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 (Fee Required)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
FOR THE TRANSITION PERIOD FROM _________ TO ____________
COMMISSION FILE NUMBER 0-6430
OWENS & MINOR, INC.
(Exact name of Registrant as specified in its charter)
VIRGINIA 54-0327460
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4800 COX ROAD
GLEN ALLEN, VIRGINIA 23260
(Address of principal executive offices) (Zipcode)
(804) 747-9794
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
Common Stock, $2 par value New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
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 any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
The aggregate market value of Common Stock held by non-affiliates (based
upon the closing sales price) was approximately $448,061,094 as of March 4,
1994. In determining this figure, the Company has assumed that all of its
officers, directors and persons known to the Company to be the beneficial
owners of more than five percent of the Company's Common Stock are affiliates.
Such assumptions shall not be deemed conclusive for any other purpose.
The number of shares of the Company's Common Stock outstanding as of March
4, 1994 was 20,396,601 shares.
<PAGE>
DOCUMENTS INCORPORTED BY REFERNCE
Portions of the Owens & Minor, Inc. Annual Report to Stockholders for the
year ended December 31, 1993 (the "1993 Annual Report") are incorporated by
reference into Part II of this Form 10-K and portions of the Owens & Minor,
Inc. definitive Proxy Statement/Prospectus for the 1994 Annual Meeting of
Shareholders (the "1994 Proxy Statement") are incorporated by reference into
Part III of this Form 10-K. With the exception of the specified information
referred to in Items 5, 6, 7, 8 and 14 hereof, the 1993 Annual Report is not
deemed to be filed as a part of this report.
<PAGE>
TABLE OF CONTENTS
and
CROSS REFERENCE SHEET
<TABLE>
Page
Number(s)/Sections
- --------------------------------------
Form Annual
Proxy
10-K Report
Statement
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<S> <C> <C>
<C>
PART I
Item 1 Business 2-5
Item 2 Properties 6
Item 3 Legal Proceedings 6
Item 4 Submission of Matters to a Vote of Security Holders 6
PART II
* Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters 10 Inside Back Cover
* Item 6 Selected Financial Data 10 18-19
* Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 18-21
* Item 8 Financial Statements and Supplementary Data 10 22-37
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 10
PART III
** Item 10 Directors and Executive Officers of the Registrant 11
Proposal 2:
Election of Directors
** Item 11 Executive Compensation 11
Proposal 2:
Election of Directors
- - Executive Compensation
** Item 12 Security Ownership of Certain Beneficial
Proposal 2:
Owners and Management 11
Election of Directors
- - O&M Common Stock
Owned by Principal
Shareholders and
Management
** Item 13 Certain Relationships and Related Transactions 11
Proposal 2:
Election of Directors
- - Compensation Committee
Interlocks and Insider
Participation
PART IV
Item 14 Exhibits, Financial Statement Schedules, and 12-14
Reports on Form 8-K
</TABLE>
* Information related to this item is hereby incorporated by reference to
the 1993 Annual Report.
** Information related to this item is hereby incorporated by reference to
the 1994 Proxy Statement.
<PAGE>
FORM 10-K
OWENS & MINOR, INC.
PART I
Item 1. Business
Owens & Minor, Inc. (the "Company") was incorporated in Virginia on
December 7, 1926 as a successor to a partnership founded in Richmond,
Virginia in 1882. The Company is a wholesale distributor of medical/surgical
supplies and carries over 104,000 products and operates 36 distribution
centers serving hospitals, nursing homes, alternate medical care facilities
and other institutions nationwide. The Company also distributes
pharmaceuticals and other products to independent pharmacies and chain drug
stores in south Florida. The Company's common stock is traded on the New
York Stock Exchange under the symbol OMI.
On December 22, 1993, the Company entered into an agreement with Stuart
Medical, Inc. (Stuart) whereby the companies will combine their two
businesses. Stuart, a distributor of medical/surgical supplies, has
distribution centers located primarily in the West, Midwest and Northeast and
had sales for the year ended December 31, 1993 of $890.5 million (unaudited).
In the proposed transaction, the Company will form a holding company that
will own all of the currently outstanding capital stock of the Company and
Stuart. Under the terms of the agreement, the new holding company would
exchange $40,200,000 in cash and $115,000,000 par value of convertible
preferred stock for all of the capital stock of Stuart. The Company will
also refinance Stuart's pro forma debt of $141,000,000 (unaudited). Each
outstanding share of the Company's common stock would be exchanged for one
share of common stock of the new holding company. The Company intends to
account for this transaction as a purchase, if consummated. The Board of
Directors of the Company and the requisite shareholders of Stuart have
unanimously approved this transaction. The Company's shareholders will vote
on the proposed transaction at the annual shareholders' meeting with expected
closing of the transaction to occur in the second quarter.
In 1993, the Company did not engage in any material amount of governmental
business that may be subject to renegotiation of profits or termination of
contract at the election of the government. The Company held no material
patents, trademarks, licenses, franchises or concessions in 1993 nor is it
subject to any material seasonality. At December 31, 1993, the Company had
1,674 full and part-time employees and considers its relations with them to
be excellent.
The Company is required to carry a significant investment in inventory to
meet the rapid delivery requirements of its customers. The Company sells
only finished goods purchased from approximately 1,650 different competing
manufacturers that provide an adequate availability of inventory. In 1993,
products purchased from Johnson & Johnson, Inc. accounted for more than 19%
of the Company's net sales. The Company believes that it is not vulnerable
to supply interruptions that would have a material adverse effect on its
operations or profitability. Due to the immediate delivery requirements of
its customers, the Company has no material backlog of orders.
During 1993, hospital customers (including members of hospital buying
groups) represented 90% of the Company's sales. The remaining sales were to
nursing homes, physicians and other purchasers. The high percentage of
sales to hospitals reflects the principal strategy to concentrate on hospital
customers in the belief that hospitals will remain the primary focus of the
healthcare industry. Important elements of this strategy have been to
maintain the Company's status as a low cost distributor of high volume
disposable, commodity products and to operate in a decentralized manner to
provide customers with a high level of service on a local basis.
In 1993, the majority of the Company's net sales were related to eight
product groups - urological products, dressings, needles and syringes,
surgical packs and gowns, sterile procedure trays, sutures, intravenous
products and endoscopic products. These products are disposable and are
generally used in high volume by customers. The sales of these products are
supplemented by sales of a wide variety of other products including
incontinence products, feeding tubes, surgical staples, blood collection
devices and surgical gloves.
The Company's growth has been achieved by expansion into new geographical
areas through acquisitions, the opening of new distribution centers and the
consolidation of existing distribution centers. In May 1989, the Company
acquired National Healthcare and Hospital Supply Corporation (National
Healthcare). With the addition of National Healthcare's six continuing
distribution centers, the Company was able to expand its distribution area to
the western portion of the United States. On December 2, 1991, the Company
acquired Koley's Medical Supply, Inc. (Koley's). The acquisition of Koley's
provided the Company with three distribution centers located in Iowa and
Nebraska. In May 1992 and September 1992, the Company opened distribution
centers in Columbus, Ohio and Memphis, Tennessee, respectively. In May 1993,
the Company acquired Lyons Physician Supply Company located in Youngstown,
Ohio. In June 1993, the Company acquired A. Kuhlman & Co. located in
Detroit, Michigan. In June 1993, the Company opened distribution centers in
Birmingham, Alabama and Detroit, Michigan, and in August 1993 and December
1993, the Company opened distribution centers in Boston, Massachusetts and
Seattle, Washington, respectively. The Company intends to continue to
acquire or establish facilities in new locations depending on the
attractiveness of new markets, the availability of suitable acquisition
candidates and the potential for additional sales or cost savings from new
locations.
Since 1985, the Company has been a distributor for Voluntary Hospitals of
America, Inc. ("VHA"). The Company entered into a new supply agreement with
VHA in November 1993. VHA is the nation's largest non-profit hospital
system, representing over 960 hospitals, approximately 370 of which are in
markets serviced by the Company.
Under the provisions of the new VHA agreement, commencing on April 1, 1994,
the Company will sell products to VHA-member hospitals and affiliates on a
variable cost-plus basis that is generally dependent upon dollar volume of
purchases and percentage of total products purchased from the Company.
Accordingly, as the Company's sales to and penetration of VHA-member
customers increase, the cost plus pricing charged to such customers
decreases. Prior to April 1, 1994, products were sold on a straight cost-
plus basis. During 1993, no single customer accounted for 10% or more of the
Company's sales, except for sales under the VHA agreement to member
hospitals, which amounted to approximately $460 million or 33% of the
Company's total net sales.
In February 1994, the Company was selected by Columbia/HCA Healthcare Corp.
("Columbia/HCA") as its prime distributer for medical/surgical products.
Columbia/HCA operates 192 acute care and specialty hospitals throughout the
United States.
The Company also acts as an agent for Abbott Laboratories, warehousing and
distributing intravenous solutions and related products on a fee basis at six
distribution centers.
CUSTOMER SERVICE AND MARKETING SYSTEMS
The Company believes that its increased use of computers will continue to
improve its inventory management and its ability to provide prompt delivery
to customers. The use of computers has enabled the Company to handle an
increasing level of sales without corresponding increases in personnel.
Since 1988, the Company has utilized its Owens & Minor Network Information
System (OMNI), a fully integrated on-line system that operates from a
centralized data base. OMNI has improved operating controls and provided
more consistent information from the distribution centers. Additionally, the
OMNI system has improved the Company's ability to communicate with and
service its customers.
The second phase of the OMNI implementation provides for the installation
of a new computer-oriented warehouse management system, which includes a
state-of-the-art radio frequency control system utilizing barcodes that
interface with the mainframe computer system. This system completely
computerizes on-line the receiving, putaway, storage, verification, order
picking and shipping of merchandise. One of the benefits of the system is
that it provides for periodic recounts of merchandise, which will improve the
accuracy of on-hand product inventory data. Through 1993, this new warehouse
management system has been implemented in 18 of the Company's 36 distribution
centers.
During 1992, the Company began an investment in resources to upgrade the
OMNI system in order to service its customers more effectively. Selected
employees within the information systems department are utilizing the latest
application development techniques including Computer Aided System
Engineering (CASE).
The Company offers its customers certain systems-related services which
management believes contribute to its competitive position. The Company has
a variety of electronic order entry systems which allow its sales
representatives and customers to enter orders directly into the Company's
computer. These systems can interface with existing customer materials
management systems and with hand-held microcomputers carried by sales
representatives to transmit orders. During 1993, approximately 63% of the
Company's sales were entered through these systems.
Electronic order entry systems have enabled the Company to reduce its order
processing costs and improve customer service. Customers with compatible
computer terminals or computerized materials management systems can enter
orders directly into the mainframe computer in Richmond using their own
product numbering system. The Company has also adapted its central computer
system in Richmond to receive computer-to-computer order transmissions from
several more comprehensive material management software systems used by
certain customers. The customer has the choice of using its own product
numbering system or the Company's standard numbering system.
MARKETING DEVELOPMENTS
Under the name of PANDAC(R) services, the Company markets wound closure
inventory management and cost control programs for use in acute care
hospitals. This system aids in budget forecasting and control, both in terms
of balance sheet and profit and loss applications.
In 1993, the Company introduced SPECTROM(TM), an instrument-scope repair
service for the cost conscious healthcare provider. The SPECTROM(TM) service
was designed to be a single source for both major and minor repairs, offering
the customer quality repair, quick turnaround time and economy. SPECTROM(TM)
can reduce the hospital's instrument-scope repair cost which offers the
customer valuable quality performance at the lowest possible cost.
In 1993, the Company introduced CARDIOM(TM), an inventory and cost
management service for the angio Cath Lab. CARDIOM(TM) can significantly
reduce the hospital's Cath Lab asset investment. As part of the service
provided by CARDIOM(TM), the hospital receives quarterly reports containing
data which assists the hospital in maintaining efficient inventories and
controlling procedure product costs.
In 1993, the Company introduced Pallet Architecture Location Services
(PALS(TM)), a service designed to reduce the customers operating costs by
palletizing customer orders to facilitate the receiving process and reduce
put-away time.
LOGISTIC SERVICES
Due to changing needs in the marketplace, the Company's Logistic Support
Services developed a Quality Management Process (QMP) to provide customized
services and solutions. The objective of QMP is to provide hospital
customers with the solutions needed to manage their business through an era
of increasing costs and shrinking reimbursements, with the underlying goal of
providing the lowest delivered cost to the patient.
The QMP Continuum offers steps to help the customer move from a traditional
to a non-traditional distribution environment, defined by the specific needs
of each hospital. The QMP Continuum is comprised of four basic components:
(1) Process Documentation identifies quality improvement opportunities to
remove redundancies, reduce inefficiency, and introduce a continuous
improvement process; (2) Asset Management Solution provides EDI transactions,
continuous inventory replenishment, J-I-T/Stockless partnerships, PANDAC(R)
Wound Closure Management Program and other asset management programs; (3)
Cost Control Analysis provides data needed to identify asset utilization,
streamline and reduce costs, including PALS(TM); and (4) Project Management and
Consulting Services provide operating system design, distribution system
design, facility design, space utilization, Cath Lab design, mergers and
consolidations, etc.
The Quality Management Process methodology is integrated into the
operations of the local Owens & Minor Distribution Center which serves the
hospital.
COMPETITION
The medical/surgical supply business in the United States consists of one
nationwide distributor, Baxter International, and a number of regional and
local distributors. The Company believes that, based upon sales, it is the
second largest distributor of medical/surgical products to hospitals in the
United States. Competition within the medical/surgical supply business
exists with respect to product availability, delivery time, services
provided, the ability to meet special requirements of customers and price.
In recent years, there has been a consolidation of medical/surgical supply
distributors through the purchase of smaller distributors by larger
companies.
Item 2. Properties
The corporate headquarters of the Company are located in western Henrico
County in suburban Richmond, Virginia in a leased facility. The Company
owns two undeveloped parcels of land in western Henrico County, which are
adjacent to the Company's corporate headquarters. The former office and
production facilities of Harbor Medical, Inc., located in Sanford, Florida,
which are presently leased to a tenant through May 1996, are owned by the
Company. Also, with the acquisition of Lyons Physician Supply Company, the
Company owns the land and building of its Youngstown, Ohio location.
The Company also leases offices and warehouses for its distribution centers
in 35 cities throughout the country.
Excluding the Stuart transaction, the Company expects to relocate or
renovate up to seven of its leased office and warehouse facilities in 1994.
All other Company facilities are considered adequate for their current and
projected use.
Item 3. Legal Proceedings
There are no legal proceedings pending against the Company or any of its
subsidiaries other than ordinary routine litigation incidental to its
business, including certain tort claims arising in the ordinary course of
business which are adequately covered by insurance and are being defended
either by the Company's insurance carriers or the suppliers of the
merchandise involved. No legal proceeding pending against the Company is
expected to have a material adverse effect upon the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 1993.
EXECUTIVE AND OTHER OFFICERS OF THE REGISTRANT
The Company's Executive Officers are:
Name Age Office Held
---- --- -----------
G. Gilmer Minor, III 53 President and Chief Executive Officer
Robert E. Anderson, III 59 Senior Vice President, Planning and
Development
Henry A. Berling 51 Senior Vice President, Sales and
Marketing
Drew St. J. Carneal 55 Senior Vice President, Corporate
Counsel and Secretary
Glenn J. Dozier 43 Senior Vice President, Finance, Chief
Financial Officer
Craig R. Smith 42 Senior Vice President, Distribution
and Information Systems
The Company's Other Officers are:
Richard F. Bozard 47 Vice President, Treasurer
Richard L. Farinholt 55 Vice President, Technology Systems
Hugh F. Gouldthorpe, Jr. 55 Vice President, Quality and
Communications
Frederick R. Ricker 48 Vice President, Business Development
and Support
Michael L. Roane 39 Vice President, Human Resources
F. Thomas Smiley 38 Vice President, Controller
Hue Thomas, III 55 Vice President, Corporate Relations
All of the Officers were elected at the annual meeting of the Board of
Directors held April 27, 1993. All Officers are elected to serve until the
1994 Annual Meeting of Shareholders, or such time as their successors are
elected.
Mr. G. Gilmer Minor, III was first employed by the Company in 1963. Mr.
Minor received his B.A. from the Virginia Military Institute in 1963. In
1966, he was awarded an MBA from the Colgate Darden School of Business
Administration from the University of Virginia. He has spent his entire
business career with the Company and was elected President in 1981 and Chief
Executive Officer in 1984.
Mr. Anderson was Vice President of Powers & Anderson from 1958 to 1966.
With the Company's acquisition of Powers & Anderson in 1967, Mr. Anderson
was employed in the Medical/Surgical Division in sales and marketing and was
elected Vice President in 1981. In October 1987, he was elected Senior Vice
President, Corporate Development. In April 1991, Mr. Anderson was elected
Senior Vice President, Marketing and Planning. In 1992, Mr. Anderson assumed
a new role as Senior Vice President, Planning and Development. Mr. Anderson
received a B.S. in Commerce from the University of Virginia in 1955.
Mr. Berling was employed by A & J Hospital Supply Company following the
completion of his education in 1965. With the Company's acquisition of A &
J Hospital Supply in 1966, Mr. Berling was employed by the Company in the
Medical/Surgical Division and was elected Vice President in 1981 and Senior
Vice President, Sales and Marketing, a newly created position, in 1987. In
April 1989, he was elected Senior Vice President and Chief Operating Officer.
In April 1991, Mr. Berling assumed a new role as Senior Vice President, Sales
and Distribution. In 1992, Mr. Berling assumed the role of Senior Vice
President, Sales and Marketing. Mr. Berling received a B.S. in Economics
from Villanova University in 1965.
Mr. Carneal was employed by the Company in January 1989 as Vice President
and Corporate Counsel. From 1985 to 1988, he served as the Richmond City
Attorney and, prior to that date, he was a partner for the law firm of
Cabell, Moncure and Carneal which provided legal services to the Company. In
February 1989, he was elected Secretary by the Board of Directors. In March
1990, he was elected Senior Vice President, Corporate Counsel and Secretary.
Mr. Carneal received a B.A. in English from Princeton University in 1960.
Mr. Carneal received his L.L.B. at the University of Virginia School of Law.
Mr. Dozier was elected to the position of Senior Vice President, Chief
Financial Officer, in February 1991. In April 1991, he assumed the
additional responsibility of Senior Vice President, Operations and Systems.
Mr. Dozier was formerly Vice President, Treasurer and Chief Financial
Officer. In 1992, Mr. Dozier assumed a new role of Senior Vice President,
Finance and Information Systems and Chief Financial Officer. In 1993, Mr.
Dozier assumed the role of Senior Vice President, Finance, Chief Financial
Officer. Prior to joining the Company in April 1990, Mr. Dozier had been
Chief Financial Officer and Vice President of Administration and Control
since 1987 for AMF Bowling, Inc. Previously, Mr. Dozier was with Dravo
Corporation, where his last position was Vice President, Finance. Mr. Dozier
received an MBA from The Colgate Darden School of Business at the University
of Virginia and received a B.S. from Virginia Polytechnic Institute and State
University in Industrial Engineering and Operations Research.
Mr. Smith was employed by National Healthcare and Hospital Supply
Corporation in June 1983 as a sales representative. With the Company's
acquisition of National Healthcare and Hospital Supply Corporation in May
1989, Mr. Smith was employed by the Company as Division Vice President. From
1990 to 1992, Mr. Smith served as Group Vice President for the western
region. On January 4, 1993 Mr. Smith assumed responsibilities of Senior Vice
President, Distribution. In 1993, Mr. Smith assumed the new role of Senior
Vice President, Distribution and Information Systems. Mr. Smith is a
graduate of the University of Southern California.
