable Interest is calculated on the basis
of the Base Rate, a period of 30 days commencing on a Business Day selected
by the Seller.
If any Tranche Period would end on a day which is not a Business Day, such
Tranche Period shall end on the next succeeding Business Day, provided, however,
that in the case of Tranche Periods corresponding to the LIBO Rate, if such next
succeeding Business Day falls in a new month, such Tranche Period shall end on
the immediately preceding Business Day. In the case of any Tranche Period for
any Receivable Interest of which commences before the Termination Date and would
otherwise end on a date occurring after the Termination Date, such Tranche
Period shall end on the Termination Date. The duration of each Tranche Period
which commences after the Termination Date shall be of such duration as selected
by the Agent.
"Transaction Documents" means, collectively, this Agreement, the Transfer
Agreement, the Originator Transfer Agreement, the Fee Letter, each Collection
Account Agreement and all other instruments, documents and agreements executed
and delivered by the Seller, the Transferor or the Originator in connection
herewith.
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"Transfer Agreement" means that certain Transfer Agreement of even date herewith
between the Seller, as buyer, and the Transferor, as seller, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"Transferor" means Bindley Western Industries, Inc., an Indiana corporation.
"UCC" means the Uniform Commercial Code as from time to time in effect in the
specified jurisdiction.
"Unauthorized Deduction" means a deduction taken by an Obligor of the
Transferor's or the Originator's bulk business from the total amount of an
invoice, without the authorization of the Transferor or the Originator, as
applicable.
"Year 2000 Issues" means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications to effectively
handle data including dates on and after January 1, 2000, as such inability
affects the business, operations, and financial condition of the Seller, the
Servicer, the Transferor, or the Originator and of the Seller's, the Servicer's
the Transferor's or the Originator's material customers, suppliers and vendors.
All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of Illinois, and not specifically defined
herein, are used herein as defined in such Article 9.
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EXHIBIT II
PRINCIPAL PLACE OF BUSINESS OF THE SELLER; LOCATION(S) OF RECORDS;
FEDERAL EMPLOYER IDENTIFICATION NUMBERS
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EXHIBIT III
LOCK-BOXES;
CONCENTRATION ACCOUNTS; AND DEPOSITARY ACCOUNTS
65
<PAGE> 67
EXHIBIT IV
FORM OF COMPLIANCE CERTIFICATE
To: The First National Bank of Chicago, as Agent
This Compliance Certificate is furnished pursuant to that certain Receivables
Purchase Agreement dated as of December 28, 1998, among Bindley Western Funding
Corporation (the "Seller"), Falcon Asset Securitization Corporation, the
financial institutions party thereto and The First National Bank of Chicago, as
agent (the "Agreement").
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected of the Seller;
2. I have reviewed the terms of the Agreement and I have made, or have caused to
be made under my supervision, a detailed review of the transactions and
conditions of the Seller and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have no
knowledge of, the existence of any condition or event which constitutes a
Termination Event or Potential Termination Event, as each such term is defined
under the Agreement, during or at the end of the accounting period covered by
the attached financial statements or as of the date of this Certificate, except
as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the compliance with certain covenants of the Agreement, all of which
data and computations are true, complete and correct.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Seller has taken, is taking, or proposes to
take with respect to each such condition or event:
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this day of , 19 .
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SCHEDULE I TO COMPLIANCE REPORT
A. Schedule of Compliance as of , 19 with Sections of
the Agreement. Unless otherwise defined herein, the terms used in this
Compliance Certificate have the meanings ascribed thereto in the
Agreement.
This schedule relates to the month ended:___________
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EXHIBIT V
FORM OF COLLECTION ACCOUNT AGREEMENT
[On letterhead of Seller]
19
------
[Lock-Box Bank/Concentration Bank/Depositary Bank]
Re: [ORIGINATOR]
Bindley Western Industries, Inc.
Bindley Western Funding Corporation
Ladies and Gentlemen:
You have exclusive control of P.O. Box # in [city, state, zip code] (the
"Lock-Box") for the purpose of receiving mail and processing payments therefrom
pursuant to that certain [name of lock-box agreement) between you and
[ORIGINATOR][Bindley Western Industries, Inc.] dated (the "Agreement"). You
hereby confirm your agreement to perform the services described therein. Among
the services you have agreed to perform therein, is to endorse all checks and
other evidences of payment, and credit such payments to our checking account no.
maintained with you in the name of [ORIGINATOR][Bindley Western Industries,
Inc.] (the "Lock-Box Account").
[ORIGINATOR][Bindley Western Industries, Inc.], hereby transfers and assigns all
of its right, title and interest in and to, and exclusive ownership and control
over, the Lock-Box and the Lock-Box Account to Bindley Western Funding
Corporation (the "Seller"). We hereby request that the name of the Lock-Box
Account be changed to Bindley Western Funding Corporation, as "Collection Agent"
for the benefit of The First National Bank of Chicago ("FNBC"), as agent under
that certain Receivables Purchase Agreement (the "Receivables Purchase
Agreement") dated as of December [__], 1998 among the Seller, Falcon Asset
Securitization Corporation, certain financial institutions parties thereto and
FNBC.
The Seller hereby irrevocably instructs you, and you hereby agree, that upon
receiving notice from FNBC in the form attached hereto as Annex A: (i) the name
of the Lock-Box Account will be changed to FNBC for itself and as agent (or any
designee of FNBC) and FNBC will have exclusive ownership of and access to such
Lock-Box Account, and neither the Seller nor any of our affiliates will have any
control of such Lock-Box Account or any access thereto, (ii) you will either
continue to send the funds from the Lock-Box to the Lock-Box Account, or will
redirect the funds as FNBC may
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otherwise request, (iii) you will transfer monies on deposit in the Lock-Box
Account, at any time, as directed by FNBC, (iv) all services to be performed by
you under the Agreement will be performed on behalf of FNBC, and (v) all
correspondence or other mail which you have agreed to send us will be sent to
FNBC at the following address:
The First National Bank of Chicago
Suite , 21st Floor
One First National Plaza
Chicago, Illinois 60670
Attention: Credit Manager, Asset Backed
Securities Division
Moreover, upon such notice, FNBC for itself and as agent will have all rights
and remedies given to us under the Agreement. We agree, however, to continue to
pay all fees and other assessments due thereunder at any time.
You hereby acknowledge that monies deposited in the Lock-Box Account or any
other account established with you by FNBC for the purpose of receiving funds
from the Lock-Box are subject to the liens of FNBC for itself and as agent under
the Receivables Purchase Agreement, and will not be subject to deduction,
set-off, banker's lien or any other right you or any other party may have
against us, except that you may debit the Lock-Box Account for any items
deposited therein that are returned or otherwise not collected and for all
charges, fees, commissions and expenses incurred by you in providing services
hereunder, all in accordance with your customary practices for the charge back
of returned items and expenses.
This letter agreement and the rights and obligations of the parties hereunder
will be governed by and construed and interpreted in accordance with the laws of
the State of Illinois. This letter agreement may be executed in any number of
counterparts and all of such counterparts taken together will be deemed to
constitute one and the same instrument. All references herein to "we" or "us"
refer to [ORIGINATOR][Bindley Western Industries, Inc.] and Bindley Western
Funding Corporation.
This letter agreement contains the entire agreement between the parties, and may
not be altered, modified, terminated or amended in any respect, nor may any
right, power or privilege of any party hereunder be waived or released or
discharged, except upon execution by all parties hereto of a written instrument
so providing. In the event that any provision in this letter agreement is in
conflict with, or inconsistent with, any provision of the Agreement, this letter
agreement will exclusively govern and control. Each party agrees to take all
actions reasonably requested by any other party to carry out the purposes of
this letter agreement or to preserve and protect the rights of each party
hereunder.
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Please indicate your agreement to the terms of this letter agreement by signing
in the space provided below. This letter agreement will become effective
immediately upon execution of a counterpart of this letter agreement by all
parties hereto.
Very truly yours,
[ORIGINATOR][BINDLEY WESTERN INDUSTRIES,
By:
Name:
-------------------
Title
-------------------------
BINDLEY WESTERN FUNDING CORPORATION
By:
Name:
--------------------
Title
-------------------------
Acknowledged and agreed to
this day of
[COLLECTION BANK]
By:
Name:
------------------------
Title:
Acknowledged and agreed to
this day of , 19
THE FIRST NATIONAL BANK OF
CHICAGO (for itself and
as agent)
By:
Name:
----------------------
Title:
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<PAGE> 72
---------------
ANNEX A
FORM OF COLLECTION NOTICE
[On letterhead of FNBC]
, 19
--------
[Collection Bank/Depositary Bank/Concentration Bank]
Re: Bindley Western Funding Corporation
Ladies and Gentlemen:
We hereby notify you that we are exercising our rights pursuant to that certain
letter agreement among [ORIGINATOR][Bindley Western Industries, Inc.], Bindley
Western Funding Corporation, you and us, to have the name of, and to have
exclusive ownership and control of, account number (the "Lock-Box
Account") maintained with you, transferred to us. [Lock-Box Account will
henceforth be a zero-balance account, and funds deposited in the Lock-Box
Account should be sent at the end of each day to .] You have further
agreed to perform all other services you are performing under that certain
agreement dated between you and Bindley Western Funding Corporation on our
behalf.