Mr. Bozard was employed by the Company in March 1988 and was elected Vice
President, Treasurer in 1991. Prior to joining the Company, he served as an
officer for CIT/Manufacturers Hanover Bank and Trust. From 1984 to 1986 he
was with Williams Furniture where his last position was President. Mr.
Bozard received a B.S. from Virginia Commonwealth University in Business
Administration.
Mr. Farinholt was employed by the Company in October 1991 as Vice
President, Information Systems. In January 1994, Mr. Farinholt assumed the
position of Vice President, Technology Systems. Prior to joining the
Company, Mr. Farinholt was President of a consulting firm, Information
Technology Group, Inc. Prior thereto, he was President of HealthNet, Inc.
Previously, Mr. Farinholt was with IBM for 17 years. Mr. Farinholt received
a B.S. Degree in Accounting from the University of Virginia.
Mr. Gouldthorpe joined the Company in 1986 as Director of Hospital Sales
for the Wholesale Drug Division. In 1987, he was promoted to Vice President
and was named Vice President and General Manager of the Wholesale Drug
Division in 1989. In April 1991, he was elected Vice President, Corporate
Communications and in September 1993, was appointed Vice President, Quality
and Communications. Prior to joining the Company, Mr. Gouldthorpe was
employed by E.R. Squibb and Sons for 20 years. While at Squibb he held
numerous sales and marketing positions that included Advertising Manager,
Director of Training and Director of Sales. Mr. Gouldthorpe is a graduate of
The Virginia Military Institute with a B.A. in Chemistry and Biology.
Mr. Ricker was employed by the Company in March 1989 as Vice President and
Director of Operations. In 1991, Mr. Ricker assumed the additional
responsibility of Vice President, Support Services. In 1993, Mr. Ricker
assumed the position of Vice President, Business Development and Support.
Prior to joining the Company, he was Director of Operations with Grinnell
Corporation from 1986 to 1989. Prior to 1986, Mr. Ricker served as Director
and/or Vice President of Operations with John Portman and Associates and W.
W. Grainger, Inc. He started his career with IBM in 1968 as a Financial
Analyst. Mr. Ricker is a graduate of Youngstown State University.
Mr. Roane was employed by the Company in October 1992 as Vice President,
Human Resources. Prior to joining Owens & Minor, Mr. Roane was employed by
Philip Morris Co. where his last position was Manager, Employee Relations
Operations. Mr. Roane received his B.S. Degree in Business Management from
Canisius College.
Mr. Smiley was employed by the Company in September 1979 as Manager of
Internal Audit. In January 1981, he became the Assistant Controller. In
June 1985, he became the Controller. In April 1986 he was elected Assistant
Vice President, Controller. In April 1989, he was elected Vice President,
Controller. Prior to joining the Company, he was with Coopers & Lybrand,
where his last position was Senior Accountant. Mr. Smiley received a B.S. in
Business Administration from the University of Richmond.
Mr. Thomas joined the Company in 1970. In 1984, he was promoted to
Assistant General Manager of the Medical/Surgical Division. In 1985, he was
made Assistant Corporate Vice President and was named Vice President in 1987.
In 1989, he was named Vice President and General Manager of the
Medical/Surgical Division. In 1991, he was named Vice President, Corporate
Relations. Mr. Thomas received a B.S. from Georgia Institute of Technology
in 1964.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Information regarding the market price of the Company's Common Stock and
related stockholder matters is set forth in the 1993 Annual Report under the
heading "Market and Dividend Information" on page 40 and is incorporated by
reference herein.
Item 6. Selected Financial Data
The information required under this item is contained in the 1993 Annual
Report under the heading "Selected Financial Data" on pages 18 and 19 and is
incorporated by reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is contained in the 1993 Annual
Report under the heading "Management's Discussion and Analysis of Results of
Operations and Financial Condition" on pages 18 through 21 and is
incorporated by reference herein.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes as of December 31, 1993 and
1992 and for each of the years in the three-year period ended December 31,
1993, together with the independent auditors' report of KPMG Peat Marwick
dated February 4, 1994, appearing on pages 22 through 37 of the 1993 Annual
Report are incorporated by reference herein.
The information required under Item 302 of Regulation S-K is set forth in
the 1993 Annual Report in Note 12 - "Quarterly Financial Data (Unaudited)"
in the Notes to the Consolidated Financial Statements on page 36 and is
incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no changes in or disagreements with accountants on accounting
and financial disclosures during the two years ended December 31, 1993.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required for this item is contained in Part I of this
report and in the 1994 Proxy Statement under the heading, "Proposal 2:
Election of Directors."
Item 11. Executive Compensation
The information required under this item is contained in the 1994 Proxy
Statement under the heading "Proposal 2: Election of Directors - Executive
Compensation" and is incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is contained in the 1994 Proxy
Statement under the heading "Proposal 2: Election of Directors - O&M Common
Stock Owned by Principal Shareholders and Management" and is incorporated by
reference herein.
Item 13. Certain Relationships and Related Transactions
The information required under this item is contained in the 1994 Proxy
Statement under the heading "Proposal 2: Election of Directors -
Compensation Committee Interlocks and Insider Participation" and is
incorporated by reference herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
<TABLE>
Page Numbers
1993 Annual Form
Report * 10-K
----------- -----
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(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements:
Independent Auditors' Report of KPMG Peat Marwick 37
Consolidated Balance Sheets at December 31, 23
1993 and 1992
Consolidated Statements of Income for the 22
years ended December 31, 1993, 1992 and 1991
Consolidated Statements of 24
Stockholders' Equity for the years
ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows 25
for the years ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements 26-36
2. Financial Statement Schedules:
Independent Auditors' Report of KPMG Peat Marwick 16
VIII - Valuation and Qualifying Accounts 17
IX - Short-term and Revolving Credit Borrowings 18
</TABLE>
* Incorporated by reference from the indicated pages of the 1993 Annual
Report.
All other schedules are omitted because the related information is included
in the consolidated financial statements or notes thereto or because they are
not applicable.
3. Exhibits
(2) Agreement of Exchange dated as of December 22, 1993
by and among Stuart Medical, Inc., the Company, OMI
Holding, Inc. and certain shareholders of Stuart
Medical, Inc.**
(3) (a) Amended and Restated Articles of Incorporation of
the Company (incorporated herein by reference to
the Company's Annual Report on Form 10-K, Exhibit
3(a), for the year ended December 31, 1990)
(b) Amendment effective March 8, 1993 to the Amended
and Restated Articles of Incorporation of the
Company (incorporated herein by reference to the
Company's Annual Report on Form 10-K, exhibit 3(b),
for the year ended December 31, 1992)
(c) Bylaws of the Company as amended on February 25,
1993 (incorporated herein by reference to the
Company's Annual Report on Form 10-K, Exhibit 3(c),
for the year ended December 31, 1992)
(4) (a) Owens & Minor, Inc. $11.5 million, 0% subordinated
note dated May 31, 1989, due May 31, 1997, between
the Company and Hygeia Ltd. (incorporated herein by
reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1990)
(b) Owens & Minor, Inc. $3.5 million, 6.5% convertible
subordinated debenture dated May 31, 1989, between
the Company and Hygeia Ltd. (incorporated herein
by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1990)
(c) Owens & Minor, Inc. $40 million Credit Agreement,
dated as of November 1, 1993, among the Company and
Crestar Bank and NationsBank of Virginia, N.A.
(10) (a) Owens & Minor, Inc. Annual Incentive Plan
(incorporated herein by reference to the Company's
definitive Proxy Statement dated March 25, 1991)*
(b) 1985 Stock Option Plan as amended on January 27,
1987 (incorporated herein by reference to the
Company's Annual Report on Form 10-K, Exhibit
10(f), for the year ended December 31, 1987)*
(c) Stock Purchase Agreement dated May 1, 1989 among
the Company, Hygeia N.V. and Hygeia Medical Supply
B.V. (incorporated herein by reference to the
Company's Current Report on Form 8-K, Exhibit 2.1,
filed on May 24, 1989)
(d) Owens & Minor, Inc. Pension Plan (incorporated
herein by reference to the Company's Annual Report
on Form 10-K, Exhibit 10(h), for the year ended
December 31, 1990)*
(e) Supplemental Executive Retirement Plan dated July
1, 1991 (incorporated herein by reference to the
Company's Annual Report on Form 10-K, Exhibit
10(i), for the year ended December 31, 1991)*
(f) Owens & Minor, Inc. Executive Severance Agreements
(incorporated herein by reference to the Company's
Annual Report on Form 10-K, Exhibit 10(i), for the
year ended December 31, 1991)*
(g) Owens & Minor, Inc. Directors' Stock Option Plan
(incorporated herein by reference to the Company's
Annual Report on Form 10-K, Exhibit 10(i), for the
year ended December 31, 1991)*
(h) Agreement dated December 31, 1985 by and between
Owens & Minor, Inc. and G. Gilmer Minor, Jr.
(incorporated herein by reference to the Company's
Annual Report on Form 10-K, exhibit 10(k), for the
year ended December 31, 1992)*
(i) Agreement dated December 31, 1985 by and between
Owens & Minor, Inc. and Philip M. Minor
(incorporated herein by reference to the Company's
Annual Report on Form 10-K, exhibit 10(l), for the
year ended December 31, 1992)*
(j) Agreement dated May 1, 1991 by and between Owens &
Minor, Inc. and W. Frank Fife (incorporated herein
by reference to the Company's Annual Report on Form
10-K, exhibit 10(m), for the year ended December
31, 1992)*
(k) Owens & Minor, Inc. 1993 Stock Option Plan*
(l) Owens & Minor, Inc. Directors' Compensation Plan*
(m) Form of Enhanced Authorized Distribution Agency
Agreement dated as of November 16, 1993 by and
between Voluntary Hospitals of America, Inc. and
Owens & Minor, Inc.***
(11) Calculation of Net Income Per Share
(13) Owens & Minor, Inc. 1993 Annual Report to
Stockholders (Note 1)
(22) Subsidiaries of Registrant
(24) Consent of KPMG Peat Marwick, independent auditors
* A management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Form 10-K.
** The schedules to this Agreement have been omitted pursuant
to Item 601(b)(2) of Regulation S-K. The Company hereby
undertakes to file supplementally with the Commission upon
request a copy of the omitted schedules.
*** The Company has requested confidential treatment by the
Commission of certain portions of this Agreement, which
portions have been omitted and filed separately with the
Commission.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the fourth quarter of 1993
Note 1. With the exception of the information incorporated in this Form 10-K
by reference thereto, the 1993 Annual Report shall not be deemed "filed" as
a part of this Form 10-K.
<PAGE>
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.
OWENS & MINOR, INC.
by/s/ G. Gilmer Minor, Jr.
G. Gilmer Minor, Jr.
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report is signed below by the following persons on behalf of the Registrant
and in the capacities and on the date indicated:
/s/ G. Gilmer Minor, Jr. /s/ R. E. Cabell, Jr.
G. Gilmer Minor, Jr. R. E. Cabell, Jr
Chairman of the Board Director
and Director
/s/ Philip M. Minor /s/ James B. Farinholt, Jr.
Philip M. Minor James B. Farinholt, Jr.
Vice Chairman and Director Director
/s/ G. Gilmer Minor, III /s/ Vernard W. Henley
G. Gilmer Minor, III Vernard W. Henley
President and Chief Director
Executive officer
and Director
/s/ William F. Fife /s/ E. Morgan Massey
William F. Fife E. Morgan Massey
Retired Executive Vice Director
President and Director
/s/ Glenn J. Dozier /s/ James E. Rogers
Glenn J. Dozier James E. Rogers
Senior Vice President, Director
Finance, Chief Financial
Officer
/s/ F. Thomas Smiley /s/ James E. Ukrop
F. Thomas Smiley James E. Ukrop
Vice President, Principal Director
Accounting Officer
and Controller
/s/ Anne Marie Whittemore
Anne Marie Whittemore
Director
Each of the above signatures is affixed as of March 7, 1994.
<PAGE>
INDEPENDENT AUDITORS
REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Stockholders
Owens & Minor, Inc.:
Over date of February 4, 1994, we reported on the consolidated balance sheets of
Owens & Minor, Inc. and subsidiaries as of December 31,1993 and 1992, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1993, as
contained in the 1993 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 1993. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related financial statement schedules included on pages 17 and 18 of this annual
report on Form 10-K. These financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
As discussed in Note 10 to the consolidated financial statements, as of January
1, 1993, the Company changed its method of accounting for income taxes.
KPMG Peat Marwick
Richmond, Virginia
February 4, 1994
<PAGE>
Schedule VIII
OWENS & MINOR, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands)
Balance at Additions
beginning charged to Balance at
of costs and end of
Description year expenses Deductions* year
- ----------- --------- -------- --------- ----------
Allowance for doubtful
accounts deducted from
accounts and notes
receivable in the
Consolidated
Balance Sheets
December 31, 1993 $4,442 $ 497 $ 261 $4,678
December 31, 1992 $4,514 $1,351 $1,423 $4,442
December 31, 1991 $3,671 $1,506 $ 663 $4,514
* Uncollectible accounts written off.
<PAGE>
Schedule IX
OWENS & MINOR, INC. AND SUBSIDIARIES
Short-Term and Revolving Credit Borrowings
(Dollars in thousands)
<TABLE>
Weighted
Weighted
average
average Maximum Average
interest
interest amount amount
rate
Category of Balance rate outstanding outstanding
during
Year Ended short-term at end at end during during
the year
December 31, borrowings of year of year the year the year
(Note A)
- ------------ ---------- ------- -------- ----------- -----------
- --------
<S> <C> <C> <C> <C> <C>
<C>
1993 Bank $37,000 3.5 % $65,300 $23,300
3.8%
1992 Bank $ 0 0 % $58,600 $ 8,413
5.9%
1991 Bank $39,400 5.0 % $63,100 $36,449
6.5%
</TABLE>
NOTE A: Calculations are based on daily average amounts outstanding and
include commitment fees on the revolving line of credit.
<PAGE>
Form 10-K
Exhibit Index
Exhibit # Description Page #
- --------- ----------- ------
2 Agreement of Exchange dated as of December 22, 1993 by and among
Stuart Medical, Inc., the Company, OMI Holding, Inc. and certain
shareholders of Stuart Medical, Inc.
4 (c) Owens & Minor, Inc. $40 million Credit Agreement, dated as of
November 1, 1993, among the Company and Crestar Bank and
NationsBank of Virginia, N.A.
10 (k) Owens & Minor, Inc. 1993 Stock Option Plan
(l) Owens & Minor, Inc. Directors' Compensation Plan
(m) Form of Enhanced Authorized Distribution Agency Agreement dated as
of November 16, 1993 by and between Voluntary Hospitals of America,
Inc. and Owens & Minor, Inc.
11 Calculation of Net Income Per Share
13 Owens & Minor, Inc. 1993 Annual Report to Stockholders
22 Subsidiaries of Registrant
24 Consent of KPMG Peat Marwick, independent auditors
AGREEMENT OF EXCHANGE
DATED AS OF DECEMBER 22, 1993
BY AND AMONG
STUART MEDICAL, INC.,
OWENS & MINOR, INC.,
OMI HOLDING, INC.