We appreciate your cooperation in this matter.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
(for itself and as agent)
By:
Title:
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EXHIBIT VI
CREDIT AND COLLECTION POLICY
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<PAGE> 74
EXHIBIT VII
FORM OF CONTRACT(S)
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EXHIBIT VIII
FORM OF MONTHLY REPORT
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EXHIBIT IX
FORM OF PURCHASE NOTICE
[Date]
The First National Bank of Chicago
as Agent for the Purchasers parties
to the Receivables Purchase Agreement
referred to below
Suite
One First National Plaza
Chicago Illinois 60670
Attention: Asset-Backed Markets
Gentlemen:
The undersigned, BINDLEY WESTERN FUNDING CORPORATION, refers
to the Receivables Purchase Agreement, dated as of December 28, 1998 (the
"Receivables Purchase Agreement", the terms defined therein being used herein as
therein defined), among the undersigned, Falcon Asset Securitization Corporation
("Falcon"), certain Investors parties thereto and The First National Bank of
Chicago, as Agent for Falcon and such Investors (Falcon and Investors,
collectively, the "Purchasers"), and hereby gives you notice irrevocably,
pursuant to Section 1.2 of the Receivables Purchase Agreement, that the
undersigned hereby requests a purchase under the Receivables Purchase Agreement,
and in that connection sets forth below the information relating to such
purchase (the "Proposed Purchase") as required by Section 1.2 of the Receivables
Purchase Agreement:
(i) The Business Day of the Proposed
Purchase is , 19 .
(ii) The requested Purchase Price in
respect of the Proposed Purchase is $ .
(iii) The requested Purchaser[s] in respect of the
Proposed Purchase [is Falcon] [are the Investors].
(iii) The duration of the initial Tranche Period for the
Proposed Purchase is [days] [months][the
Accrual Period].
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(iv) The Discount Rate related to such
initial Tranche Period is requested to be the
[CP][LIBO] [Base] Rate [and is requested to be
funded with Specially Pooled Paper in accordance
with Section 1.9(b)].
The undersigned hereby certifies that the conditions precedent in
Section 4.2 of the Receivables Purchase Agreement are satisfied, including,
without limitation, that the following statements are true on the date hereof,
and will be true on the date of the Proposed Purchase (before and after giving
effect to the Proposed Purchase):
(A) the representations and warranties set forth in Article III of
the Receivables Purchase Agreement are correct on and as of
such date, as though made on and as of such date;
(B) no event has occurred, or would result from the Proposed
Purchase that will constitute a Termination Event, and no
event has occurred and is continuing, or would result from
such Proposed Purchase, that would constitute a Potential
Termination Event; and
(C) the Liquidity Termination Date shall not have occurred, the
aggregate Capital of all Receivable Interests shall not exceed
the Purchase Limit and the aggregate Receivable Interests
shall not exceed 100%.
Very truly yours,
BINDLEY WESTERN FUNDING CORPORATION
By:
--------------------------------
Name:
--------------------------
Title:
--------------------------
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<PAGE> 78
SCHEDULE A
[TO BE COMPLETED]
DOCUMENTS AND RELATED ITEMS TO BE DELIVERED TO THE AGENT
ON OR PRIOR TO THE INITIAL PURCHASE
1. Copy of the Resolutions of the Board of Directors of the Seller
certified by its Secretary authorizing the Seller's execution, delivery
and performance of this Agreement and the other documents to be
delivered by it thereunder.
2. Articles or Certificate of Incorporation of the Seller certified by the
Secretary of State of the jurisdiction of incorporation of the Seller
on or within thirty (30) days prior to the initial Purchase.
3. Good Standing Certificate for the Seller issued by the Secretaries of
State of each jurisdiction where it has material operations.
4. A certificate of the Secretary of the Seller certifying (i) the names
and signatures of the officers authorized on its behalf to execute the
Agreement and any other documents to be delivered by it thereunder and
(ii) a copy of the Seller's By-Laws.
5. Time stamped receipt copies of proper financing statements, duly filed
under the UCC on or before the date of such initial Purchase in all
jurisdictions as may be necessary or, in the opinion of the Agent,
desirable, under the UCC of all appropriate jurisdictions or any
comparable law in order to perfect the ownership interests contemplated
by the Agreement.
6. Time stamped receipt copies of proper UCC termination statements, if
any, necessary to release all security interests and other rights of
any Person in the Receivables, Contracts or Related Security previously
granted by the Seller.
7. Executed copy of the Collection Account Agreements.
8. A favorable opinion of legal counsel for the Seller reasonably
acceptable to the Agent which addresses the following matters and such
other matters as the Agent may reasonably request:
-- The Seller is a corporation duly incorporated,
validly existing, and in good standing under the
laws of its state of incorporation.
-- The Seller has all requisite authority to conduct
its business in each jurisdiction where failure to
be so qualified would have a material adverse effect
on the Seller's business.