and
CERTAIN SHAREHOLDERS OF
STUART MEDICAL, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions
1.01 "Affiliate". . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 "Agreement". . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 "BCL". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04 "Balance Sheet Deficiency" . . . . . . . . . . . . . . . . . . 2
1.05 "Balance Sheet Holdback Shares". . . . . . . . . . . . . . . . 2
1.06 "CERCLA" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.07 "Certificates" . . . . . . . . . . . . . . . . . . . . . . . . 2
1.08 "Closing". . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.09 "Closing Balance Sheet". . . . . . . . . . . . . . . . . . . . 2
1.10 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 "Competing Transaction". . . . . . . . . . . . . . . . . . . . 2
1.12 "Contracts". . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 "E&Y". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 "Effective Time" . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 "ERISA". . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 "ERISA Affiliate". . . . . . . . . . . . . . . . . . . . . . . 3
1.17 "Exchanges". . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 "First C Year" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 "GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 "Hazardous Materials". . . . . . . . . . . . . . . . . . . . . 3
1.22 "HSR Act". . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 "Intellectual Property". . . . . . . . . . . . . . . . . . . . 3
1.24 "J.P. Morgan". . . . . . . . . . . . . . . . . . . . . . . . . 3
1.25 "Knowledge". . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.26 "KPMG" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.27 "Last SMI Year". . . . . . . . . . . . . . . . . . . . . . . . 3
1.28 "Law". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.29 "Leased Property". . . . . . . . . . . . . . . . . . . . . . . 3
1.30 "Losses" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.31 "Midwest". . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 "Midwest Accounts Receivable". . . . . . . . . . . . . . . . . 4
1.33 "Midwest Acquisition". . . . . . . . . . . . . . . . . . . . . 4
1.34 "Net Worth Deficiency" . . . . . . . . . . . . . . . . . . . . 4
1.35 "Notice of Objection". . . . . . . . . . . . . . . . . . . . . 4
1.36 "O&M". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.37 "O&M Holding". . . . . . . . . . . . . . . . . . . . . . . . . 4
1.38 "O&M Articles of Exchange" . . . . . . . . . . . . . . . . . . 4
1.39 "O&M Common Stock" . . . . . . . . . . . . . . . . . . . . . . 4
1.40 "O&M Disclosure Schedule". . . . . . . . . . . . . . . . . . . 4
1.41 "O&M Exchange" . . . . . . . . . . . . . . . . . . . . . . . . 4
1.42 "O&M Financial Statements" . . . . . . . . . . . . . . . . . . 4
1.43 "O&M Holding Common Stock" . . . . . . . . . . . . . . . . . . 4
1.44 "O&M Holding Preferred Stock". . . . . . . . . . . . . . . . . 5
1.45 "O&M's Indemnitees". . . . . . . . . . . . . . . . . . . . . . 5
1.46 "O&M Plan of Exchange" . . . . . . . . . . . . . . . . . . . . 5
1.47 "O&M Shareholders' Meeting". . . . . . . . . . . . . . . . . . 5
1.48 "O&M Subsidiaries" . . . . . . . . . . . . . . . . . . . . . . 5
1.49 "PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.50 "Pension Plans". . . . . . . . . . . . . . . . . . . . . . . . 5
1.51 "Permitted Liens". . . . . . . . . . . . . . . . . . . . . . . 5
1.52 "Phantom Stock Plans". . . . . . . . . . . . . . . . . . . . . 5
1.53 "Proxy Statement/Prospectus" . . . . . . . . . . . . . . . . . 5
1.54 "Qualified Pension Plan" . . . . . . . . . . . . . . . . . . . 5
1.55 "RCRA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.56 "Real Property". . . . . . . . . . . . . . . . . . . . . . . . 5
1.57 "Registration Rights Agreement". . . . . . . . . . . . . . . . 6
1.58 "Related Agreements" . . . . . . . . . . . . . . . . . . . . . 6
1.59 "Review Auditors". . . . . . . . . . . . . . . . . . . . . . . 6
1.60 "SMI". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.61 "SMI 401(k) Plan". . . . . . . . . . . . . . . . . . . . . . . 6
1.62 "SMI Articles of Exchange" . . . . . . . . . . . . . . . . . . 6
1.63 "SMI Common Stock" . . . . . . . . . . . . . . . . . . . . . . 6
1.64 "SMI Current Balance Sheet". . . . . . . . . . . . . . . . . . 6
1.65 "SMI Disclosure Schedule". . . . . . . . . . . . . . . . . . . 6
1.66 "SMI Exchange" . . . . . . . . . . . . . . . . . . . . . . . . 6
1.67 "SMI Exchange Consideration" . . . . . . . . . . . . . . . . . 6
1.68 "SMI Financial Statements" . . . . . . . . . . . . . . . . . . 6
1.69 "SMI Funding". . . . . . . . . . . . . . . . . . . . . . . . . 6
1.70 "SMI Plan of Exchange" . . . . . . . . . . . . . . . . . . . . 6
1.71 "Sale and Administration Agreement". . . . . . . . . . . . . . 7
1.72 "SEC". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.73 "SEC Reports". . . . . . . . . . . . . . . . . . . . . . . . . 7
1.74 "Securities Act" . . . . . . . . . . . . . . . . . . . . . . . 7
1.75 "Series B Preferred Stock" . . . . . . . . . . . . . . . . . . 7
1.76 "Severance Agreements" . . . . . . . . . . . . . . . . . . . . 7
1.77 "Shareholder" or "Shareholders". . . . . . . . . . . . . . . . 7
1.78 "Shareholders' Indemnitees". . . . . . . . . . . . . . . . . . 7
1.79 "Shareholders' Representative" . . . . . . . . . . . . . . . . 7
1.80 "Specialty". . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.81 "Specialty Litigation" . . . . . . . . . . . . . . . . . . . . 7
1.82 "Specialty Obligations". . . . . . . . . . . . . . . . . . . . 7
1.83 "Subordinated Note". . . . . . . . . . . . . . . . . . . . . . 7
1.84 "Subordinated Note Holdback Shares". . . . . . . . . . . . . . 7
1.85 "Transfer" . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.86 "VHA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.87 "VSCA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.88 "Welfare Plans". . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II
The Closing
2.01 The Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.02 Closing; Filing of Articles of Exchange. . . . . . . . . . . . 8
2.03 Holdback Shares. . . . . . . . . . . . . . . . . . . . . . . . 8
2.04 Voting of Holdback Shares; Dividends; Interest . . . . . . . . 9
2.05 Closing Balance Sheet. . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
The Exchanges
ARTICLE IV
Representations of SMI and the Shareholders
4.01 Existence and Good Standing. . . . . . . . . . . . . . . . . . 12
4.02 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 13
4.03 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.04 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 13
4.05 Subsidiaries, Affiliated Companies and
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.06 Financial Statements . . . . . . . . . . . . . . . . . . . . . 14
4.07 No Material Adverse Changes. . . . . . . . . . . . . . . . . . 14
4.08 Books and Records. . . . . . . . . . . . . . . . . . . . . . . 16
4.09 Governmental Authorization . . . . . . . . . . . . . . . . . . 16
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.11 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.12 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.13 Personal Property, Inventory and Accounts
Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.14 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.15 Obligations for Money Borrowed . . . . . . . . . . . . . . . . 19
4.16 Employment Agreements and Benefits . . . . . . . . . . . . . . 19
4.17 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 19
4.18 Employee Relations . . . . . . . . . . . . . . . . . . . . . . 21
4.19 Transactions with Affiliates . . . . . . . . . . . . . . . . . 21
4.20 Environmental Compliance . . . . . . . . . . . . . . . . . . . 21
4.21 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.23 Absence of Certain Practices . . . . . . . . . . . . . . . . . 24
4.24 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 24
4.25 Certain Obligations. . . . . . . . . . . . . . . . . . . . . . 24
4.26 Pricing Audits . . . . . . . . . . . . . . . . . . . . . . . . 24
4.27 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.28 Broker's or Finder's Fees. . . . . . . . . . . . . . . . . . . 24
ARTICLE V
Representations of O&M
5.01 Existence and Good Standing. . . . . . . . . . . . . . . . . . 25
5.02 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 25
5.03 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.04 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 26
5.05 Subsidiaries, Affiliated Companies and
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.06 Financial Statements . . . . . . . . . . . . . . . . . . . . . 26
5.07 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.08 Books and Records. . . . . . . . . . . . . . . . . . . . . . . 27
5.09 Governmental Authorization . . . . . . . . . . . . . . . . . . 27
5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.11 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 27
5.13 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.14 Securities Reports . . . . . . . . . . . . . . . . . . . . . . 28
5.15 Broker's or Finder's Fees. . . . . . . . . . . . . . . . . . . 28
ARTICLE VI
Conduct of Businesses and Certain Other Actions
Pending the Effective Time
6.01 Access to Information Concerning Properties and
Records for Due Diligence Review . . . . . . . . . . . . . . . 28
6.02 Obligations Concerning Confidentiality . . . . . . . . . . . . 29
6.03 Conduct of Business by SMI Pending the Effective
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.04 HSR Act Filings. . . . . . . . . . . . . . . . . . . . . . . . 31
6.05 No Shopping. . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.06 Shareholders Meeting . . . . . . . . . . . . . . . . . . . . . 32
6.07 Certain Notices. . . . . . . . . . . . . . . . . . . . . . . . 32
6.08 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 32
6.09 Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . 33
6.10 Shareholders Meeting; Proxy Statement/Prospectus . . . . . . . 33
6.11 Certain Notices. . . . . . . . . . . . . . . . . . . . . . . . 33
6.12 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 34
6.13 Severance Agreements . . . . . . . . . . . . . . . . . . . . . 34
6.14 Phantom Stock Plans. . . . . . . . . . . . . . . . . . . . . . 34
6.15 SMI Funding. . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.16 Supply Agreement . . . . . . . . . . . . . . . . . . . . . . . 35
6.17 Servicing Agreements . . . . . . . . . . . . . . . . . . . . . 35
6.18 Midwest Acquisition. . . . . . . . . . . . . . . . . . . . . . 35
6.19 Fixed Assets Inventory . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII
Conditions Precedent to Obligations of SMI and the Shareholders
7.01 O&M Obligations. . . . . . . . . . . . . . . . . . . . . . . . 36
7.02 Accuracy of Representations and Warranties . . . . . . . . . . 36
7.03 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 36
7.04 Court Orders . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.05 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.06 Actions and Proceedings. . . . . . . . . . . . . . . . . . . . 36
7.07 O&M Shareholder Vote . . . . . . . . . . . . . . . . . . . . . 37
7.08 Completion of Investigation. . . . . . . . . . . . . . . . . . 37
7.09 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII
Conditions Precedent to the Obligations of O&M and O&M Holding
8.01 SMI and Shareholders Obligations . . . . . . . . . . . . . . . 38
8.02 Accuracy of Representations and Warranties . . . . . . . . . . 38
8.03 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 38
8.04 Court Orders . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.05 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.06 Actions and Proceedings. . . . . . . . . . . . . . . . . . . . 38
8.07 O&M Shareholder Vote . . . . . . . . . . . . . . . . . . . . . 39
8.08 Opinion of J. P. Morgan. . . . . . . . . . . . . . . . . . . . 39
8.09 Completion of Investigation. . . . . . . . . . . . . . . . . . 39
8.10 VHA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.11 Opinion Concerning Certain Tax Matters . . . . . . . . . . . . 39
8.12 Title to Real Property . . . . . . . . . . . . . . . . . . . . 39
8.13 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 39
8.14 Refinancing of SMI Indebtedness; Additional O&M
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.15 Registration Statement . . . . . . . . . . . . . . . . . . . . 40
8.16 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX
Indemnification and
Additional Agreements
9.01 The Shareholders' Indemnity. . . . . . . . . . . . . . . . . . 41
9.02 O&M's Indemnity. . . . . . . . . . . . . . . . . . . . . . . . 43
9.03 Acquisition for Investment; Transfer Limitations . . . . . . . 44
9.04 Right of First Refusal . . . . . . . . . . . . . . . . . . . . 44
9.05 Standstill . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.06 Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . 47
9.07 Noncompetition Covenant. . . . . . . . . . . . . . . . . . . . 48
9.08 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.09 Board Nominee. . . . . . . . . . . . . . . . . . . . . . . . . 49
9.10 Financial Statements . . . . . . . . . . . . . . . . . . . . . 49
9.11 Tax Status of Exchanges. . . . . . . . . . . . . . . . . . . . 49
9.12 Shareholders' Representative . . . . . . . . . . . . . . . . . 50
9.13 Books and Records. . . . . . . . . . . . . . . . . . . . . . . 50
9.14 Phantom Stock Plans. . . . . . . . . . . . . . . . . . . . . . 50
9.15 New York Stock Exchange Listing Application. . . . . . . . . . 51
9.16 Midwest Accounts Receivable Guarantee. . . . . . . . . . . . . 51
ARTICLE X
Termination, Amendment and Waiver
10.01 Termination. . . . . . . . . . . . . . . . . . . . . . . 51
10.02 Effect of Termination. . . . . . . . . . . . . . . . . . 52
10.03 Post-Termination Covenants . . . . . . . . . . . . . . . 52
ARTICLE XI
General Provisions
11.01 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 53
11.02 Break-up Fee.. . . . . . . . . . . . . . . . . . . . . . 53
11.03 Publicity. . . . . . . . . . . . . . . . . . . . . . . . 53
11.04 Further Assurances . . . . . . . . . . . . . . . . . . . 54
11.05 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 54
11.06 Descriptive Headings . . . . . . . . . . . . . . . . . . 55
11.07 Parties in Interest. . . . . . . . . . . . . . . . . . . 56
11.08 Severability . . . . . . . . . . . . . . . . . . . . . . 56
11.09 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 56
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . 56
11.11 Amendment. . . . . . . . . . . . . . . . . . . . . . . . 56
11.12 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 56
Exhibit A O&M Plan of Exchange
Exhibit B Registration Rights Agreement
Exhibit C SMI Plan of Exchange
Exhibit D Series B Preferred Stock Terms
Exhibit E Opinion of Hunton & Williams
Exhibit F Opinion of Cohen & Grigsby, P.C.
Exhibit G Opinion of Counsel to the Shareholders
<PAGE>
SMI Disclosure Schedule
Item 1.23 Intellectual Property
Item 1.29 Leased Property
Item 1.56 Real Property
Item 1.76 Severance Agreements
Item 4.03 Consents, etc.
Item 4.04 Capitalization of SMI
Item 4.07 Material Adverse Changes
Item 4.10A Litigation
Item 4.10B Specialty Litigation
Item 4.14 Contracts
Item 4.15 Obligations for Money Borrowed
Item 4.16 Employment Agreements
Item 4.17 Employee Benefit Plans
Item 4.18 Employee Relations
Item 4.19 Transactions with Affiliates
Item 4.21 Tax Matters
Item 4.22 Insurance
Item 4.24 Compliance with Laws
Item 4.26 Pricing Audits
O&M Disclosure Schedule
Item 1.48 O&M Subsidiaries
Item 5.03 Consents, etc.
Item 5.10 Litigation
Item 5.12 Compliance with Laws
<PAGE>
AGREEMENT OF EXCHANGE
AGREEMENT OF EXCHANGE (this "Agreement"), dated as of December 22, 1993,
among Stuart Medical, Inc., a Pennsylvania corporation ("SMI"), Owens &
Minor, Inc., a Virginia corporation ("O&M"), OMI Holding, Inc., a Virginia
corporation ("O&M Holding"), and Henry L. Hillman, Elsie H. Hillman and C. G.
Grefenstette, Trustees under the Henry L. Hillman Trust under agreement of
trust dated November 18, 1985, Juliet Lea Hillman Simonds, Audrey Hillman
Fisher, Henry L. Hillman, Jr., William T. Hillman, Howard B. Hillman and
Tatnall L. Hillman, each a shareholder of SMI (each, a "Shareholder", and
collectively, the "Shareholders").
WHEREAS, SMI, O&M Holding and the Shareholders desire to effect a share
exchange pursuant to which all outstanding shares of SMI Common Stock will be
exchanged for 1,150,000 shares of Series B Preferred Stock and $40,200,000 to
be allocated among the holders of SMI Common Stock in accordance with their
elections pursuant to the SMI Plan of Exchange;
WHEREAS, O&M and O&M Holding desire to effect a share exchange pursuant
to which each outstanding share of O&M Common Stock will be exchanged for one
share of O&M Holding Common Stock; and
WHEREAS, O&M, O&M Holding, SMI and the Shareholders acknowledge that
such exchanges are intended to qualify as a transaction described in Section
351 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound, SMI, O&M, O&M
Holding and the Shareholders hereby agree as follows:
ARTICLE I
Definitions
1.01 "Affiliate" shall mean, with respect to any person, any person that
directly, or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such person.
1.02 "Agreement" shall mean this Agreement of Exchange and the Related
Agreements, together with the Exhibits and Schedules attached hereto,
including the SMI Disclosure Schedule and the O&M Disclosure Schedule, as
amended from time to time in accordance with the terms hereof.
1.03 "BCL" shall mean the Pennsylvania Business Corporation Law.
1.04 "Balance Sheet Deficiency" shall mean the excess, if any, of (i)
the sum of the amount, as of the Effective Time, of (x) any assets reflected
on the Closing Balance Sheet that are not actually owned or in the possession
of SMI at the Effective Time and (y) any liabilities to which SMI was subject
at the Effective Time that were not reflected on the Closing Balance Sheet,
over (ii) the sum of (x) the amount of any assets owned and in the possession
of SMI at the Effective Time that are not reflected on the Closing Balance
Sheet and (y) the amount of liabilities that as of the Effective Time were
actually less than the amount reflected in respect thereof on the Closing
Balance Sheet (limited, in the case of any amount described in this clause
(ii), to the extent such amounts are within the Knowledge of O&M Holding at
the time any of O&M's Indemnitees makes a claim with respect to a Balance
Sheet Deficiency under Section 9.01(a)(v) hereof).
1.05 "Balance Sheet Holdback Shares" shall mean the shares of O&M
Holding Preferred Stock issued and retained pursuant to Section 2.03(a)
hereof.
1.06 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
1.07 "Certificates" shall mean the certificates that, immediately prior
to the Effective Time, represented shares of SMI Common Stock.
1.08 "Closing" shall mean the conference held at 10:00 a.m. local time,
on the date determined in accordance with Section 2.02 hereof, at the offices
of Hunton & Williams, or such other time and place as the parties may
mutually agree in writing.
1.09 "Closing Balance Sheet" shall mean the audited balance sheet of SMI
at the Effective Time prepared by E&Y in accordance with Section 2.05 hereof.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.11 "Competing Transaction" shall have the meaning set forth in Section
6.05 hereof.
1.12 "Contracts" shall have the meaning set forth in Section 4.14
hereof.
1.13 "E&Y" shall mean Ernst & Young.
1.14 "Effective Time" shall mean the effective time specified in (a) the
SMI Articles of Exchange and (b) the O&M Articles of Exchange.
1.15 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.16 "ERISA Affiliate" shall mean a trade or business, whether or not
incorporated, which, with SMI, would be treated as a single employer under
Section 414 of the Code of ERISA.
1.17 "Exchanges" shall mean, collectively, the O&M Exchange and the SMI
Exchange.
1.18 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.19 "First C Year" shall have the meaning set forth in Section 9.08
hereof.
1.20 "GAAP" shall mean generally accepted accounting principles applied
in a manner consistent with prior periods.
1.21 "Hazardous Materials" shall mean (a) material defined as "hazardous
substances," "hazardous wastes", "solid wastes" or "pollutants" in CERCLA,
RCRA, the Clean Air Act, the Clean Water Act or similar state or local
environmental statutes and (b) petroleum products, pollutants, contaminants
or hazardous or toxic substances, materials or wastes.
1.22 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
1.23 "Intellectual Property" shall mean the trademarks, service marks,
trade names, copyrights and other intellectual property owned or used by SMI
listed on Item 1.23 of the SMI Disclosure Schedule.
1.24 "J.P. Morgan" shall mean J.P. Morgan Securities Inc.
1.25 "Knowledge" as to O&M and SMI shall mean the knowledge of any
officer or director of such party after due investigation and as to any
individual, including a Shareholder, shall mean the knowledge of such person
after due investigation.
1.26 "KPMG" shall mean KPMG Peat Marwick.
1.27 "Last SMI Year" shall have the meaning set forth in Section 9.08
hereof.
1.28 "Law" shall mean any federal, state, local or other law or
governmental requirement of any kind, including judgments, decrees or orders,
and the rules, regulations and orders promulgated thereunder.
1.29 "Leased Property" shall mean real property leased by SMI pursuant
to a Contract and listed on Item 1.29 of the SMI Disclosure Schedule.
1.30 "Losses" shall have the meaning set forth in Section 9.01 hereof.
1.31 "Midwest" shall mean Midwest Hospital Supply Company, Inc..
1.32 "Midwest Accounts Receivable" shall mean the accounts receivable of
Midwest that have not been sold to SMI Funding in accordance with Section
6.15(b) hereof and are reflected on the Closing Balance Sheet.
1.33 "Midwest Acquisition" shall mean the acquisition by SMI of certain
assets and the assumption of certain liabilities of Midwest in accordance
with the terms and provisions of an agreement that is substantially similar
to the Asset Purchase Agreement, draft of December 17, 1993, among Midwest,
the shareholders of Midwest and SMI.
1.34 "Net Worth Deficiency" shall mean the amount by which the
shareholders' equity of SMI as reflected on the Closing Balance Sheet is less
than $41,000,000.
1.35 "Notice of Objection" shall have the meaning set forth in Section
2.05 hereof.
1.36 "O&M" shall mean Owens & Minor, Inc., a Virginia corporation.
1.37 "O&M Holding" shall mean OMI Holding, Inc., a Virginia corporation
and a wholly owned subsidiary of O&M.
1.38 "O&M Articles of Exchange" shall mean the Articles of Exchange to
be filed by O&M with the Commonwealth of Virginia State Corporation
Commission with respect to the O&M Plan of Exchange.
1.39 "O&M Common Stock" shall mean the Common Stock of O&M, $2.00 par
value per share.
1.40 "O&M Disclosure Schedule" shall mean the disclosure schedule of O&M
attached hereto.
1.41 "O&M Exchange" shall mean the exchange of each outstanding share of
O&M Common Stock for one share of O&M Holding Common Stock pursuant to the
O&M Plan of Exchange.
1.42 "O&M Financial Statements" shall have the meaning set forth in
Section 5.06 hereof.
1.43 "O&M Holding Common Stock" shall mean the Common Stock of O&M
Holding, $2.00 par value per share.
1.44 "O&M Holding Preferred Stock" shall mean the 1,150,000 shares of
Series B Preferred Stock to be issued to the holders of SMI Common Stock
pursuant to the SMI Plan of Exchange.
1.45 "O&M's Indemnitees" shall mean O&M, O&M Holding, SMI and their
respective successors, assigns and representatives.
1.46 "O&M Plan of Exchange" shall mean the plan of exchange with respect
to the O&M Exchange attached hereto as Exhibit A.
1.47 "O&M Shareholders' Meeting" shall mean the annual or special
meeting of the holders of O&M Common Stock held and conducted in accordance
with O&M's Articles of Incorporation and Bylaws, the VSCA and the proxy rules
of the SEC for the approval of the transactions contemplated by this
Agreement, including the O&M Plan of Exchange.
1.48 "O&M Subsidiaries" shall mean the companies listed on Item 1.48 of
the O&M Disclosure Schedule.
1.49 "PBGC" shall mean the Pension Benefit Guaranty Corporation.
1.50 "Pension Plans" shall have the meaning set forth in Section 4.17
hereof.
1.51 "Permitted Liens" shall mean: (a) liens for taxes and assessments
that are accrued on the SMI Current Balance Sheet or the Closing Balance
Sheet, as the case may be, that are not due and payable; (b) liens securing
indebtedness reflected on the SMI Current Balance Sheet; and (c) carrier's,
warehousemen's, mechanic's, materialmen's, repairmen's or other like liens
arising in the ordinary course of business and in respect of obligations
which are not due.