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-- The execution and delivery by the Seller of
the Agreement and Collection Account Agreements and
its performance of its obligations thereunder have
been duly authorized by all necessary corporate
action and proceedings on the part of the Seller and
will not:
(a) require any action by or in
respect of, or filing with, any governmental
body, agency or official (other than the
filing of UCC financing statements);
(b) contravene, or constitute a
default under, any provision of applicable
law or regulation or of its Articles of
Incorporation or By-Laws or of any
agreement, judgment, injunction, order,
decree or other instrument binding upon the
Seller; or
(c) result in the creation or
imposition of any Adverse Claim on assets of
the Seller or any of its Subsidiaries
(except as contemplated by the Agreement).
-- The Agreement and Collection Account Agreements have
been duly executed and delivered by the Seller and
constitute the legal, valid, and binding obligation
of the Seller enforceable in accordance with their
terms, except to the extent the enforcement thereof
may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights
generally and subject also to the availability of
equitable remedies if equitable remedies are sought.
-- the Seller has a valid and unencumbered
ownership interest in each Receivable in existence
as of the date of the Agreement and, if a Purchase
is made as of such date, the Agent for the benefit
of the Purchasers shall acquire a first perfected
ownership interest in each Receivable, the related
Collections and the Related Security.
-- To the best of the opinion givers knowledge, there
is no action, suit or other proceeding against the
Seller or any Affiliate of the Seller, which would
materially adversely affect the business or
financial condition of the Seller and its Affiliates
taken as a whole or which would materially adversely
affect the ability of the Seller to perform its
obligations under the Agreement.
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<PAGE> 80
9. If requested by Falcon or the Agent, a favorable opinion of legal
counsel for each Investor, reasonably acceptable to the Agent which
addresses the following matters:
-- The Agreement has been duly authorized by all
necessary corporate action of the Investor.
-- The Agreement has been duly executed and delivered
by the Investor and, assuming due authorization,
execution and delivery by each of the other parties
thereto, constitutes a legal, valid and binding
obligation of the Investor, enforceable against the
Investor in accordance with its terms.
10. A Compliance Certificate.
11. Written information from the Borrower, satisfactory to each Agent and
each Lender, indicating that the Borrower (a) has made a full and
complete assessment of the Year 2000 Issues; (b) has a realistic and
achievable program for remediating the Year 2000 Issues on a timely
basis, and (c) does not reasonably anticipate that Year 2000 Issues
will have a Material Adverse Effect.
12. The Fee Letter.
13. A direction letter executed by the Seller authorizing the Agent, and
directing warehousemen to allow the Agent, to inspect and make copies
from Seller's books and records maintained at off-site data processing
or storage facilities.
14. A Monthly Report as at , 19 .
15. Executed copies of (i) all consents from and authorizations by any
Persons and (ii) all waivers and amendments to existing credit
facilities, that are necessary in connection with the Agreement.
16. For each Purchaser that is not incorporated under the laws of the
United States of America, or a state thereof, two duly completed copies
of United States Internal Revenue Service Form 1001 or 4224, certifying
in either case that such Purchaser is entitled to receive payments
under the Agreement without deduction or withholding of any United
States federal income taxes.
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<PAGE> 81
TABLE OF CONTENTS
PAGE
ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES Page 1
Section 1.1. Purchase Facility Page 1
Section 1.2. Making Purchases Page 2
Section 1.3. Selection of Tranche Periods and Discount Rates Page 2
Section 1.4. Percentage Evidenced by Receivable Interests Page 3
Section 1.5. Dividing or Combining Receivable Interests Page 3
Section 1.6. Reinvestment Purchases Page 3
Section 1.7. Liquidation Settlement Procedures. Page 3
Section 1.8. Deemed Collections Page 4
Section 1.9. Discount and Funding Charges; Payments and
Computations, Etc Page 4
Section 1.10. Seller Interest Page 5
Section 1.11. Seller's Option to Repurchase Page 6
Section 1.12 Commitment of NBD Bank, N.A.. Page 6
ARTICLE II LIQUIDITY FACILITY Page 7
Section 2.1. Transfer to Investors Page 7
Section 2.2. Transfer Price Reduction Discount Page 7
Section 2.3. Payments to Falcon Page 7