1.52 "Phantom Stock Plans" shall mean, collectively, the 1993 Phantom
Stock Plan for Senior Management and the Second 1993 Phantom Stock Plan for
Senior Management.
1.53 "Proxy Statement/Prospectus" shall mean the proxy statement of O&M
to be distributed in connection with the O&M Shareholders' Meeting pursuant
to Regulation 14A of the Exchange Act and the prospectus of O&M Holding to be
distributed in connection with the O&M Exchange pursuant to the Securities
Act.
1.54 "Qualified Pension Plan" shall have the meaning set forth in
Section 4.17 hereof.
1.55 "RCRA" shall mean the Resource Conservation and Recovery Act, as
amended.
1.56 "Real Property" shall mean the property, fixtures and improvements
located thereon and appurtenances thereto owned by SMI listed on Item 1.56 of
the SMI Disclosure Schedule.
1.57 "Registration Rights Agreement" shall mean the agreement attached
hereto as Exhibit B.
1.58 "Related Agreements" shall mean the Registration Rights Agreement
and any other document or agreement delivered pursuant hereto.
1.59 "Review Auditors" shall have the meaning set forth in Section 2.05
hereof.
1.60 "SMI" shall mean Stuart Medical, Inc., a Pennsylvania corporation.
1.61 "SMI 401(k) Plan" shall mean the Stuart Medical, Inc.
Retirement/Savings Plan.
1.62 "SMI Articles of Exchange" shall mean the Articles of Exchange to
be filed by SMI with the Department of State of the Commonwealth of
Pennsylvania with respect to the SMI Plan of Exchange.
1.63 "SMI Common Stock" shall mean the Common Stock of SMI, $.0025 par
value per share.
1.64 "SMI Current Balance Sheet" shall have the meaning set forth in
Section 4.06 hereof.
1.65 "SMI Disclosure Schedule" shall mean the disclosure schedule of SMI
and the Shareholders attached hereto.
1.66 "SMI Exchange" shall mean the exchange of all outstanding shares of
SMI Common Stock for the SMI Exchange Consideration pursuant to the SMI Plan
of Exchange.
1.67 "SMI Exchange Consideration" shall mean the O&M Holding Preferred
Stock and $40,200,000 in cash to be received by the holders of SMI Common
Stock in exchange for all the outstanding shares of SMI Common Stock pursuant
to the SMI Plan of Exchange, such consideration to be allocated among the
holders of SMI Common Stock in accordance with the SMI Plan of Exchange.
1.68 "SMI Financial Statements" shall have the meaning set forth in
Section 4.06 hereof.
1.69 "SMI Funding" shall mean Stuart's Funding Corporation, a
Pennsylvania corporation.
1.70 "SMI Plan of Exchange" shall mean the plan of exchange with respect
to the SMI Exchange attached hereto as Exhibit C.
1.71 "Sale and Administration Agreement" shall mean the Amended and
Restated Sale and Administration Agreement between SMI and SMI Funding dated
as of September 30, 1993.
1.72 "SEC" shall mean the Securities and Exchange Commission.
1.73 "SEC Reports" shall have the meaning set forth in Section 5.14
hereof.
1.74 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.75 "Series B Preferred Stock" shall mean the O&M Holding Series B
Preferred Stock, $100 par value per share, having the rights and designations
substantially as set forth in Exhibit D attached hereto.
1.76 "Severance Agreements" shall mean the agreements with certain
employees of SMI listed on Item 1.76 of the SMI Disclosure Schedule.
1.77 "Shareholder" or "Shareholders" shall mean individually or
collectively Henry L. Hillman, Elsie H. Hillman and C. G. Grefenstette,
Trustees under the Henry L. Hillman Trust under agreement of trust dated
November 18, 1985, Juliet Lea Hillman Simonds, Audrey Hillman Fisher, Henry
L. Hillman, Jr., William T. Hillman, Howard B. Hillman and Tatnall L.
Hillman, each a shareholder of SMI.
1.78 "Shareholders' Indemnitees" shall mean the Shareholders and their
respective successors, assigns and representatives.
1.79 "Shareholders' Representative" shall mean C. G. Grefenstette or his
designee.
1.80 "Specialty" shall mean National Medical Specialty, Inc.
1.81 "Specialty Litigation" shall mean the litigation described on Item
4.10B of the SMI Disclosure Schedule.
1.82 "Specialty Obligations" shall mean any note or notes and other
obligations payable by Specialty to SMI.
1.83 "Subordinated Note" shall mean the deferred payment note, dated
September 30, 1993, payable to SMI and made by SMI Funding.
1.84 "Subordinated Note Holdback Shares" shall mean the number of shares
of O&M Holding Preferred Stock issued and retained pursuant to Section
2.03(b) hereof.
1.85 "Transfer" shall mean, when used as a verb, to sell, to transfer,
to pledge, to encumber or to otherwise dispose of, and shall mean, when used
as a noun, sale, transfer, pledge, encumbrance or other disposition.
1.86 "VHA" shall mean Voluntary Hospitals of America, Inc.
1.87 "VSCA" shall mean the Virginia Stock Corporation Act.
1.88 "Welfare Plans" shall have the meaning set forth in Section 4.17
hereof.
ARTICLE II
The Closing
2.01 The Exchanges. At the Effective Time and subject to the terms and
conditions of this Agreement, the VSCA and the BCL, (a) all of the
outstanding shares of SMI Common Stock other than Dissenting Shares (as
defined in the SMI Plan of Exchange) will be exchanged for the SMI Exchange
Consideration and the SMI Exchange Consideration shall be allocated among the
holders of SMI Common Stock in accordance with their elections made pursuant
to the SMI Plan of Exchange and (b) each of the outstanding shares of O&M
Common Stock will be exchanged for one share of O&M Holding Common Stock.
2.02 Closing; Filing of Articles of Exchange. Upon the terms and
subject to the conditions hereof, as soon as practicable after all of the
conditions to the obligations of the parties hereunder have been satisfied or
waived, the parties shall conduct the Closing for the purpose of confirming
the foregoing. As soon as practicable after the Closing, (a) SMI shall in
the manner required by the BCL deliver to and file with the Department of
State of the Commonwealth of Pennsylvania the duly executed SMI Articles of
Exchange in accordance with the provisions of the BCL, (b) O&M Holding shall
in the manner required by the VSCA deliver to and file with the Commonwealth
of Virginia State Corporation Commission the duly executed O&M Articles of
Exchange in accordance with the VSCA and (c) the parties hereto shall take
all such other action as may be required by law to make the Exchanges
effective.
2.03 Holdback Shares.
(a) At the Effective Time, O&M Holding shall issue and retain,
pending final determination of the Closing Balance Sheet pursuant to the
provisions of Section 2.05 hereof, from the SMI Exchange Consideration to be
received by each Shareholder, certificates representing 3% of that number of
shares (rounded up to the nearest whole share) of the O&M Holding Preferred
Stock that would be issued to such Shareholder if the cash election permitted
by Section 3.02 of the SMI Plan of Exchange were not exercised by any holder
of SMI Common Stock in the SMI Exchange (the "Balance Sheet Holdback Shares")
. The Balance Sheet Holdback Shares shall be held and delivered as provided
in Section 2.05 hereof.
(b) At the Effective Time, O&M Holding shall issue and retain from
the SMI Exchange Consideration to be received by the Shareholders,
certificates representing in the aggregate that number of shares of O&M
Holding Preferred Stock (rounded up to the nearest whole share) determined by
dividing the outstanding principal balance (plus accrued interest thereon) of
the Subordinated Note as of the Effective Time by $100 (the "Subordinated
Note Holdback Shares"). The number of the Subordinated Note Holdback Shares
to be so retained in respect of each Shareholder (rounded to the nearest
whole share) shall be determined by multiplying the aggregate number of the
Subordinated Note Holdback Shares by a fraction, the numerator of which is
the number of shares of the O&M Holding Preferred Stock that would be issued
to such Shareholder in the SMI Exchange if the cash election permitted by
Section 3.02 of the SMI Plan of Exchange were not exercised by any holder,
and the denominator of which is the aggregate number of shares of the O&M
Holding Preferred Stock that would be so issued to all Shareholders in the
SMI Exchange under the same assumption. Upon payment in full by SMI Funding
of the Subordinated Note within 150 days after the Effective Time (including
all accrued interest thereon to the date of payment), O&M Holding shall
promptly deliver to the Shareholder's Representative the share certificates
representing the Subordinated Note Holdback Shares (including any dividends
paid or distributions made with respect thereto and any interest thereon).
In the event SMI Funding fails to pay in full the Subordinated Note
(including accrued interest thereon) on or before 150 days after the
Effective Time, O&M Holding shall (a) retain and cancel ratably, in the same
proportion as the Subordinated Note Holdback Shares were withheld from the
Shareholders, the number of whole Subordinated Note Holdback Shares
(including any dividends paid or distributions made with respect thereto)
that when multiplied by $100 equals or exceeds by less than $100 the unpaid
principal amount of the Subordinated Note (less the accounts receivable
reserve reflected on the Closing Balance Sheet other than any reserve for the
Midwest Receivables) plus any unpaid accrued interest thereon through 150
days after the Effective Time and (b) shall assign without recourse the
Subordinated Note to the Shareholders' Representative. O&M Holding shall
promptly deliver to the Shareholders' Representative any Subordinated Note
Holdback Shares (including any dividends paid or distributions made with
respect thereto and any interest thereon) not retained and canceled pursuant
to the preceding sentence.
2.04 Voting of Holdback Shares; Dividends; Interest. Each Shareholder
shall have full power to vote his respective Balance Sheet Holdback Shares
and Subordinated Note Holdback Shares in accordance with Section 9.06 hereof.
Any dividends paid on or other distributions made with respect to the Balance
Sheet Holdback Shares or the Subordinated Note Holdback Shares shall be
invested by O&M Holding in any of the following securities or accounts as
designated in writing to O&M Holding by the Shareholders' Representative:
(a) direct obligations of the United States of America; (b) general
obligations of any state or political subdivision thereof if such obligations
are rated by at least two nationally recognized rating agencies as "AA" or
higher; and (c) certificates of deposit of any national bank or state bank
member of the Federal Reserve System having an aggregate capital and surplus
of at least $100,000,000.
2.05 Closing Balance Sheet.
(a) Within 60 days after the Effective Time, the Shareholders
shall cause E&Y to prepare a balance sheet of SMI as of immediately prior to
the Effective Time (the "Closing Balance Sheet") and the Shareholders shall
deliver the Closing Balance Sheet to O&M Holding together with a certificate
signed by the Shareholders certifying that the Closing Balance Sheet has been
prepared in accordance with GAAP (except for the absence of footnotes) and
this Agreement and fairly presents the assets and liabilities of SMI as of
immediately prior to the Effective Time. The Closing Balance Sheet shall be
prepared in accordance with GAAP (except for the absence of footnotes);
provided that: (i) the Closing Balance Sheet shall not include (x) any
accounts receivable other than Midwest Accounts Receivable or any accruals
for the payments to be made by SMI with respect to the Phantom Stock Plans in
accordance with Section 6.14 hereof or (y) any accrual of amounts that may be
payable with respect to holders of Dissenting Shares (as defined in the SMI
Plan of Exchange); and (ii) the reserve for obsolescent inventory on the
Closing Balance Sheet shall include, without limitation, the following
(except with respect to inventory acquired from U.S. Surgical that may be
exchanged for other U.S. Surgical inventory without additional cost to SMI):
(A) a reserve for 100% of any item of inventory that has
shown no arm's length and bona fide sales activity for a
period of 12 months before the Effective Time (other than
inventory purchased within 60 days before the Effective Time);
(B) a reserve for 25% of any item of inventory, the on-
hand quantities of which exceed two times the total cumulative
arm's length and bona fide sales of such item during the 12
months before the Effective Time, if SMI has made a
substantial purchase of such item of inventory within 12
months prior to the Effective Time; and
(C) a reserve for 100% of any item of inventory, the on-
hand quantities of which exceed two times the total cumulative
arm's length and bona fide sales of such item during the 12
months prior to the Effective Time, if SMI has not made a
substantial purchase of such item of inventory within 12
months before the Effective Time.
SMI's inventory shall be valued on a first-in, first-out basis at the lower
of cost or market value. Commencing on the date of the Effective Time, SMI
shall conduct, and the Shareholders' Representative, or his designee, and E&Y
shall observe, a physical count of SMI's inventory as of the Effective Time.
E&Y will make its work papers available to SMI, the Shareholders'
Representative, KPMG and O&M Holding's representatives once E&Y has completed
the Closing Balance Sheet.
(b) Within 30 days after delivery of the Closing Balance Sheet to
O&M Holding, O&M Holding may object to such balance sheet by delivering
written notice of such objection ("Notice of Objection") to the Shareholders'
Representative. If no Notice of Objection is delivered in accordance with
the terms hereof, the Closing Balance Sheet shall be final and binding on the
parties to this Agreement without modification. If a Notice of Objection is
delivered in accordance with the terms hereof, the Shareholders'
Representative and O&M Holding shall confer together and attempt in good
faith to agree upon a resolution of the objection. If they have not agreed
upon such a resolution within 15 days after delivery of the Notice of
Objection, the disputed items on the Closing Balance Sheet shall be referred
to independent certified public accountants other than E&Y and KPMG (the
"Review Auditors") selected by mutual agreement of O&M Holding and the
Shareholders' Representative. Within 30 days after the matter is referred to
them, the Review Auditors shall issue a report on their resolution of the
disputed items on the Closing Balance Sheet, which shall either confirm the
correctness thereof or state specifically the modifications to be made
thereto. Upon delivery of such report to O&M Holding and the Shareholders'
Representative, the Closing Balance Sheet shall be deemed confirmed or
modified, as the case may be, in accordance therewith. The Closing Balance
Sheet, as so confirmed or modified, shall be final and binding on all parties
to this Agreement. O&M Holding and the Shareholders shall cooperate fully
with the Review Auditors and, following the Effective Time, each of O&M
Holding, on the one hand, and the Shareholders, on the other, shall bear one
half of the fees and expenses of the Review Auditors for the work undertaken
by them pursuant to this Section 2.05.
(c) O&M Holding shall retain and cancel, ratably in the same
proportion as the Balance Sheet Holdback Shares were withheld from the
Shareholders, the number of whole Balance Sheet Holdback Shares that, when
multiplied by $100 equals or exceeds by less than $100 any Net Worth
Deficiency and O&M Holding shall retain any dividends paid or distributions
made with respect thereto. No later than ten days after the Closing Balance
Sheet becomes final and binding pursuant to Section 2.05(b) hereof, O&M
Holding shall deliver to the Shareholders' Representative certificates
representing any Balance Sheet Holdback Shares (including any dividends paid
or distributions made with respect thereto and any interest thereon) not
retained and canceled pursuant to the preceding sentence. In the event the
aggregate par value of the Balance Sheet Holdback Shares is less than the Net
Worth Deficiency, then the Shareholders shall be obligated, jointly and
severally, to immediately pay to O&M Holding the amount of such shortfall.
ARTICLE III
The Exchanges
At the Effective Time, by virtue of the Exchanges and without any action
on the part of SMI, O&M, O&M Holding, or the holders of O&M Common Stock or
SMI Common Stock:
(a) All of the shares of SMI Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of SMI Common
Stock then held in the treasury of SMI) shall, by reason of the SMI Exchange
and without any action by any holder of SMI Common Stock, be exchanged for
the right to receive the SMI Exchange Consideration (subject to adjustment
for any stock split, reverse stock split, stock dividend or other similar
distribution or reclassification with respect to the outstanding SMI Common
Stock or O&M Common Stock, or any issuance of SMI Common Stock, from the date
hereof to the Effective Time, with any fractional shares of O&M Holding
Preferred Stock to which a holder of SMI Common Stock would otherwise be
entitled being rounded to the nearest full share (with a fraction of .5 or
greater being rounded to the next highest full share)). The SMI Exchange
Consideration shall be allocated among the holders of SMI Common Stock in
accordance with such holders' elections made pursuant to Section 3.02 of the
SMI Plan of Exchange.
(b) Each share of SMI Common Stock held in the treasury of SMI
immediately prior to the Effective Time shall be automatically canceled and
retired and cease to exist, and no cash or securities or other property shall
be paid or payable in respect thereof.
(c) Each share of O&M Common Stock validly issued and outstanding
immediately prior to the Effective Time shall, by reason of the O&M Exchange
and without any action by any holder of O&M Common Stock, be exchanged for
the right to receive one share of O&M Holding Common Stock in accordance with
the O&M Plan of Exchange.
ARTICLE IV
Representations of SMI and the Shareholders
SMI and each of the Shareholders, jointly and severally, represent and
warrant as follows:
4.01 Existence and Good Standing. SMI is a corporation duly organized
and validly subsisting under the laws of the Commonwealth of Pennsylvania and
is duly qualified and in good standing to do business in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on SMI's
business or financial condition or would not impair SMI's right to enforce
any material agreement to which it is a party. SMI has full power, authority
and legal right to own its property and to carry on its business as now being
conducted. SMI has delivered to O&M true and complete copies of its Articles
of Incorporation, as amended, and Bylaws, as currently in effect.
4.02 Authorization. SMI has corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. Each of the Shareholders has power and authority to execute and
deliver this Agreement and the Related Agreements and to consummate the
transactions contemplated hereby and thereby. This Agreement constitutes,
and the Related Agreements (when executed and delivered pursuant hereto for
value received) will constitute, the valid and binding agreements of SMI and
each of the Shareholders, respectively, enforceable against SMI and each of
the Shareholders in accordance with their respective terms.
4.03 No Conflict. The execution, delivery and performance of this
Agreement by SMI and the Shareholders does not and will not (a) violate,
conflict with or result in the breach of any provision of the Articles of
Incorporation or Bylaws of SMI, (b) conflict with or violate any Law
applicable to SMI or any of the Shareholders or by which any of its assets,
properties or businesses is bound or affected or (c) except as provided on
Item 4.03 of the SMI Disclosure Schedule, conflict with, result in any breach
of, constitute a default (or event which with the giving of notice or lapse
of time, or both, would become a default) under, require any consent under,
or give to others any rights of termination, amendment, acceleration,
suspension revocation or cancellation of, or result in the creation of any
lien, security interest, charge or encumbrance on any of the assets or
properties of SMI pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease (including any leases with respect to the Leased
Property), sublease, license, permit, franchise or other instrument or
arrangement to which SMI or any of the Shareholders is a party or by which
any of such assets or properties is bound or affected.
4.04 Capitalization. The authorized capital stock of SMI consists of
10,000,000 shares of Common Stock, $.0025 par value, of which 2,000,000
shares are issued and outstanding. All of the outstanding shares of SMI
Common Stock are owned of record and beneficially by the holders indicated
and in the amounts set forth on Item 4.04 of the SMI Disclosure Schedule.
All such outstanding shares have been duly authorized and validly issued and
are fully paid and non-assessable and free of adverse claims, liens, options,
encumbrances, judgments, or restrictions of any kind, and preemptive or other
rights that entitle or entitled any person to acquire such shares, and no
shares of capital stock are reserved for issuance. Except as set forth on
Item 4.04 of the SMI Disclosure Schedule, there are no outstanding options,
warrants, rights, calls, subscriptions, commitments, conversion rights,
rights of exchange, plans or other agreements or claims of any character
providing for the purchase, issuance or sale of any shares of the capital
stock of SMI. Except as provided on Item 4.04 of the SMI Disclosure
Schedule, there are no shares of SMI Common Stock held in the treasury of
SMI. There are an aggregate of 173,913 Rights (as such term is defined in
the Phantom Stock Plans) issued and outstanding under the Phantom Stock
Plans, each of which Rights has an Initial Value (as such term is defined in
the Phantom Stock Plans) of $69.00. No shares of SMI Common Stock have been
issued in violation of applicable securities laws.
4.05 Subsidiaries, Affiliated Companies and Investments. SMI does not
own, directly or indirectly, of record or beneficially, any capital stock or
other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
4.06 Financial Statements. SMI has heretofore furnished O&M with (a)
the financial statements including the notes thereto as of and for the twelve
months ended April 30, 1992, and the eight months ended December 31, 1992,
which statements include the balance sheets as of those dates, and the
related statements of income, shareholders' equity and cash flows for the
periods then ended, as audited by E&Y and (b) the unaudited balance sheet of
SMI as of October 31, 1993 (the "SMI Current Balance Sheet"), together with
the related statement of income for the ten months then ended (all such
financial statements being referred to collectively as the "SMI Financial
Statements"). The SMI Financial Statements have been prepared in accordance
with GAAP (except as may be noted therein and except for the absence of
footnotes with respect to the SMI Current Balance Sheet) and fairly present
the financial condition of SMI at the respective dates thereof and the
results of operations of SMI and changes in its financial position for the
periods indicated (subject, in the case of the SMI Current Balance Sheet, to
normal, recurring year-end audit adjustments that are not in the aggregate
material).
4.07 No Material Adverse Changes. Since December 31, 1992, the business
of SMI has been operated in the ordinary course and there has been no change
(and to the Knowledge of SMI and the Shareholders, no fact or condition
exists or is contemplated or threatened which might cause such a change in
the future) in the assets or liabilities, or in the business or condition,
financial or otherwise, or in the results of operations or prospects, of SMI,
which individually or in the aggregate, have had a material adverse effect on
the business prospects, properties or condition, financial or otherwise, of
SMI; provided, however, that any deterioration in SMI's condition (financial
or otherwise) or relationships with customers (other than VHA) or employees
resulting from (i) SMI's announcement of the transactions contemplated hereby
or (ii) business or personnel policies or actions (e.g., terminations) which
O&M Holding may implement with respect to SMI following the Effective Time
shall not constitute a material adverse change for these purposes (or for
purposes of Section 8.02 hereof). Without limiting the foregoing, except as
set forth on Item 4.07 of the SMI Disclosure Schedule, since December 31,
1992, there has not been:
(a) any loss, damage, destruction or other casualty materially and
adversely affecting the business prospects, properties, assets or business of
SMI (whether or not covered by insurance);
(b) (i) any increase made or agreed to in the compensation
(including, without limitation, any increase pursuant to any pension, profit
sharing or other plan) payable or to become payable by SMI to any of its
directors, officers, agents, consultants, or any of its employees whose total
compensation after such increase was in excess of $100,000 per annum other
than to the persons listed on Item 4.16 of the SMI Disclosure Schedule, (ii)
any bonus, percentage compensation, service award or other like benefit
having a value in excess of $25,000 granted, made, agreed to or accrued to
the credit of any such director, officer, agent, consultant or employee other
than to the persons listed on Item 4.16 of the SMI Disclosure Schedule, or
(iii) any welfare, pension, retirement or similar payment or arrangement made
or agreed to by SMI for the benefit of any such director, officer, agent,
consultant or employee other than to the persons listed on Item 4.16 of the
SMI Disclosure Schedule;
(c) any change in any method of accounting or accounting practice
of SMI;
(d) any notes or accounts receivable or portions thereof written
off by SMI as uncollectible, if such write offs were either in excess of the
bad debt reserve established therefor in the SMI Current Balance Sheet or
incurred other than in the ordinary course of business;
(e) any issuance or sale of any stock, bonds or other corporate
securities of which SMI is the issuer, or the grant or issuance of any stock
options, warrants, or other rights to purchase securities of SMI;
(f) any direct or indirect redemption, purchase or other
acquisition by SMI of any shares of capital stock of SMI;
(g) any declaration, setting aside or payment of any dividend or
distribution (direct or indirect, whether in cash or property, and whether
characterized as salary, bonus, dividend or otherwise) other than
distributions totaling $3,838,000;
(h) any discharge or satisfaction of any lien or encumbrance or
payment or satisfaction of any obligation or liability (whether absolute,
accrued, contingent or otherwise and whether due or to become due), other
than (x) current liabilities shown on the SMI Current Balance Sheet, (y)
current liabilities incurred since the date of the SMI Current Balance Sheet
in the ordinary course of business and consistent with past practice, and (z)
indebtedness outstanding under the credit agreement identified in paragraph
1 of Item 4.15 of the SMI Disclosure Schedule;
(i) any sale, assignment, transfer, mortgage, pledge or
encumbrance of any assets (real, personal or mixed, tangible or intangible)
of SMI, cancellation of any debts or claims or waiver of any rights of
substantial value, except, in each case, in the ordinary course of business
and consistent with past practice;
(j) any assumption, guarantee or endorsement by SMI of the
obligations of any other individual or entity or any loans or advances to any
individual or entity except in the normal course of business;
(k) any sale, assignment or transfer of any patents, trademarks,
trade names, copyrights or other similar assets, including applications or
licenses therefor;
(l) any capital expenditures, or commitment to make any capital
expenditures, for additions to property, plant or equipment, not in the
ordinary course of business;
(m) any payment of any amounts or liability incurred to or in
respect of, or sale of any properties or assets (real, personal or mixed,
tangible or intangible) to, or any transaction or any agreement or
arrangement with, any corporation or business in which SMI or any of its
corporate officers or directors, or any affiliate or associate of any such
person, has any direct or indirect ownership interest other than the
transactions listed on Item 4.19 of the SMI Disclosure Schedule;
(n) any material deterioration of relations between SMI and its
customers considered as a whole, including but not limited to the loss, or to
the Knowledge of SMI and the Shareholders, any threatened loss of VHA;
(o) any collective bargaining agreements entered into by SMI;
(p) any other transaction other than in the ordinary course of
business or otherwise contemplated by this Agreement; or
(q) any agreement to do any of the foregoing.
4.08 Books and Records. The minute books of SMI, which have been made
available to O&M, contain accurate and complete records of all corporate
actions taken by the shareholders and Board of Directors (and committees
thereof) of SMI from incorporation to date. The books of accounts and
records of SMI are true, complete and correct in all material respects.
4.09 Governmental Authorization. The execution, delivery and
performance by SMI and the Shareholders of this Agreement, and the
consummation of the transactions contemplated hereby by SMI and the
Shareholders, require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than filings required
to be made under the HSR Act, filings required to be made under applicable
federal and state securities laws and filing of the SMI Articles of Exchange
in connection with the SMI Exchange.
4.10 Litigation. There is no action, suit, proceeding, claim or
investigation pending, or, to the Knowledge of SMI and the Shareholders,
threatened against or affecting SMI which could materially and adversely
affect SMI or which in any manner challenges or seeks to prevent, enjoin,
alter or delay any of the transactions contemplated by this Agreement; to the
Knowledge of SMI and the Shareholders, there is no valid basis for any such
action, proceeding or investigation. Item 4.10A of the SMI Disclosure
Schedule sets forth each pending action, suit, proceeding, claim or
investigation to which SMI is a party, as well as the forum, parties thereto,
a brief description of the subject matter thereof and the amount of damages
claimed. Item 4.10B of the SMI Disclosure Schedule sets forth each pending
action, proceeding, claim or investigation to which SMI is a party related to
any separate line of business formerly, but not now, conducted by SMI
(whether as an unincorporated division or business function or as a
subsidiary), including without limitation Specialty and the former AIP
division. SMI is not subject to any order, judgment, decree or obligation of
any court, arbitrator, governmental department, commission, board, bureau,
agency or instrumentality.
4.11 Liabilities. SMI has no outstanding claims, liabilities or
indebtedness, contingent or otherwise, except as set forth in the SMI Current
Balance Sheet, other than liabilities incurred subsequent to the date of the
SMI Current Balance Sheet in the ordinary course of business and consistent
with past practices. SMI is not in default in respect of the terms or
conditions of any indebtedness in excess of $1,000,000, regardless of whether
SMI has received notice of the existence of any such default.
4.12 Assets.
(a) Item 1.56 of the SMI Disclosure Schedule contains a complete
and correct list of all of the Real Property owned by SMI. Item 1.29 of the
SMI Disclosure Schedule contains a complete and correct list of all the
Leased Property used by SMI. All buildings, structures and appurtenances
included in the Real Property and the Leased Property: (i) are in good
operating condition and in a state of good maintenance and repair, normal
wear and tear excepted; (ii) are adequate and suitable for the purposes for
which they are presently being used; (iii) comply in all material respects
with existing Law currently applicable to the use of each building as it is
currently being used, including but not limited to, zoning, building and
Occupational Safety and Health Act regulations; and (iv) contain no asbestos
deemed hazardous by Law. There are two underground storage tanks located on
the Real Property and no underground storage tanks located on the Leased
Property.
(b) SMI has good, valid and marketable title to all assets owned
by it (whether real, fee or leasehold, personal or mixed, tangible or
intangible) and used in its business, including without limitation, all
assets reflected in the SMI Financial Statements and all assets acquired by
SMI since October 31, 1993 (except for assets that have been sold or
otherwise disposed of in the ordinary course of business), free and clear of
any and all mortgages, liens, encumbrances, charges, claims, restrictions,
pledges, security interests or impositions other than Permitted Liens.
(c) Item 1.23 of the SMI Disclosure Schedule contains a complete
and correct list of all of the Intellectual Property owned or used in the
business of SMI. SMI owns all right, title and interest in and to or
otherwise has the right to use the Intellectual Property. There are no
claims or proceedings pending or, to the Knowledge of SMI and the
Shareholders, threatened against SMI asserting that its use of any of the
Intellectual Property infringes on the rights of any other person. SMI has
not licensed or assigned the Intellectual Property to any third party and, to
the Knowledge of SMI and the Shareholders, there are no infringing uses of
any of the Intellectual Property by third parties.
4.13 Personal Property, Inventory and Accounts Receivable.
(a) All of the tangible personal property owned by SMI or used in
its business is in good operating condition and repair, normal wear and tear
excepted, and is sufficient for the operation of the business of SMI as
presently conducted.
(b) SMI's inventory is valued on a first-in, first-out basis at
the lower of cost or market value. All of such inventory shown on the SMI
Financial Statements or acquired after October 31, 1993, but prior to the
Effective Time is, or will be, set forth on the books and records of SMI in
accordance with GAAP applied on a basis consistent with the audited financial
statements of SMI for prior periods. All of such inventory (net of all
inventory reserves shown on the SMI Financial Statements) is useable or
saleable in the ordinary course of business.
(c) The SMI Financial Statements do not reflect any accounts
receivable.
4.14 Contracts. Item 4.14 of the SMI Disclosure Schedule contains a
complete and correct list of each contract, agreement, lease, plan, purchase
order, arrangement or commitment of SMI, whether oral or written (the
"Contracts"), that (a) is a lease of real property, (b) relates to (i) the
purchase of products for resale or delivery to customers of amounts in excess
of $100,000 or having a duration in excess of three years or (ii) the supply
of products to customers with actual sales in calendar year 1992 or expected
sales in calendar year 1993 of $1,000,000 or more, (c) relates to the
purchase of goods, equipment or services used in support of SMI's business or
operations of amounts in excess of $20,000 per year and having a duration in
excess of one year, (d) contains covenants pursuant to which SMI has agreed
not to compete with any person or any person has agreed not to compete with
SMI or (e) upon which any substantial part of SMI's business is dependent or
which, if breached, could reasonably be expected to materially and adversely
affect the earnings, assets, financial condition or operations of SMI. All
such Contracts are valid, binding and in full force and effect, and true and
correct copies thereof have been delivered to O&M. Except as set forth on
Item 4.14 of the SMI Disclosure Schedule, SMI has performed each material
term, covenant and condition of each of the Contracts that is to be performed
by it at or before the date hereof and will perform each material term,
covenant and condition of each Contract to be performed by it prior to the
Effective Time. No event has occurred that would, with the passage of time
or compliance with any applicable notice requirements, constitute a default
by SMI under any of the Contracts and, to the Knowledge of SMI and the
Shareholders, no party to any of the Contracts intends to cancel, terminate
or exercise any option under any of the Contracts. Except as set forth on
Item 4.14 of the SMI Disclosure Schedule, SMI's execution, delivery and
performance of this Agreement will not constitute a breach of or a default
under any Contract. As to those Contracts noted on Item 4.14 of the SMI
Disclosure Schedule, copies of which will be made available to O&M only upon
the expiration of any applicable waiting period provided for by Section 7A of
the HSR Act, such Contracts individually and in the aggregate are properly
reflected and accounted for in the financial records of SMI, will not impose
any otherwise undisclosed additional material financial burdens or risks upon
O&M or are, by their terms, terminable at will by SMI and do not obligate
SMI, and will not obligate O&M, to undertake any activity of questionable
legality or to be in breach or risk of breach of such Contracts in the
ordinary course of SMI's business or, to the Knowledge of the Shareholders,
O&M's ordinary business.
4.15 Obligations for Money Borrowed. Item 4.15 of the SMI Disclosure
Schedule contains a complete and correct list of all liabilities of SMI for
money borrowed. Each such obligation outstanding as of the Effective Time
may be prepaid by SMI after the Effective Time without penalty under the
terms thereof. Except as set forth on Item 4.15 of the SMI Disclosure
Schedule, SMI is not in default under any such obligations and no event has
occurred or is contemplated by SMI or, to the Knowledge of SMI and the
Shareholders, by any other party that would constitute a default or an event
that with the giving of notice or passage of time or both would constitute a
default thereunder. SMI has paid, and through the Effective Time will pay,
all amounts then due and payable under the terms of each such obligation.
4.16 Employment Agreements and Benefits. Item 4.16 of the SMI
Disclosure Schedule contains a complete and correct list of all agreements
relating to the compensation and other benefits of present and former
employees, salesmen, consultants, contractors and other agents of SMI,
including all collective bargaining agreements and all pension, retirement,
bonus, stock option, profit sharing, health, disability, life insurance,
hospitalization, education, severance, termination or other similar plans or
arrangements (whether or not subject to ERISA), true and complete copies of
which (or true and complete descriptions of which, in the case of oral
agreements) have been delivered to O&M. None of the agreements listed on
Item 4.16 of the SMI Disclosure Schedule will be breached by SMI's execution,
delivery and performance of this Agreement. Except as set forth on Item 4.16
of the SMI Disclosure Schedule, no such agreement requires O&M Holding to
assume or make payments with respect to any employment, compensation, fringe
benefit, pension, profit sharing or deferred compensation plan in respect of
any employee. Item 4.16 of the SMI Disclosure Schedule includes a complete
list of all officers and employees paid more than $100,000 by SMI per year.
4.17 Employee Benefit Plans.
(a) Item 4.17 of the SMI Disclosure Schedule contains a list of
each "pension plan" (as defined in Section 3(2) of ERISA) (the "Pension
Plans") and each "welfare plan" (as defined in Section 3(1) of ERISA) (the
"Welfare Plans") now or previously maintained for the benefit of employees of
SMI or to which SMI now contributes or has contributed on behalf of its
employees or the employees of an ERISA Affiliate. Except as provided in Item
4.17 of the SMI Disclosure Schedule, each such plan is enforceable in
accordance with its terms, and to the Knowledge of SMI and the Shareholders,
no present or former employee, salesman, consultant, contractor or other
agent of SMI or any dependent or beneficiary of such person has been advised
with respect to any such plan in a manner that is inconsistent with the terms
of such plan.
(b) Item 4.17 of the SMI Disclosure Schedule identifies each
Pension Plan that is intended to be qualified (a "Qualified Pension Plan")
under Section 401(a) of the Code. Each Qualified Pension Plan is in
compliance with applicable law as of the date hereof. The Internal Revenue
Service has issued a favorable determination letter with respect to each
Qualified Pension Plan's compliance with Section 401(a) of the Code. Except
as disclosed on Item 4.17 of the SMI Disclosure Schedule, there are no facts
or circumstances that could reasonably be expected to jeopardize or adversely
affect the qualification under Section 401(a) of any Qualified Pension Plan.
(c) No "prohibited transaction" (as defined in Section 4975 of the
Code) has occurred and no "accumulated funding deficiency" (as defined in
Section 302 of ERISA or Section 412 of the Code), whether or not waived,
exists with respect to any Qualified Pension Plan. No Qualified Pension Plan
currently or previously maintained or contributed to for the benefit of
employees of SMI or an ERISA Affiliate is or was subject to the provisions of
Title IV of ERISA. None of the Qualified Pension Plans has been completely
or partially terminated and there has not been any "reportable event" (as
defined in Section 4043(b) of ERISA) with respect to any such plans required
to be reported to the PBGC by law or regulation.
(d) Each employee plan has been administered in accordance with
its terms. In addition, each employee plan is in compliance with and has
been administered in accordance with, the provisions of ERISA (including the
rulings and regulations promulgated thereunder) and all other applicable law.
All reports, returns and other documentation that are required to have been
filed with the Internal Revenue Service, the Department of Labor, the PBGC or
any other governmental agency (federal, state or local) with respect to the
employee plans have been filed on a timely basis. Except as set forth in
Item 4.17 of the SMI Disclosure Schedule, no claims or complaints to or by
any person or governmental entity have been filed or, to the knowledge of SMI
and each of the Shareholders, are contemplated or threatened, with respect to
any employee plan.
(e) Neither SMI nor any ERISA Affiliate contributes to or has ever
contributed to or maintained a "multiemployer plan" (as defined in Section
3(37) of ERISA).
(f) Except as required by Section 601 of ERISA and Section 4980B
of the Code, SMI does not maintain or contribute to any plan or arrangement
which provides or has any liability to provide life insurance, medical or
other benefits under a welfare benefit plan (as defined in Section 3(2) of
ERISA) to any employee or former employee upon his retirement or termination
of employment and SMI has never represented, promised or contracted (whether
in oral or written form) to any employee or former employee that such
benefits would be provided. The execution of and performance of the
transactions contemplated in this Agreement and the Related Agreements will
not (either alone or upon the occurrence of any additional or subsequent
events) constitute an event of default under any benefit plan, policy,
arrangement or agreement or any trust or loan that will or may result in any
payment, acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
employee.
4.18 Employee Relations. Except as set forth on Item 4.18 of the SMI
Disclosure Schedule, SMI has paid or made provision for payment of all
salaries and wages accrued through the date of this Agreement and is in
material compliance with all federal and state laws respecting employment and
employment practices, terms and conditions of employment, wages and hours and
non-discrimination in employment and is not engaged in any unfair employment
practice. There is no charge pending or, to the Knowledge of SMI and the
Shareholders, threatened before any court or agency alleging unlawful
discrimination in employment practices or any unfair labor practice by SMI's
nor is there a basis for any such claim. SMI has not experienced any
material labor difficulty during the three years immediately preceding the
date of this Agreement.
4.19 Transactions with Affiliates. Except as set forth in Item 4.19 of
the SMI Disclosure Schedule, since December 31, 1992, SMI has not, in the
ordinary course of business or otherwise, purchased, leased or otherwise
acquired any property or assets or obtained any services from, or sold,
leased or otherwise disposed of any property or assets or provided any
services to (except with respect to remuneration for services as an officer
or employee of SMI) any officer, employee or Affiliate of SMI. Except as set
forth on Item 4.19 of the SMI Disclosure Schedule, SMI does not owe any
amount or have any contractual obligation or commitment to any Affiliate
(other than compensation for current services not yet due and payable and
reimbursement of expenses arising in the ordinary course of business) and no
Affiliate (including an employee of SMI) owes any amount or has any
contractual obligation to SMI. Except as set forth on Item 4.19 of the SMI
Disclosure Schedule, none of the holders of SMI Common Stock has any
interest, direct or indirect, in any property, real or personal, tangible or
intangible, used in or pertaining to the business of SMI except as a
shareholder or employee of SMI.