Section 2.4. Limitation on Commitment to Purchase from Falcon Page 7
Section 2.5. Defaulting Investors Page 8
ARTICLE III REPRESENTATIONS AND WARRANTIES Page 8
Section 3.1. Seller Representations and Warranties Page 8
Section 3.2. Investor Representations and Warranties Page 12
ARTICLE IV CONDITIONS OF PURCHASES Page 12
Section 4.1. Conditions Precedent to Initial Purchase Page 12
Section 4.2. Conditions Precedent to All Purchases and
Reinvestments Page 12
ARTICLE V COVENANTS Page 13
Section 5.1. Affirmative Covenants of Seller Page 13
Section 5.2. Negative Covenants of Seller Page 19
ARTICLE VI ADMINISTRATION AND COLLECTION Page 21
Section 6.1. Designation of Servicer Page 21
Section 6.2. Duties of Servicer Page 22
Section 6.3. Collection Notices Page 23
Section 6.4. Responsibilities of the Seller Page 24
Section 6.5. Reports Page 24
Section 6.6. Servicer Fee Page 24
<PAGE> 82
ARTICLE VII TERMINATION EVENTS Page 24
Section 7.1. Termination Event Page 24
ARTICLE VIII INDEMNIFICATION Page 26
Section 8.1. Indemnities by the Seller Page 26
Section 8.2. Increased Cost and Reduced Return Page 29
Section 8.3. Other Costs and Expenses Page 30
Section 8.4. Allocations Page 30
ARTICLE IX THE AGENT Page 30
Section 9.1. Authorization and Action Page 30
Section 9.2. Delegation of Duties Page 31
Section 9.3. Exculpatory Provisions Page 31
Section 9.4. Reliance by Agent Page 32
Section 9.5. Non-Reliance on Agent and Other Purchasers Page 32
Section 9.6. Reimbursement and Indemnification Page 32
Section 9.7. Agent in its Individual Capacity Page 32
Section 9.8. Successor Agent Page 33
ARTICLE X ASSIGNMENTS; PARTICIPATIONS Page 33
Section 10.1. Assignments Page 33
Section 10.2. Participations Page 34
ARTICLE XI MISCELLANEOUS Page 34
Section 11.1. Waivers and Amendments Page 34
Section 11.2. Notices Page 35
Section 11.3. Ratable Payments Page 35
Section 11.4. Protection of Ownership Interests
of the Purchasers Page 36
Section 11.5. Confidentiality Page 36
Section 11.6. Bankruptcy Petition Page 37
Section 11.7. Limitation of Liability Page 37
SECTION 11.8. CHOICE OF LAW Page 37
SECTION 11.9. CONSENT TO JURISDICTION Page 37
SECTION 11.10. WAIVER OF JURY TRIAL Page 38
Section 11.11. Integration; Survival of Terms Page 38
Section 11.12. Counterparts; Severability Page 38
Section 11.13. First Chicago Roles Page 39
Section 11.14. Characterization Page 39
<PAGE> 83
EXHIBITS AND SCHEDULES
EXHIBIT I DEFINITIONS
EXHIBIT II PRINCIPAL PLACE OF BUSINESS OF THE SELLER;
LOCATION(S) OF RECORDS; FEDERAL EMPLOYER
IDENTIFICATION NUMBERS
EXHIBIT III LOCK-BOXES; CONCENTRATION ACCOUNTS; DEPOSITARY
ACCOUNTS
EXHIBIT IV FORM OF COMPLIANCE CERTIFICATE
EXHIBIT V FORM OF COLLECTION ACCOUNT AGREEMENT
EXHIBIT VI CREDIT AND COLLECTION POLICY
EXHIBIT VII FORM OF CONTRACT(S)
EXHIBIT VIII FORM OF MONTHLY REPORT
EXHIBIT IX FORM OF PURCHASE NOTICE
SCHEDULE A LIST OF DOCUMENTS TO BE DELIVERED TO THE AGENT PRIOR
TO THE INITIAL PURCHASE
<PAGE> 1
EXHIBIT 10-BB
BINDLEY WESTERN INDUSTRIES, INC.
1998 NON-QUALIFIED STOCK OPTION PLAN
(AS AMENDED)
1. PLAN PURPOSE. The purpose of the Plan is to promote the long-term
interests of the Company and its shareholders by providing a means for
attracting and retaining employees of the Company and its Affiliates.
2. DEFINITIONS. The following definitions are applicable to the Plan:
"Affiliate" -- means any "parent corporation" or "subsidiary corporation"
of the Company as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
"Award" -- means the grant by the Committee of a Non-Qualified Stock Option
as provided in the Plan.
"Board" -- means the Board of Directors of the Company.
"Change in Control" -- means each of the events specified in the following
clauses (i) through (iii): (i) any third person, including a "group" as defined
in Section 13(d)(3) of the Exchange Act shall, after the date of the adoption of
the Plan by the Board, first become the beneficial owner of shares of the
Company with respect to which 25% or more of the total number of votes for the
election of the Board of Directors of the Company may be cast, (ii) as a result
of, or in connection with, any cash tender offer, exchange offer, merger or
other business combination, sale of assets or contested election, or combination
of the foregoing, the persons who were directors of the Company shall cease to
constitute a majority of the Board of Directors of the Company or (iii) the
stockholders of the Company shall approve an agreement providing either for a
transaction in which the Company will cease to be an independent publicly owned
entity or for a sale or other disposition of all or substantially all the assets
of the Company; provided, however, that the occurrence of any of such events
shall not be deemed a Change in Control if, prior to such occurrence, a
resolution specifically approving such occurrence shall have been adopted by at
least a majority of the Board of Directors of the Company.