4.20 Environmental Compliance. SMI is in compliance in all material
respects with all applicable Laws relating to pollution control and
environmental contamination including, but not limited to, all Laws governing
the generation, use, collection, treatment, storage, transportation,
recovery, removal, emission, discharge, or disposal of Hazardous Materials
and all Laws with regard to recordkeeping, notification and reporting
requirements respecting Hazardous Materials. SMI has not been alleged to be
in violation of, nor has it been subject to any administrative or judicial
proceeding pursuant to, such Laws either now or any time during the past
three years. Seller has obtained all environmental permits, including those
related to environmental quality and the emission, discharge, storage,
handling, treatment, use, generation or transportation of Hazardous
Materials. There are no liabilities, known or unknown, absolute or
contingent, related to the Real Property or Leased Property or the conduct of
SMI's business arising in connection with the generation, use, treatment,
storage, release, disposal, emission, discharge, arranging for disposal or
transportation of Hazardous Materials. SMI has not, and to the Knowledge of
SMI and the Shareholders, no other person has, released from or deposited on
the Real Property or Leased Property any, Hazardous Materials or used the
Real Property or Leased Property as a hazardous waste treatment, storage or
disposal site. There are no facts or circumstances that SMI or the
Shareholders reasonably believe could form the basis for the assertion of any
claim against SMI relating to environmental matters including, but not
limited to, any claim arising from past or present environmental practices
asserted under CERCLA, RCRA, the Clean Air Act, the Clean Water Act or any
other federal, state or local environmental statute, regulation, policy,
guideline, order, judgment or decree. Promptly upon learning thereof, SMI
and the Shareholders will advise O&M of any facts or circumstances that could
form the basis for the assertion of any claim against SMI relating to
environmental matters including, but not limited to, any claim arising from
past or present environmental practices under CERCLA, RCRA, the Clean Air
Act, the Clean Water Act or any other federal, state or local environmental
statute.
4.21 Tax Matters. Pursuant to an election made before January 1, 1987,
in accordance with Section 1362(a) and (b) of the Code and the regulations
thereunder, SMI continuously has been and is an "S Corporation" within the
meaning of Section 1361(a)(1) of the Code. SMI has filed or, in the case of
returns not yet due, will file all tax returns and reports required to have
been filed by it on or before the date of the Effective Time, and all
material information set forth in such returns or reports is or (in the case
of returns or reports not yet due) will be accurate and complete. SMI has
paid or made adequate provision for or (with respect to returns or reports
not yet due) on or before the date of the Effective Time will pay or make
adequate provision for all taxes, additions to tax, penalties and interest
payable by SMI for all periods covered by those returns or reports. Except
as set forth on Item 4.21 of the SMI Disclosure Schedule and (solely with
respect to liabilities arising after the date hereof) except as will be
accrued on the Closing Balance Sheet, there are, and on the date of the
Effective Time will be, no unpaid taxes, additions to tax, penalties, or
interest payable by SMI or by any other person that are or could become a
lien on any asset, or otherwise adversely affect the business, properties, or
financial condition, of SMI. SMI has collected or withheld, or will collect
or withhold before the date of the Effective Time, all amounts required to be
collected or withheld by it for any taxes or assessments, and all such
amounts have been, or on or before the date of the Effective Time will have
been, paid to the appropriate governmental agencies or set aside in
appropriate accounts for future payment when due. SMI is in compliance with,
and its records contain all information and documents (including, without
limitation, executed Forms W-9) necessary to comply with, all applicable
information reporting and tax withholding requirements. The balance sheets
contained in the SMI Financial Statements fully and properly reflect, as of
the date thereof, the liabilities of SMI for all accrued taxes, additions to
tax, penalties and interest. For periods ending after October 31, 1993, the
books and records of SMI fully and properly reflect and the Closing Balance
Sheet will reflect SMI's liability for all accrued taxes, additions to tax,
penalties and interest. Except as disclosed in Item 4.21 of the SMI
Disclosure Schedule, SMI has not granted nor is it subject to any waiver of
the period of limitations for the assessment of tax for any currently open
taxable period, no unpaid tax deficiency has been asserted against or with
respect to SMI by any taxing authority, and SMI is not required to include in
income any amount for an adjustment pursuant to Section 481 of the Code or
the regulations thereunder. Item 4.21 of the SMI Disclosure Schedule lists
by jurisdiction the date of the last clearance or audit of SMI by a state or
local authority with respect to sales or income taxes. Item 4.21 of the SMI
Disclosure Schedule describes all material tax elections and consents
affecting SMI. SMI has not made or entered into, and holds no asset subject
to, a consent filed pursuant to Section 341(f) of the Code and the
regulations thereunder or a "safe harbor lease" subject to former Section
168(f)(8) of the Code and the regulations thereunder. None of the
Shareholders is a "foreign person" for purposes of Section 1445 of the Code.
4.22 Insurance. Item 4.22 of the SMI Disclosure Schedule contains a
complete and correct list of all policies of property, fire and casualty,
product liability, workers' compensation, automobile and other forms of
insurance owned or held by SMI and includes for each such policy its type,
term, limits and retentions, deductibles, name of insurer, annual premiums,
the aggregate remaining unused limits for each such policy giving effect to
claims made and expected to be made thereunder and, for product liability
policies, whether such policy is claims made coverage or occurrence-based
coverage. All such policies (a) are in full force and effect with all
premiums due having been paid in full and are sufficient for compliance by
SMI with all requirements of law and all agreements to which SMI is a party,
(b) are valid, outstanding and enforceable policies, (c) insure against risks
of the kind customarily insured against and (d) provide that they will remain
in full force and effect through the respective dates set forth in Item 4.22
of the SMI Disclosure Schedule, subject to the cancellation rights specified
in such policies. Except as set forth on Item 4.22 of the SMI Disclosure,
during the last two years, SMI has not been denied any insurance coverage
which it has requested, has made no material change in the scope or nature of
its insurance coverage and has not received notice of any material increase
in premiums for any of such policies nor of any termination or refusal to
renew such policies. All policies of primary comprehensive general liability
insurance and excess carriers insurance which insure against product
liability claims which SMI has maintained during the past five years are set
forth on Item 4.22 of the SMI Disclosure Schedule including the same
information with respect to such policies as is set forth for SMI's current
policies. All vendors to SMI which maintain vendor's endorsements on their
liability insurance policies are set forth on Item 4.22 of the SMI Disclosure
Schedule. During the past five years, there has been no lapse in coverage of
SMI's property, fire and casualty, product liability, workers' compensation,
automobile, comprehensive general liability or other form of insurance
carried by SMI in the ordinary course of its business.
4.23 Absence of Certain Practices. To the Knowledge of SMI and the
Shareholders, no officer, director, shareholder, employee or agent of SMI
has, directly or indirectly, given or made or agreed to give or make any
improper or illegal commission, payment, gratuity, gift, political
contribution or similar benefit to any customer, supplier, governmental
employee or other person who is or may be in a position to assist or hinder
the business of SMI.
4.24 Compliance with Laws. Except as disclosed on Item 4.24 of the SMI
Disclosure Schedule, SMI is in compliance in all material respects with all
Laws applicable to SMI or its operations. SMI holds all licenses,
certificates and permits from all regulatory authorities that are material to
the conduct of its business, all of which are valid and in full force and
effect.
4.25 Certain Obligations. None of SMI or the Shareholders have any
continuing obligations to Baxter International, Inc. or any Affiliate thereof
pursuant to any written or oral agreement or otherwise.
4.26 Pricing Audits. Item 4.26 of the SMI Disclosure Schedule sets forth
the results of all of SMI's customer pricing audits conducted since December
31, 1991. Except as disclosed in Item 4.26 of the SMI Disclosure Schedule,
as of the date hereof, there are no customer pricing audits of SMI being
conducted.
4.27 Disclosure. Neither this Agreement nor the SMI Financial
Statements contains any untrue statement of a fact or omits to state a fact
necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they are made, not misleading. To the
Knowledge of SMI and the Shareholders, there is no fact which materially and
adversely affects or could affect the business, prospects or financial
condition of SMI or its properties or assets, which has not been described in
this Agreement or the SMI Financial Statements.
4.28 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of SMI or the Shareholders is or will be entitled to any commission
or broker's or finder's fees from any of the parties hereto, or from any
Affiliate of the parties hereto, in connection with any of the transactions
contemplated by this Agreement.
ARTICLE V
Representations of O&M
O&M hereby represents and warrants as follows:
5.01 Existence and Good Standing.
(a) O&M is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia and is duly
qualified and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure
to be so qualified would not have a material adverse effect on its business
or financial condition or would not impair O&M's right to enforce any
material agreement to which it is a party. O&M has full power, authority and
legal right to own its property and to carry on its business as now being
conducted. O&M has delivered to SMI true and complete copies of its Articles
of Incorporation, as amended, and Bylaws, as currently in effect.
(b) O&M Holding is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia.
5.02 Authorization. Each of O&M and O&M Holding has the corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement constitutes and the Related
Agreements (when executed and delivered pursuant hereto for value received)
will constitute the valid and binding agreements of O&M and O&M Holding
enforceable against O&M and O&M Holding in accordance with their respective
terms.
5.03 No Conflict. The execution, delivery and performance of this
Agreement by O&M and O&M Holding do not and will not (a) violate, conflict
with or result in the breach of any provision of the Articles of
Incorporation or Bylaws of O&M or O&M Holding, (b) conflict with or violate
any Law applicable to O&M or O&M Holding or by which any of O&M's assets,
properties or businesses is bound or affected or (c) except as provided by
Item 5.03 of the O&M Disclosure Schedule, conflict with, result in any breach
of, constitute a default (or event which with the giving of notice or lapse
of time, or both, would become a default) under, require any consent under,
or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
lien, security, interest, charge or encumbrance on any of the assets or
properties of O&M pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or arrangement to which O&M is a party or by which any of such
assets or properties is bound or affected.
5.04 Capitalization.
(a) The authorized capital stock of O&M consists of (a) 30,000,000
shares of O&M Common Stock, $2.00 par value, of which (i) 20,282,405 shares
are issued and outstanding, (ii) no shares are issued and held in treasury
and (iii) 1,453,524 shares are reserved for issuance upon the exercise or
conversion of options, warrants or convertible securities granted or issued
by O&M and (b) 1,000,000 shares of cumulative Preferred Stock, $10.00 par
value (300,000 shares of which have been designated as Series A Participating
Preferred Stock issuable pursuant to O&M's Rights Agreement dated as of June
22, 1988 or otherwise by O&M's Board of Directors), none of which shares are
issued and outstanding. All such outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable and were
issued free of preemptive or similar rights that entitled any person to
acquire such shares.
(b) The authorized capital stock of O&M Holding consists of 100
shares of common stock, $2.00 par value, of which ten shares are issued and
outstanding. All such outstanding shares have been duly authorized and
validly issued and are fully paid and nonassessable and were issued free of
adverse claims, liens, options, encumbrances, judgments, or restrictions of
any kind, and preemptive or other rights that entitled any person to acquire
such shares. The shares of O&M Holding Preferred Stock to be issued to the
holders of SMI Common Stock in the SMI Exchange will be fully paid and
nonassessable and free of adverse claims, liens, options, encumbrances,
judgments, or restrictions of any kind, and preemptive or other rights that
entitle any person to acquire such shares.
5.05 Subsidiaries, Affiliated Companies and Investments. O&M owns,
directly or indirectly, each of the outstanding shares of capital stock of
each of the O&M Subsidiaries. Except for interests in the O&M Subsidiaries,
O&M does not own, directly or indirectly, of record or beneficially, any
capital stock or other equity or ownership or proprietary interest in any
corporation, partnership, association, trust, joint venture or other entity.
5.06 Financial Statements. The financial statements and schedules of
O&M contained in O&M's Annual Report on Form 10-K for the year ended December
31, 1992 and in O&M's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1993 (the "O&M Financial Statements") as filed with the
SEC, were prepared in accordance with GAAP, except as may be noted therein,
and fairly present the financial condition of O&M at the respective dates
thereof and the results of operations of O&M for the periods indicated
(subject, in the case of unaudited financial statements to normal, recurring
year-end adjustments that are not in the aggregate material.)
5.07 No Changes. Since September 30, 1993, the business of O&M and the
O&M Subsidiaries has been operated in the ordinary course consistent with
past practice, and there has not been (and to the Knowledge of O&M, no fact
or condition exists or is contemplated or threatened which might cause such
change in the future) (a) any material adverse change in the operations,
properties or condition (financial or otherwise) of O&M and the O&M
Subsidiaries or (b) any other change in the nature of, or in the manner of
conducting, the business of O&M and the O&M Subsidiaries, other than changes
which neither have had, nor reasonably may be expected to have, a material
adverse effect on the business of O&M and the O&M Subsidiaries considered as
a whole.
5.08 Books and Records. The books of accounts and records of O&M are
true, complete and correct in all material respects.
5.09 Governmental Authorization. The execution, delivery and
performance by O&M and O&M Holding of this Agreement and the consummation of
the transactions contemplated hereby by O&M and O&M Holding, require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority other than fillings required to be made under the HSR
Act, filings required to be made under applicable federal and state
securities laws and filing of the O&M Articles of Exchange in connection with
the O&M Exchange.
5.10 Litigation. There is no action, suit, proceeding, claim or
investigation pending, or, to the Knowledge of O&M, threatened against or
affecting O&M or O&M Holding which could materially and adversely affect O&M
or which in any manner challenges or seeks to prevent, enjoin, alter or delay
any of the transactions contemplated by this Agreement; to the Knowledge of
O&M, there is no valid basis for any such action, proceeding or
investigation. Item 5.10 of the O&M Disclosure Schedule sets forth each
pending action, suit, proceeding, claim or investigation to which O&M or O&M
Holding is a party, as well as the forum, parties thereto, a brief
description of the subject matter thereof and the amount of damages claimed.
O&M Holding is not subject to any order, judgment, decree or obligation of
any court, arbitrator, governmental department, commission, board, bureau,
agency or instrumentality.
5.11 Liabilities. O&M has no outstanding claims, liabilities or
indebtedness, contingent or otherwise, except as set forth in the O&M
Financial Statements, other than liabilities incurred subsequent to September
30, 1993, in the ordinary course of business and consistent with past
practices. O&M is not in default in respect of the terms or conditions of
any indebtedness, regardless of whether O&M has received notice of the
existence of any such default.
5.12 Compliance with Laws. Except as disclosed on Item 5.12 of the O&M
Disclosure Schedule, O&M is in compliance in all material respects with all
Laws applicable to its operations. O&M holds all licenses, certificates and
permits from all regulatory authorities that are material to the conduct of
its business, all of which are valid and in full force and effect.
5.13 Disclosure. Neither this Agreement nor the O&M Financial
Statements contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they are made, not
misleading. To the Knowledge of O&M, there is no fact which materially and
adversely affects or could affect the business, prospects or financial
condition of O&M or O&M Holding or their respective properties or assets,
which has not been described in this Agreement, the SEC Reports or the O&M
Financial Statements.
5.14 Securities Reports. O&M has filed, and delivered to SMI complete
copies of, all forms, reports, statements and other documents required to be
filed with the SEC since January 1, 1990 by O&M including, without
limitation, (a) all Annual Reports on Form 10-K, (b) all Quarterly Reports on
Form 10-Q, (c) all proxy statements relating to meetings of shareholders
(whether annual or special), (d) all Current Reports on Form 8-K, (e) all
other reports or registration statements and (f) all amendments and
supplements to all such reports and registration statements (collectively
"SEC Reports"). The SEC Reports did not at the time they were filed contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
5.15 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of O&M is or will be entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any Affiliate of the
parties hereto, in connection with any of the transactions contemplated by
this Agreement except that O&M has retained J. P. Morgan as its financial
advisor.
ARTICLE VI
Conduct of Businesses and Certain Other Actions
Pending the Effective Time
6.01 Access to Information Concerning Properties and Records for Due
Diligence Review. Following the execution and delivery of this Agreement,
SMI shall give, and shall cause its officers, directors and agents to give,
to O&M and its counsel, accountants and other representatives, and O&M shall
give, and shall cause its officers, directors and agents to give, to SMI and
the Shareholders and their counsel, accountants and other representatives,
full access during normal business hours to all of the offices, properties,
books, contracts, commitments, records and affairs of SMI or O&M, as the case
may be, and will promptly furnish copies of all documents and information
concerning the business, operations, properties and affairs of O&M that SMI
or its representatives or of SMI that O&M and its representatives may
reasonably request. SMI, the Shareholders and O&M agree to jointly plan and
conduct such due diligence in a manner reasonably believed not to adversely
affect the relationship and good will of the employees, customers, vendors
and other business partners of SMI and O&M. Notwithstanding the foregoing,
SMI and O&M may restrict the access of the other to certain commercially
sensitive information with respect to pricing, margins and contractual terms
with specific vendors and customers prior to expiration of the waiting period
(and any extensions thereof) under the HSR Act, provided that reasonable
arrangements shall be made for the conduct of the review of such information
promptly following such expiration and the completion of such review before
the mailing of the Proxy Statement/Prospectus.
6.02 Obligations Concerning Confidentiality.
(a) SMI, the Shareholders and O&M and O&M Holding will treat all
such information obtained from the other in strict confidence and will take
all necessary or appropriate actions to prevent disclosure of such
confidential information to third parties without the prior consent of the
other party and will use all reasonable efforts to cause their Affiliates and
advisors to keep such information confidential; provided, however, that: (i)
any of such information obtained by a party hereto may be disclosed to the
directors, officers, employees, representatives, advisors and Affiliates of
such party solely in connection with this Agreement and the transactions
contemplated hereby (it being understood that such directors, officers,
employees, representatives and advisors shall be informed by such party of
the confidential nature of such information and shall be directed by such
party to treat such information confidentially); and (ii) any of such
information may be disclosed as, in the opinion of counsel to O&M, is
required to be disclosed in the Proxy Statement/Prospectus or in any report
or other filing made by O&M under the Securities Act or the Exchange Act or,
in the reasonable judgment of O&M, is necessary to be disclosed in connection
with obtaining the financing described in Section 8.14. The foregoing shall
not apply to any party with respect to information which:
(i) was at the time of disclosure generally available to
the public, other than by breach of this provision;
(ii) was in the possession of such party prior to
disclosure by the other party;
(iii) after such disclosure was acquired in good faith
from a third party, who did not obtain it directly or
indirectly from SMI, O&M, or any agent of any such party
unlawfully; or
(iv) was developed independently within the
organization of SMI or O&M, as the case may be, by personnel
not having access to such information.
(b) Notwithstanding anything in paragraph (a) of this Section
6.02, confidential information may be disclosed, if and only to the extent
legally required, in response to legal process or applicable governmental
regulations, provided that the party obligated to disclose such information
first notifies the other party of the obligation to disclose such
confidential information and the party so obligated fully cooperates with the
other party in taking such measures as shall be appropriate and to the extent
and in the manner permissible under applicable Law.