"Code" -- means the Internal Revenue Code of 1986, as amended.
"Committee" -- means the Committee referred to in Section 3 hereof.
"Company" -- means Bindley Western Industries, Inc., an Indiana
corporation.
"Continuous Service" -- means the absence of any interruption or
termination of service as an employee of the Company or an Affiliate. Service
shall not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Company or in the case of any
transfer between the Company and an Affiliate or any successor to the Company.
"Employee" -- means any person who is employed by the Company or any
Affiliate.
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<PAGE> 2
"Exchange Act" -- means the Securities Exchange Act of 1934, as amended.
"Exercise Price" -- means the price per Share at which the Shares subject
to an Option may be purchased upon exercise of such Option.
"Market Value" -- means the last reported sale price on the date in
question (or, if there is no reported sale on such date, on the last preceding
date on which any reported sale occurred) of one Share on the principal exchange
on which the Shares are listed for trading, or if the Shares are not listed for
trading on any exchange, on the NASDAQ National Market System or any similar
system then in use, or, if the Shares are not listed on the NASDAQ National
Market System, the mean between the closing high bid and low asked quotations of
one Share on the date in question as reported by NASDAQ or any similar system
then in use, or, if no such quotations are available, the fair market value on
such date of one Share as the Committee shall determine.
"Non-Qualified Stock Option" -- means an option to purchase Shares granted
by the Committee pursuant to the terms of the Plan, which option is not intended
to qualify under Section 422 of the Code.
"Option" -- means a Non-Qualified Stock Option.
"Participant" -- means any employee, other than an officer or director, of
the Company or any Affiliate who is selected by the Committee to receive an
Award.
"Plan" -- means this Non-Qualified Stock Option Plan of the Company.
"Reorganization" -- means the liquidation or dissolution of the Company or
any merger, consolidation or combination of the Company (other than a merger,
consolidation or combination in which the Company is the continuing entity and
which does not result in the outstanding Shares being converted into or
exchanged for different securities, cash or other property or any combination
thereof).
"Securities Act" -- means the Securities Act of 1933, as amended.
"Shares" -- means the Common Stock, $.01 par value, of the Company.
3. ADMINISTRATION. The Plan shall be administered by the Compensation and
Stock Option Committee of the Board (the "Committee"), which shall consist of
two or more members of the Board. The members of the Committee shall be
appointed by the Board. Except as limited by the express provisions of the Plan,
the Committee shall have sole and complete authority and discretion to (a)
select Participants and grant Awards; (b) determine the number of Shares to be
subject to types of Awards generally, as well as to individual Awards granted
under the Plan; (c) determine the terms and conditions upon which Awards shall
be granted under the Plan; (d) prescribe the form and terms of instruments
evidencing such grants; (e) establish procedures and regulations for the
administration of the Plan; (f) interpret the Plan; and (g) make all
determinations deemed necessary or advisable for the administration of the Plan.
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<PAGE> 3
A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by all members of the Committee without a meeting,
shall be acts of the Committee. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan shall be final, conclusive, and
binding on all persons, and shall be given the maximum deference permitted by
law.
4. PARTICIPANTS. The Committee may select from time to time Participants in
the Plan from those employees of the Company or its Affiliates who, in the
opinion of the Committee, have the capacity for contributing in a substantial
measure to the successful performance of the Company or its Affiliates;
provided, however, that the Committee shall not select as a Participant any
individual who is an officer or director of the Company or its Affiliates at the
time of such selection.
5. SHARES SUBJECT TO PLAN. Subject to adjustment by the operation of
Section 9 hereof, the maximum number of Shares with respect to which Awards may
be made under the Plan is 600,000 Shares, all of which are currently held by the
Company as treasury shares. The number of Shares which may be granted under the
Plan to any Participant during any calendar year of the Plan under Awards shall
not exceed 50,000 Shares. The Shares with respect to which Awards may be made
under the Plan may only be Shares held by the Company as treasury shares. The
Company shall at all times hold that number of Shares as treasury shares as
would be required to be delivered upon the exercise of all Options then
outstanding under the Plan. With respect to any Option which terminates or is
surrendered for cancellation, new Awards may be granted under the Plan with
respect to the number of Shares as to which such termination or surrender has
occurred.