(c) If this Agreement should terminate for any reason, SMI and the
Shareholders will return to O&M all documents obtained by it or its agents
from O&M, containing non-public information concerning O&M and shall destroy
or cause to be destroyed any copies thereof made for SMI or any of its agents
or employees or the Shareholders, and O&M will return to SMI all documents
obtained by it or its agents from SMI or the Shareholders, containing non-
public information concerning SMI or the Shareholders, and shall destroy or
cause to be destroyed any copies thereof made for O&M or any of its agents or
employees.
6.03 Conduct of Business by SMI Pending the Effective Time. SMI
covenants and agrees that, from the date of this Agreement until the
Effective Time or the earlier termination of this Agreement for any reason,
SMI shall conduct its operations in the ordinary course and consistent with
past practices (except for entry into new product lines and markets), and
shall use its best efforts to (a) maintain and preserve its business
organization, (b) retain the services of its key employees and (c) maintain
relationships with customers, suppliers, and other third parties such that
their goodwill and ongoing business shall not be impaired in any material
respect. Without limiting the generality of the foregoing, during the period
from the date hereof until the Effective Time, SMI shall not, except as
otherwise expressly provided in this Agreement, without the prior written
consent of O&M:
(a) do or effect any of the following actions with respect to the
securities of SMI: (i) adjust, split, combine or reclassify its capital
stock; (ii) make, declare or pay any dividend or distribution on or directly
or indirectly redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock (except with respect to
distributions aggregating (x) $3,000,000, plus (y) 45% of SMI's taxable
income for the period from January 1, 1993 through the Effective Time,
reduced by any distributions previously made with respect to such taxable
income); (iii) grant any person any right to acquire any shares of its
capital stock including rights under the Phantom Plans; (iv) issue, deliver
or sell or agree to issue, deliver or sell any additional shares of its
capital stock or any securities or obligations convertible into or
exchangeable or exercisable for any shares of its capital stock or such
securities; or (v) enter into any agreement, understanding or arrangement
with respect to the sale of capital stock;
(b) sell, transfer, pledge, mortgage, encumber or otherwise
dispose of any of its property or assets other than sales of inventory made
in the ordinary course of business;
(c) make or propose any changes in its Articles of Incorporation
or Bylaws;
(d) merge or consolidate with any other person or acquire a
significant amount of the assets or the capital stock of any other person
other than the Midwest Acquisition;
(e) incur, create, assume or otherwise become liable for any
indebtedness for borrowed money other than in the ordinary course of business
and pursuant to the Midwest Acquisition in accordance with Section 6.18
hereof;
(f) create any subsidiaries;
(g) other than in the ordinary course of business, enter into or
modify any employment, severance, termination or similar agreements or
arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officer, director, consultant or employee;
(h) change any method or principle of accounting in a manner that
is inconsistent with past practice;
(i) make or revoke any tax election;
(j) settle any claims, litigation or actions, whether now pending
or hereafter made or brought, unless such settlement does not result in a
material adverse effect on the business or condition (financial or otherwise)
of SMI;
(k) forgive any indebtedness or other obligations of any Affiliate
of SMI or third party to SMI;
(l) make any commitments for capital expenditures other than in
the ordinary course of business; or
(m) agree to commit to do any of the foregoing.
6.04 HSR Act Filings. SMI and O&M agree to make their respective
filings promptly pursuant to the HSR Act, and to use their reasonable best
efforts (which shall not include the obligation of O&M to divest any business
or operations of SMI or O&M other than a divestiture of a de minimis amount
of such business or operations), and to cooperate with each other in their
efforts to effect compliance with the HSR Act. SMI and O&M will each supply
the other party with a draft notification prior to filing, and a copy of its
notification as filed, without exhibits.
6.05 No Shopping. Prior to the Effective Time or termination of this
Agreement pursuant to Section 10.01 hereof, neither SMI or the Shareholders
will, directly or indirectly, through any officer or director of SMI, any
agent or otherwise: (a) solicit, initiate, encourage the submission of,
respond to or discuss inquiries or proposals of offers from any person
relating to any acquisition or purchase of assets of, or any equity interest
in, SMI or the SMI Common Stock or any exchange offer, merger, consolidation,
business combination, sale of substantial assets or of a substantial amount
of assets, sale of securities, liquidation, dissolution or similar
transactions involving SMI or the Shareholders (a "Competing Transaction");
(b) enter into or participate in any discussions or negotiations regarding a
Competing Transaction, or furnish to any other person any information with
respect to the business, properties or assets of SMI; or (c) otherwise
cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek a
Competing Transaction. SMI and the Shareholders shall immediately notify O&M
of any proposal relating to a Competing Transaction or if any inquiry or
contact with any person with respect thereto is made and shall immediately
deliver to O&M copies of any such written proposal or offer and any
communications made in response thereto.
6.06 Shareholders Meeting. SMI shall duly call a meeting of the holders
of SMI Common Stock to be held as soon as practicable (or arrange for action
by unanimous written consent) for the purpose of voting on adoption of the
SMI Plan of Exchange and approval of the transactions contemplated by this
Agreement. Each Shareholder covenants and agrees to vote, or cause to be
voted, all shares of SMI Common Stock owned by him in favor of approval of
the SMI Plan of Exchange and approval of the transactions contemplated by
this Agreement.
6.07 Certain Notices. After the date hereof and prior to the Effective
Time, SMI and the Shareholders shall give prompt notice to O&M of (a) any
notice of, or other communication received by SMI relating to, a default or
event which with notice or lapse of time or both would become a default under
its Articles of Incorporation or Bylaws, or any indenture, loan agreement or
other material agreement to which SMI is a party, by which it or any of its
properties is bound or to which it or any of its properties is subject, (b)
any notice or other communication from any third party received by SMI
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated hereby and (c) any matter
which, if it had occurred prior to the date hereof, would have made any of
SMI's and the Shareholders' representations and warranties incorrect,
incomplete or misleading.
6.08 Consents and Approvals. SMI and the Shareholders shall use its and
their respective best efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this
Agreement, to cooperate with O&M in connection with the foregoing and to
obtain all material consents, waivers, approvals, authorizations or orders
required for the authorization, execution and delivery of this Agreement and
the SMI Plan of Exchange by SMI and the consummation by SMI of the
transactions contemplated hereby and thereby prior to the Effective Time and
to furnish true, correct and complete copies of each thereof to O&M. Without
limiting the foregoing, SMI and each of the Shareholders shall use its and
their respective best efforts: (a) to obtain all waivers, consents and
approvals listed on Item 4.03 of the SMI Disclosure Schedule; (b) to obtain
all necessary consents, approvals and authorizations as are required to be
obtained under any Laws, to defend all lawsuits or other legal proceedings
challenging this Agreement or the Related Agreements or the consummation of
the transactions contemplated hereby, to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby; and (c) to effect
all necessary registrations and filings and submissions of information
requested by governmental authorities.
6.09 Proxy Statement/Prospectus. SMI and the Shareholders, at the
Shareholders' sole expense, shall furnish to O&M and O&M Holding (a) as soon
as practicable, but in no event later than February 28, 1994, all financial
statements with respect to SMI and Midwest required to be included in the
Proxy Statement/Prospectus and (b) within 45 days after the date hereof, all
other information concerning SMI required for inclusion in the Proxy
Statement/Prospectus, or for any application or other filing to be made by
O&M or O&M Holding pursuant to this Agreement or pursuant to the rules and
regulations of any governmental body in connection with the transactions
contemplated by this Agreement, including without limitation all filings
required to be made under federal laws or state securities laws, and shall
otherwise cooperate with O&M and O&M Holding in connection therewith. SMI
represents and warrants that all information so furnished to O&M and O&M
Holding shall be correct in all material respects and shall not omit any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, and if SMI shall at any time discover that
any such information so furnished shall not be in compliance with the
foregoing, it will immediately notify O&M and O&M Holding of the same and
correct and supplement any such information to the extent that it is
necessary to do so. O&M represents and warrants that all information in the
Proxy Statement/Prospectus other than information furnished to O&M by SMI and
the Shareholders shall be correct in all material respects and shall not omit
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading.
6.10 Shareholders Meeting; Proxy Statement/Prospectus. O&M shall duly
call the O&M Shareholders' Meeting to be held as soon as practicable in
accordance with O&M's Bylaws and applicable Law for the purpose of approving
this Agreement and the transactions contemplated hereby, including the O&M
Plan of Exchange, and agrees to use its best efforts to obtain the necessary
adoption and approval thereof by the holders of O&M Common Stock. As
promptly as practicable following the execution and delivery of this
Agreement, O&M and O&M Holding shall prepare and file with the SEC the Proxy
Statement/Prospectus and form of proxy complying in all respects with the
proxy rules of the SEC and shall deliver the Proxy Statement/Prospectus and
form of proxy to its shareholders of record at the earliest practicable date
permitted under such rules for purposes of soliciting the proxies of the
holders of O&M Common Stock for the O&M Shareholders' Meeting.
6.11 Certain Notices. After the date hereof and prior to the Effective
Time, O&M shall give prompt notice to SMI and the Shareholders of (a) any
notice of, or other communication received by O&M relating to, a default or
event which with notice or lapse of time or both would become a default under
its Articles of Incorporation or Bylaws, or any indenture, loan agreement or
other material agreement to which O&M is a party, by which it or any of its
properties is bound or to which it or any of its properties is subject, (b)
any notice or other communication from any third party received by O&M
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated hereby and (c) any matter
which, if it had occurred prior to the date hereof, would have made any of
O&M's representations and warranties incorrect, incomplete or misleading.
6.12 Consents and Approvals. Each of O&M and O&M Holding shall use its
best efforts to take, or cause to be taken, all actions, and to do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement, to cooperate with
SMI in connection with the foregoing and to obtain all consents, waivers,
approvals, authorizations or orders required for the authorization, execution
and delivery of this Agreement by O&M and the consummation by it of the
transactions contemplated hereby and thereby prior to the Effective Time and
to furnish true, correct and complete copies of each thereof to SMI. Without
limiting the foregoing, O&M shall use its best efforts: (a) to obtain all
waivers, consents and approvals listed on Item 5.03 of the O&M Disclosure
Schedule; (b) to obtain all necessary consents, approvals and authorizations
as are required to be obtained under any Laws, to defend all lawsuits or
other legal proceedings challenging this Agreement or the Related Agreements
or the consummation of the transactions contemplated hereby, to lift or
rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions
contemplated hereby; and (c) to effect all necessary registrations and
filings and submissions of information requested by governmental authorities.
6.13 Severance Agreements. The Shareholders shall obtain from each
person who is a party to a Severance Agreement an agreement of satisfaction
and release of SMI, O&M and O&M Holding with respect thereto in a form
satisfactory to O&M Holding.
6.14 Phantom Stock Plans. SMI shall use its best efforts to obtain from
each participant in the Phantom Stock Plans an agreement of satisfaction and
release effective upon payment by SMI of $1,800,000 pursuant to Section 9.14
hereof in a form satisfactory to O&M.
6.15 SMI Funding.
(a) SMI will continue to sell all of its accounts receivable to
SMI Funding in accordance with the Sale and Administration Agreement through
the close of business on the day immediately preceding the Effective Time.
Before the Effective Time, SMI and SMI Funding will enter into an agreement
satisfactory to them and to O&M Holding providing for the termination, no
later than 150 days after the Effective Time, of the Sale and Administration
Agreement and any agreement relating thereto. Such agreement also will
provide, without limitation, that: (i) as of the close of business on the
day immediately preceding the Effective Time, SMI shall have no further
obligations to sell its receivables to SMI Funding and SMI Funding shall have
no further obligations to purchase such receivables; (ii) for a period not to
exceed 150 days after the Effective Time, SMI will continue to receive and
remit to SMI Funding the proceeds of all SMI receivables sold to SMI Funding
prior to the Effective Time; (iii) from and after the Effective Time, SMI
will have no obligations or liabilities whatsoever under the Sale and
Administration Agreement or any other agreement relating thereto; and (iv)
the following provisions will govern the application of payments received:
(x) all payments on accounts received or collected by SMI on or after the
Effective Time will be allocated among the receivables sold to SMI Funding
and the receivables of SMI arising on or after the Effective Time in the
manner specified in the remittance advice accompanying such payment; (y) if
such allocation is not so specified in any remittance advice, SMI will
contact the customer and request instructions as to how such payment should
be allocated and (z) if the customer then declines to give such instructions,
the amount of such payment shall be applied against the oldest outstanding
invoices.
(b) SMI will use its best efforts to sell all accounts receivable
purchased from Midwest in connection with the Midwest Acquisition to SMI
Funding pursuant to the terms of the Sale and Administration Agreement.
6.16 Supply Agreement. Prior to the Effective Time, SMI shall have
terminated its supply agreement with Pittsburgh International Medical Supply
and SMI shall have no further obligations under such agreement thereafter.
6.17 Servicing Agreements. Prior to the Effective Time, SMI and
Specialty shall have agreed in writing that (i) the Servicing Agreement
between them dated July 30, 1993 shall terminate no later than June 30, 1994
with respect to management information systems services and no later than the
Effective Time with respect to all other services provided thereunder and
(ii) the Warehousing Agreement between them dated July 30, 1993 shall
terminate no later than June 30, 1994.
6.18 Midwest Acquisition. SMI and O&M acknowledge that SMI has entered
into a letter of intent with respect to the Midwest Acquisition. The
Shareholders agree that they shall cause the Midwest Acquisition to be
consummated for an aggregate purchase price of not more than $12 million
(including the assumption of indebtedness and all payments to any person in
connection with such acquisition) no later than January 15, 1994.
6.19 Fixed Assets Inventory.
(a) On or before January 31, 1994, SMI shall permit O&M and its
representatives, together with SMI, to conduct an inventory of the fixed
assets of SMI of such scope as agreed upon between the parties. SMI agrees
to give O&M and its representatives access during normal business hours to
all of the offices, properties and relevant books and records of SMI in
accordance with the provisions of Section 6.01 hereof for purposes of
conducting any such fixed assets inventory.
(b) SMI shall use its reasonable best efforts to preserve its
fixed assets and prevent theft of its fixed assets, including personal
computers.
6.20 Specialty Obligations. Prior to the Effective Time, Specialty
shall have paid in full the Specialty Obligations, including accrued interest
thereon, if any, to the date of payment.
ARTICLE VII
Conditions Precedent to Obligations of SMI and the Shareholders
The obligations of SMI and the Shareholders under this Agreement are
subject, at the option of SMI and the Shareholders, to the fulfillment at or
prior to the Effective Time of each of the following conditions:
7.01 O&M Obligations. O&M shall have performed each obligation and
covenant to be performed by it hereunder on or prior to the Effective Time.
7.02 Accuracy of Representations and Warranties. The representations
and warranties of O&M set forth in this Agreement shall be true and correct
in all material respects at and as of the Effective Time as if made at and as
of such time, except (a) as explicitly permitted by this Agreement and (b) to
the extent that any such representation or warranty is made as of a specified
date, in which case such representation or warranty shall have been true and
correct as of such date.
7.03 Consents and Approvals. SMI shall have received, each in form and
substance satisfactory to SMI, all authorizations, consents, orders and
approvals of all governmental authorities and officials and all third party
consents listed on Item 4.03 of the SMI Disclosure Schedule and Item 5.03 of
the O&M Disclosure Schedule which SMI deems reasonably necessary for the
consummation of the transactions contemplated by this Agreement.
7.04 Court Orders. No preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission or statute,
rule, regulation or executive order promulgated or enacted by any
governmental authority shall be in effect which would (a) make the Exchanges
or any of the transactions contemplated hereby illegal, (b) impose
limitations on the ability of SMI or O&M to operate their businesses
following the Exchanges other than a de minimus divestiture of SMI's or O&M's
business or operations as provided in Section 6.04 hereof or (c) otherwise
prevent the consummation of the Exchanges or the other transactions
contemplated hereby.
7.05 HSR Act. The waiting period (and any extensions thereof) under the
HSR Act applicable to the SMI Exchange shall have expired or terminated.
7.06 Actions and Proceedings. No suit, action or proceeding before any
court or any governmental or regulatory authority shall have been commenced
and be pending by any person against SMI, the Shareholders, O&M or O&M
Holding or any of their Affiliates, associates, officers or directors seeking
to restrain, prevent, change or delay in any respect the transactions
contemplated hereby, challenging any of the material terms or provisions of
this Agreement or seeking damages in connection with the transactions
contemplated hereby.
7.07 O&M Shareholder Vote. At O&M's Shareholders' Meeting, the holders
of more than two-thirds of the issued and outstanding shares of O&M Common
Stock shall have voted to approve this Agreement and the transactions
contemplated hereby, including the O&M Plan of Exchange.
7.08 Completion of Investigation. On or before the date the Proxy
Statement/Prospectus is mailed to the holders of O&M Common Stock, SMI and
the Shareholders shall have completed to their reasonable satisfaction, as
determined in good faith, a business and legal investigation of the matters
set forth in the O&M Disclosure Schedule. SMI, the Shareholders, O&M and O&M
Holding shall negotiate in good faith to resolve any issues disclosed in such
investigation.
7.09 Deliveries at Closing. O&M shall have delivered to SMI and the
Shareholders, each properly executed and dated as of the date of Closing:
(a) a certificate of the Chief Executive Officer and Chief
Financial Officer of O&M to the effect that, to their Knowledge, the
conditions specified in Section 7.01 and 7.02 hereof have been fulfilled;
(b) certified resolutions duly adopted by O&M's Board of Directors
approving the execution and delivery of this Agreement and consummation of
the transactions contemplated hereby and certified resolutions duly adopted
by the holders of O&M Common Stock approving this Agreement and the
transactions contemplated hereby, including the O&M Plan of Exchange;
(c) the opinion of Hunton & Williams, counsel to O&M,
substantially to the effect set forth in Exhibit E attached hereto, together
with such additional opinions as SMI may reasonably request and subject to
such assumptions and qualifications (including reliance on certificates of
officers of O&M and O&M Holding and governmental officials and opinions of
other counsel) as may be customary or reasonable under the circumstances;
(d) the Registration Rights Agreement; and
(e) a copy of the Amended and Restated Articles of Incorporation
of O&M Holding, in the form in which the same has been delivered to the
Commonwealth of Virginia State Corporation Commission for filing, which shall
reflect that the Series B Preferred Stock will be accorded substantially the
same relative seniority and priority, and will be entitled to substantially
the same rights, under such Amended and Restated Articles of Incorporation as
if the Series B Preferred Stock were to be issued as an additional series of
preferred stock of O&M under its articles of incorporation as in effect on
the date of this Agreement.
ARTICLE VIII
Conditions Precedent to the Obligations of O&M and O&M Holding
The obligations of O&M and O&M Holding under this Agreement are subject,
at the option of O&M and O&M Holding to the fulfillment at or prior to the
Effective Time of each of the following conditions:
8.01 SMI and Shareholders Obligations. Each of SMI and the Shareholders
shall have performed each obligation and covenant to be performed by each of
them hereunder on or prior to the Effective Time.
8.02 Accuracy of Representations and Warranties. The representations
and warranties of SMI and the Shareholders set forth in this Agreement shall
be true and correct in all material respects at and as of the Effective Time
as if made at and as of such time, except (a) as explicitly permitted by this
Agreement and (b) to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty
shall have been true and correct as of such date.
8.03 Consents and Approvals. O&M shall have received, each in form and
substance satisfactory to O&M, all authorizations, consents, orders and
approvals of all governmental authorities and officials and all third party
consents listed on Item 4.03 of the SMI Disclosure Schedule and Item 5.03 of
the O&M Disclosure Schedule which O&M deems reasonably necessary for the
consummation of the transactions contemplated by this Agreement, including
without limitation, the consent of each of O&M's lenders and VHA to the
transactions contemplated by this Agreement on terms reasonably satisfactory
to O&M.