6. GENERAL TERMS AND CONDITIONS OF OPTIONS. The Committee shall have full
and complete authority and discretion, except as expressly limited by the Plan,
to grant Options and to provide the terms and conditions (which need not be
identical among Participants) thereof. In particular, the Committee shall
prescribe the following terms and conditions: (i) the Exercise Price, (ii) the
number of Shares subject to, and the expiration date of, any Option, (iii) the
manner, time and rate (cumulative or otherwise) of exercise of such Option, and
(iv) the restrictions, if any, to be placed upon such Option or upon Shares
which may be issued upon exercise of such Option. The Committee may, as a
condition of granting any Option, require that a Participant agree to surrender
for cancellation one or more Options previously granted to such Participant.
7. EXERCISE OF OPTIONS.
(a) Except as provided in Section 12, an Option granted under the Plan
shall be exercisable during the lifetime of the Participant to whom such Option
was granted only by such Participant, and except as provided in Section 8, no
Option may be exercised unless at the time the Participant exercises the Option,
the Participant has maintained Continuous Service since the date of the grant of
the Option.
(b) To exercise an Option under the Plan, the Participant must give
written notice to the Company or its designated agent specifying the number of
Shares with respect to which the
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<PAGE> 4
Participant elects to exercise the Option together with full payment of the
Exercise Price. The date of exercise shall be the date on which the notice is
received by the Company or its designated agent. Payment may be made either (i)
in cash (including check, bank draft or money order), (ii) by tendering Shares
already owned by the Participant and having a Market Value on the date of
exercise equal to the Exercise Price, (iii) by requesting that the Company or
its designated agent withhold the value of Shares sold upon exercise of the
Option having a Market Value equal to the Exercise Price, or (iv) by any other
means determined by the Committee in its sole discretion.
8. TERMINATION OF OPTIONS. Unless otherwise specifically provided by
the Committee, Options shall terminate as provided in this Section.
(a) Unless sooner terminated under the provisions of this Section, Options
shall expire on the earlier of the date specified by the Committee or the
expiration of ten (10) years from the date of grant.
(b) If the Continuous Service of a Participant is terminated for cause, or
voluntarily by the Participant for any reason other than death, disability or
retirement, all rights under any Option of such Participant shall expire
immediately upon such cessation of Continuous Service, and the Participant shall
(unless the Committee in its sole discretion waives this requirement) repay to
the Company within 10 days the amount of any gain realized by the Participant
upon any exercise within the 90-day period prior to the cessation of Continuous
Service. If the Continuous Service of a Participant is terminated by reason of
death, disability or retirement, such Participant may exercise such Option, but
only to the extent such Participant was entitled to exercise such Option at the
date of such cessation, at any time during the remaining term of such Option. If
a Participant shall cease to maintain Continuous Service for any reason other
than those set forth above in this paragraph (b) of this Section 8, such
Participant may exercise such Option to the extent that such Participant was
entitled to exercise such Option at the date of such cessation but only within
the period of three (3) months immediately succeeding such cessation of
Continuous Service, and in no event after the expiration date of the subject
Option; provided, however, that such right of exercise after cessation of
Continuous Service shall not be available to a Participant if the Company
otherwise determines and so provides in the applicable instrument or instruments
evidencing the grant of such Option.
(c) In the event of the death of a Participant while in the Continuous
Service of the Company or an Affiliate, the person to whom any Option held by
the Participant at the time of his death is transferred by will or by the laws
of descent and distribution may exercise such Option on the same terms and
conditions that such Participant was entitled to exercise such Option. Following
the death of any Participant to whom an Option was granted under the Plan, the
Committee, as an alternative means of settlement of such Option, may elect to
pay to the person to whom such Option is transferred the amount by which the
Market Value per Share on the date of exercise of such Option shall exceed the
Exercise Price of such Option, multiplied by the number of Shares with respect
to which such Option is properly exercised. Any such settlement of an Option
shall be considered an exercise of such Option for all purposes of the Plan.
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<PAGE> 5
(d) Notwithstanding the provisions of the foregoing paragraphs of this
Section 8, the Committee may, in its sole discretion, establish different terms
and conditions pertaining to the effect of the cessation of Continuous Service,
to the extent permitted by applicable federal and state law.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any change
in the outstanding Shares subsequent to the effective date of the Plan by reason
of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Company, the maximum aggregate number and
class of shares as to which Awards may be granted under the Plan and the number
and class of shares with respect to which Awards theretofore have been granted
under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
10. EFFECT OF REORGANIZATION. Awards will be affected by a Reorganization
as follows:
(a) If the Reorganization is a dissolution or liquidation of the Company
then each outstanding Option shall terminate, but each Participant to whom the
Option was granted shall have the right, immediately prior to such dissolution
or liquidation, to exercise his Option in full and the Company shall notify each
Participant of such right within a reasonable period of time prior to any such
dissolution or liquidation.
(b) If the Reorganization is a merger or consolidation, other than a Change
in Control subject to Section 11 of this Agreement, upon the effective date of
such Reorganization each Optionee shall be entitled, upon exercise of his Option
in accordance with all of the terms and conditions of the Plan, to receive in
lieu of Shares, shares of such stock or other securities or consideration as the
holders of Shares shall be entitled to receive pursuant to the terms of the
Reorganization.
-30-
<PAGE> 6
The adjustments contained in this Section and the manner of application of such
provisions shall be determined solely by the Committee.
11. EFFECT OF CHANGE IN CONTROL. If a tender offer or exchange offer for
Shares (other than such an offer by the Company) is commenced, or if the event
specified in clause (iii) of the definition of a Change in Control contained in
Section 2 shall occur, unless the Committee shall have otherwise provided in the
instrument evidencing the grant of an Option, all Options theretofore granted
and not fully exercisable shall become exercisable in full upon the happening of
such event and shall remain so exercisable in accordance with their terms;
provided, however, that no Option which has previously been exercised or
otherwise terminated shall become exercisable.
12. ASSIGNMENTS AND TRANSFERS. Except as otherwise determined by the
Committee, no Award nor any right or interest of a Participant under the Plan in
any instrument evidencing any Award under the Plan may be assigned, encumbered
or transferred except, in the event of the death of a Participant, by will or
the laws of descent and distribution.
13. EMPLOYEE RIGHTS UNDER THE PLAN. No employee or other person shall have
a right to be selected as a Participant nor, having been so selected, to be
selected again as a Participant and no employee or other person shall have any
claim or right to be granted an Award under the Plan or under any other
incentive or similar plan of the Company or any Affiliate. Neither the Plan nor
any action taken thereunder shall be construed as giving any employee any right
to be retained in the employ of the Company or any Affiliate.
14. DELIVERY AND REGISTRATION OF STOCK. The Company's obligation to deliver
Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Company shall determine to be necessary or advisable to comply with the
provisions of the Securities Act or any other applicable federal or state
securities legislation. It may be provided that any representation requirement
shall become inoperative upon a registration of the Shares or other action
eliminating the necessity of such representation under the Securities Act or
other securities legislation. The Company shall not be required to deliver any
Shares under the Plan prior to (i) the admission of such shares to listing on
any stock exchange or system on which Shares may then be listed, and (ii) the
completion of such registration or other qualification of such Shares under any
state or federal law, rule or regulation, as the Company shall determine to be
necessary or advisable.
15. WITHHOLDING TAX. Where a Participant or other person is entitled to
receive Shares pursuant to the exercise of an Option pursuant to the Plan, the
Company, at the request of the Participant, shall (in lieu of requiring the
Participant or such other person to pay the Company the amount of any taxes
which the Company is required to withhold with respect to such Shares) retain a
number of such Shares sufficient to cover the minimum amount required to be
withheld.
<PAGE> 7
16. TERMINATION, AMENDMENT AND MODIFICATION OF PLAN. The Board may at any
time terminate, and may at any time and from time to time and in any respect
amend or modify, the Plan; provided, however, that to the extent necessary and
desirable to comply with any applicable law or regulation, including
requirements of any stock exchange or NASDAQ system on which the Shares are
listed or quoted, shareholder approval of any Plan amendment shall be obtained
in such a manner and to such a degree as is required by the applicable law or
regulation; and provided, further, that no termination, amendment or
modification of the Plan shall in any manner affect any Award theretofore
granted pursuant to the Plan without the consent of the Participant to whom the
Award was granted or transferee of the Award.
17. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective upon
its adoption by the Board of Directors of the Company and shall continue in
effect for a term of ten years from the date of adoption unless sooner
terminated under Section 16 hereof.
ADOPTED BY THE BOARD OF DIRECTORS OF
BINDLEY WESTERN INDUSTRIES, INC. AS OF
DECEMBER 11, 1998, AND AMENDED ON
MARCH 25, 1999
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<PAGE> 1
EXHIBIT 21
BINDLEY WESTERN INDUSTRIES, INC.
LIST OF SUBSIDIARIES
1. BW Food Distributors, Inc. - Salem, NH
2. BW Transportation Services, Inc. - Indianapolis, IN
3. Special Services Company - Orange, CT
4. Priority Healthcare Services Corporation - Indianapolis, IN
5. College Park Plaza Associates, Inc. - Indianapolis, IN
Exhibit 21
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<PAGE> 1
EXHIBIT 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No.'s 33-15471, 33-37781, 33-58947, 33-64828, 333-04517,
333-57975 and 333-60279) of Bindley Western Industries, Inc. of our report dated
February 24, 1999, appearing on page F-1 of this Form 10-K.
PricewaterhouseCoopers LLP
Indianapolis, Indiana
March 30, 1999
-33-
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<PERIOD-END> DEC-31-1998
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