8.04 Court Orders. No preliminary or permanent injunction or other
order, decree or filing issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission or statute,
rule, regulation or executive order promulgated or enacted by any
governmental authority shall be in effect which would (a) make the Exchanges
or any of the transactions contemplated hereby illegal, (b) impose
limitations on the ability of SMI or O&M to operate their businesses
following the Exchanges other than a de minimus divestiture of SMI's or O&M's
business or operations as provided in Section 6.04 hereof or (c) otherwise
prevent the consummation of the Exchanges or the transactions contemplated
hereby.
8.05 HSR Act. The waiting period (and any extensions thereof) under the
HSR Act applicable to the SMI Exchange shall have expired or terminated.
8.06 Actions and Proceedings. No suit, action or proceeding before any
court or any governmental or regulatory authority shall have been commenced
and be pending by any person against SMI, the Shareholders, O&M or O&M
Holding or any of their Affiliates, associates, officers or directors seeking
to restrain, prevent, change or delay in any respect the transactions
contemplated hereby, challenging any of the material terms or provisions of
this Agreement or seeking damages in connection with the transactions
contemplated hereby.
8.07 O&M Shareholder Vote. At O&M's Shareholders' Meeting, the holders
of more than two-thirds of the issued and outstanding shares of O&M Common
Stock shall have voted to approve this Agreement and the transactions
contemplated hereby, including the O&M Plan of Exchange.
8.08 Opinion of J. P. Morgan. Before the Proxy Statement/Prospectus is
mailed to the holders of O&M Common Stock, the Board of Directors of O&M
shall have received from J. P. Morgan a written opinion addressed to it, in
form and substance reasonably satisfactory to the Board of Directors of O&M
and its counsel, for inclusion in the Proxy Statement/Prospectus, and dated
on or about the date thereof, substantially to the effect that the proposed
consideration to be paid by O&M Holding pursuant to the SMI Exchange is fair
to the holders of O&M Holding Common Stock and O&M Holding from a financial
point of view, and J. P. Morgan shall not have withdrawn such opinion before
the Effective Time.
8.09 Completion of Investigation. On or before the date the Proxy
Statement/Prospectus is mailed to the holders of O&M Common Stock, O&M shall
have completed to its reasonable satisfaction, as determined in good faith,
a business and legal investigation of the matters set forth in the SMI
Disclosure Schedule. SMI, the Shareholders, O&M and O&M Holding shall
negotiate in good faith to resolve any issues disclosed in such
investigation.
8.10 VHA. O&M shall have received assurances from VHA that it does not
intend to terminate or substantially reduce the volume of business under its
contracts with SMI or O&M.
8.11 Opinion Concerning Certain Tax Matters. O&M shall have received
the written opinion of Hunton & Williams to the effect that no gain will be
recognized for federal income tax purposes as a result of the Exchanges by
SMI, O&M Holding, O&M or the holders of O&M Common Stock, and that the basis
of holders of O&M Common Stock in the O&M Holding Common Stock received in
the O&M Exchange will be the same as the basis of the O&M Common Stock
exchanged therefor.
8.12 Title to Real Property. O&M shall have received evidence that SMI
has an owner's title insurance policy in an amount reasonably satisfactory to
O&M insuring that SMI has good and marketable title to the Real Property and
that the Real Property is free and clear of all liens, objections, charges,
pledges and other encumbrances other than Permitted Liens.
8.13 Environmental Matters. O&M shall have received a copy of an
environmental report prepared by environmental engineers or auditors selected
by O&M and at O&M's expense containing information consistent with good
commercial and engineering practices to the reasonable satisfaction of O&M
that no environmental noncompliance or conditions exist on or with respect to
the Real Property or the Leased Property that could result in liabilities in
excess of $250,000.
8.14 Refinancing of SMI Indebtedness; Additional O&M Indebtedness. O&M
Holding shall have received on or prior to the Effective Time proceeds of
financings that are adequate, in the reasonable opinion of O&M Holding, for
(a) the refinancing of SMI's indebtedness (other than any indebtedness
incurred to make the $3,000,000 distribution described in Section 6.03(a))
and (b) the refinancing of O&M's existing bank loans and all additional
financing necessary for the transactions contemplated hereby, all on terms
reasonably satisfactory to O&M Holding.
8.15 Registration Statement. The registration statement of which the
Proxy Statement/Prospectus constitutes a part shall have become effective and
shall not be subject to any stop order issued by the SEC, and no action,
suit, proceeding or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, or shall have been
threatened and be unresolved.
8.16 Deliveries at Closing. SMI and the Shareholders shall have
delivered to O&M and O&M Holding, each properly executed and dated as of the
date of Closing:
(a) a certificate of the Chief Executive Officer and Chief
Financial Officer of SMI to the effect that, to their Knowledge, the
conditions specified in Sections 8.01 and 8.02 hereof have been fulfilled;
(b) a certificate from each of the Shareholders to the effect
that, to his Knowledge, the conditions specified in Sections 8.01 and 8.02
hereof have been fulfilled;
(c) certified resolutions duly adopted by SMI's Board of Directors
approving the execution and delivery of this Agreement and consummation of
the transactions contemplated hereby and certified resolutions duly adopted
by the Shareholders approving the SMI Plan of Exchange and the transactions
contemplated by this Agreement;
(d) the opinion of Cohen & Grigsby, P.C., counsel to SMI,
substantially to the effect set forth in Exhibit F attached hereto, together
with such additional opinions as O&M may reasonably request and subject to
such assumptions and qualifications (including reliance on certificates of
officers of SMI and governmental officials and opinions of other counsel) as
may be customary or reasonable under the circumstances;
(e) the opinion of H. Vaughan Blaxter, III, or Russell W. Ayres,
III, substantially to the effect set forth in Exhibit G attached hereto,
together with such additional opinions as O&M may reasonably request and
subject to such assumptions and qualifications (including reliance on
certificates of Shareholders and governmental officials and opinions of other
counsel) as may be customary or reasonable under the circumstances;
(f) the Registration Rights Agreement;
(g) releases executed by each of the Shareholders releasing SMI
from any claim he may have against SMI with respect to all matters and
dealings with SMI prior to the date of Closing;
(h) the releases referred to in Sections 6.13 and 6.14 hereof with
respect to the Severance Agreements and the Phantom Stock Plans,
respectively;
(i) the agreement between SMI and SMI Funding referred to in
Section 6.15 hereof;
(j) estoppel certificates in a form reasonably satisfactory to O&M
from each sublessee of Leased Property;
(k) an IRS Form W-9 completed and executed by each Shareholder;
and
(l) a statement executed by each Shareholder providing a good
faith estimate of his or her adjusted basis for federal income tax purposes
in the shares of SMI Common Stock owned by such Shareholder immediately
before the Effective Time.
ARTICLE IX
Indemnification and
Additional Agreements
9.01 The Shareholders' Indemnity.
(a) Each of the Shareholders hereby jointly and severally agrees
to indemnify and hold O&M's Indemnitees harmless from and against, and agrees
to defend promptly O&M's Indemnitees from and reimburse O&M's Indemnitees
for, any and all losses, damages, costs, expenses, liabilities, obligations
and claims of any kind, including, without limitation, reasonable attorneys'
fees and other legal costs and expenses (hereinafter referred to collectively
as "Losses"), that O&M's Indemnitees may at any time suffer or incur, or
become subject to, as a result of or in connection with: (i) any breach or
inaccuracy of any of the representations and warranties made by SMI or the
Shareholders in or pursuant to this Agreement; (ii) any failure of SMI or any
of the Shareholders to carry out, perform, satisfy and discharge any of its
or his covenants, agreements, undertakings, liabilities or obligations under
this Agreement or the Related Agreements or under any of the documents and
instruments delivered by the Shareholders or SMI pursuant to this Agreement;
(iii) the conduct of the business of SMI at any time before the Effective
Time to the extent such activities result in any loss or liability (including
tax obligations) that is not fully reflected on the Closing Balance Sheet or
(except for the Specialty Litigation) the SMI Disclosure Schedules; provided,
that, with respect to Losses related to the matters disclosed on Item 4.10A
of the SMI Disclosure Schedule, the Shareholders shall indemnify O&M's
Indemnitees for any amount by which the insurance deductible of SMI
applicable to such matter exceeds the deductible, if any, provided for under
O&M's insurance policy applicable to such a matter and in effect at the time
of the occurrence of the event from which such Loss arose; (iv) any Specialty
Litigation and any liability relating to or arising from the sale or other
disposition or operation of any separate line of business formerly (but not
now) conducted by SMI (whether as an unincorporated division or business
function or as a subsidiary, direct or indirect), including without
limitation Specialty and the former AIP division; (v) any Balance Sheet
Deficiency; (vi) any costs, expenses or other liabilities incurred by SMI,
O&M or O&M Holding resulting from the exercise by any holder of SMI Common
Stock of dissenters' rights in connection with the transactions contemplated
by this Agreement to the extent such costs, expenses or other liabilities
exceed the sum of the cash consideration and the aggregate par value of the
O&M Holding Preferred Stock to which such dissenting shareholder would have
been entitled to pursuant to the SMI Plan of Exchange; (vii) the matter
described on Item 4.10 of the SMI Disclosure Schedule with respect to the SMI
401(k) Plan, including but not limited to any costs of litigation with
respect to such matter and the failure of the SMI 401(k) Plan to qualify and
continue to qualify as a Qualified Pension Plan as a consequence of such
matter described on Item 4.10 of the SMI Disclosure Schedule or as a
consequence of any other matter occurring prior to the Effective Time; (viii)
any obligation under the Phantom Stock Plans in excess of the amount set
forth in Section 9.14 hereof; (ix) the Severance Agreements; and (x) any and
all obligations, expenses or liabilities incurred by SMI, O&M or O&M Holding
relating to or arising out of the Sale and Administration Agreement or any
other agreement relating thereto (other than the agreement to be entered into
by SMI and SMI Funding pursuant to Section 6.15 hereof); provided, however,
that O&M's Indemnitees shall have no right to be indemnified, held harmless
from, defended or reimbursed under Section 9.01(a)(i) unless such right is
asserted (whether or not such Losses have actually been incurred) within 24
months after the Effective Time, except there shall be no time limitation
with respect to the representations set forth in Sections 4.01, 4.02, 4.04
and 4.20 hereof, and the time limit with respect to any matter covered by
Section 4.21 hereof shall be 30 days after the expiration of the applicable
statute of limitations with respect to such matter; and provided, further,
that with respect to Losses related to item (vii) hereof, the term O&M's
Indemnitees shall also include the SMI 401(k) Plan, the SMI 401(k) Plan's
trust, and the participants, beneficiaries and alternate payees of the SMI
401(k) Plan (other than participants who have been trustees of the SMI 401(k)
Plan and beneficiaries and alternate payees of participants who have been
trustees of the SMI 401(k) Plan). Notwithstanding the foregoing, the
Shareholders shall not be required to indemnify O&M's Indemnitees under
Section 9.01(a)(i), (ii), (iii) and (v) unless and until the amount of all
Losses (without regard to any potential tax benefits) for which
indemnification is sought with respect thereto shall exceed $1,000,000 and
then only to the extent and in the amount of such excess.
(b) In the event a claim against O&M's Indemnitees arises that is
covered by the indemnity provisions of Section 9.01(a) hereof, notice shall
be given promptly by O&M Holding to the Shareholders' Representative.
Provided that the Shareholders' Representative admits in writing to O&M
Holding that such claim is covered by the indemnity provisions of Section
9.01(a) hereof, the Shareholders' Representative shall have the right to
contest and defend by all appropriate legal proceedings such claim and to
control all settlements (unless O&M Holding agrees to assume the cost of
settlement and to forgo such indemnity) and to select lead counsel to defend
any and all such claims at the sole cost and expense of the Shareholders;
provided, however, that the Shareholders' Representative may not effect any
settlement that could result in any cost, expense or liability to the O&M
Indemnities unless O&M Holding consents in writing to such settlement and the
Shareholders' Representative agrees to indemnify the O&M Indemnitees
therefor. O&M Holding may select counsel to participate in any defense
assumed by the Shareholders, in which event such counsel shall be at O&M
Holding's own cost and expense. In connection with any such claim, action or
proceeding, the parties shall cooperate with each other and provide each
other with access to relevant books and records in their possession.
9.02 O&M's Indemnity.
(a) Each of O&M Holding and O&M hereby agrees to indemnify and
hold Shareholders' Indemnitees harmless from and against, and agree to defend
promptly Shareholders' Indemnitees from and reimburse Shareholders'
Indemnitees for, any and all Losses that Shareholders' Indemnitees may at any
time suffer or incur, or become subject to, as a result of or in connection
with: (i) any breach or inaccuracy of any of the representations and
warranties made by O&M in or pursuant to this Agreement; (ii) any failure by
O&M to carry out, perform, satisfy and discharge any of its covenants,
agreements, undertakings, liabilities or obligations under this Agreement or
the Related Agreements and (iii) the conduct by SMI, O&M or O&M Holding of
the business of SMI after the Effective Time other than with respect to
facts, circumstances or conditions existing as of the Effective Time;
provided, however, that Shareholders' Indemnitees shall have no right to be
indemnified, held harmless from, defended or reimbursed under Section
9.02(a)(i) unless such right is asserted (whether or not such Losses have
actually been incurred) within 24 months after the Effective Time, except
there shall be no time limitation with respect to the representations set
forth in Sections 5.01 and 5.02 hereof. Notwithstanding the foregoing, O&M
and O&M Holding shall not be required to indemnify Shareholders' Indemnitees
under this Section 9.02 unless and until the amount of all Losses (without
regard to any potential tax benefits) for which indemnification is sought
with respect thereto shall exceed $1,000,000 and then only to the extent and
in the amount of such excess.
(b) In the event a claim against Shareholders' Indemnitees arises
that is covered by the indemnity provisions of Section 9.02(a) hereof, notice
shall be given promptly by the Shareholders' Representative to O&M Holding.
Provided that O&M Holding admits in writing to the Shareholders'
Representative that such claim is covered by the indemnity provisions of
Section 9.02(a) hereof, O&M Holding shall have the right to contest and
defend by all appropriate legal proceedings such claim and to control all
settlements (unless the Shareholders' Representative agrees to assume the
cost of settlement and to forgo such indemnity) and to select lead counsel to
defend any and all such claims at the sole cost and expense of O&M Holding;
provided, however, that O&M Holding may not effect any settlement that could
result in any cost, expense or liability to the Shareholders unless the
Shareholders' Representative consents in writing to such settlement and O&M
Holding agrees to indemnify the Shareholders therefor. The Shareholders'
Representative may select counsel to participate on behalf of the
Shareholders in any defense assumed by O&M Holding, in which event the
Shareholders' counsel shall be at their own cost and expense. In connection
with any such claim, action or proceeding, the parties shall cooperate with
each other and provide each other with access to relevant books and records
in their possession.
9.03 Acquisition for Investment; Transfer Limitations. Each of the
Shareholders represents and warrants to O&M Holding that he is an "accredited
investor", as defined in Rule 501 under the Securities Act, his respective
shares of O&M Holding Preferred Stock are being acquired in the SMI Exchange
for investment purposes and not with a view toward any resale or any
distribution thereof. No Shareholder may Transfer shares of the O&M Holding
Preferred Stock; provided, however, a Shareholder may Transfer O&M Holding
Preferred Stock (a) by a gift, (b) by descent or distribution, (c) to
beneficiaries pursuant to a trust existing as of the date hereof and (d) to
a Shareholder if, in any such case, the transferee (other than a charitable
institution holding less than 1% of the O&M Holding Common Stock) expressly
agrees in writing to be bound by the terms of Sections 9.03, 9.04, 9.05 and
9.06 hereof. Each Shareholder may only Transfer shares of O&M Holding Common
Stock in compliance with this Section and Section 9.04 hereof and the
Securities Act. Each Shareholder acknowledges that the shares of O&M Holding
Preferred Stock (and the shares of O&M Holding Common Stock received upon
conversion thereof) will be issued pursuant to an exemption from registration
under the Securities Act, and the certificates representing such shares will
bear a legend indicating that they have not been registered under the
Securities Act and may not be Transferred by such Shareholder, except, in the
case of the O&M Holding Common Stock, in compliance with this Agreement and
pursuant to an effective registration statement or pursuant to an exemption
from registration. In the event a Shareholder determines to Transfer any
shares of O&M Holding Common Stock pursuant to an exemption from registration
under the Securities Act, such Shareholder will, prior to Transferring such
shares, cause counsel selected by such Shareholder but satisfactory to O&M
Holding to deliver an opinion to O&M Holding to the effect that the Transfer
of such shares is exempt from the registration provisions of the Securities
Act or, in the case of a transfer permitted by Rule 144, such Shareholder
will provide evidence satisfactory to O&M Holding that the Transfer of such
shares is exempt from the registration provisions of the Securities Act.
9.04 Right of First Refusal.
(a) In the event that any Shareholder desires to Transfer to any
third party any shares of O&M Holding Common Stock as permitted by Section
9.03 hereof, he shall give O&M Holding notice ("Notice of Transfer") of his
bona fide intent to sell such shares of O&M Holding Common Stock, specifying
(i) the number of shares to be Transferred, (ii) the prospective purchasers
thereof, (iii) the minimum price and other terms and conditions of such
Transfer, and offering to Transfer such shares of O&M Holding Common Stock to
O&M or its designee(s) at such minimum price and on such terms and
conditions. The Notice of Transfer shall be accompanied by a copy of the
offer from such third party.
(b) If O&M Holding or its designee(s) shall not within 30 days
after receipt of the Notice of Transfer accept such offer in writing with
respect to all the shares of O&M Holding Common Stock specified in such
notice, then, subject to the provisions of paragraphs (c) and (e) hereof,
such Shareholder may Transfer such shares to the prospective purchasers
specified in such Notice of Transfer at a price equal to or above the minimum
price and on other terms and conditions no less favorable to such
Shareholder than those specified in the Notice of Transfer, at any time
within 60 days of the expiration of such 30-day period, but not otherwise.
(c) If such Shareholder shall not have consummated the proposed
Transfer within 60 days after the expiration of the 30-day period referred to
in paragraph (b) above, then he may not Transfer such shares of O&M Holding
Common Stock without again complying with the provisions of this Section
9.04.
(d) If O&M Holding or its designee(s) shall accept such offer
within 30 days after the receipt of the Notice of Transfer pursuant to
paragraph (b) above, then O&M Holding or its designee(s) shall purchase the
shares of O&M Holding Common Stock specified in such notice as promptly as is
reasonably practicable, but in no event later than 60 days following such
acceptance.
(e) Notwithstanding any other provision in this Section 9.04, each
Shareholder agrees that he will not, without the prior written consent of O&M
Holding, knowingly Transfer any shares of O&M Holding Common Stock to a
competitor of O&M Holding (including any officer, director, employee,
shareholder or Affiliate of such competitor) or to any person (including such
person's Affiliates and any person or entity which is, to his Knowledge after
inquiry of O&M Holding, part of any group which includes such transferee or
any of its Affiliates) that, after giving effect to such Transfer, would
beneficially own 5% or more of the issued and outstanding shares of O&M
Holding Common Stock unless the transferee agrees to be bound by Sections
9.03, 9.04, 9.05 and 9.06 hereof.
(f) Notwithstanding any provision to the contrary in this Section
9.04, a Shareholder may Transfer O&M Holding Common Stock without complying
with the provisions of this Section 9.04 (i) by a gift, (ii) by descent or
distribution, (iii) to beneficiaries pursuant to a trust existing as of the
date hereof, or (iv) to a Shareholder; provided, that, in any such case, the
transferee (other than a charitable institution holding less than 1% of the
O&M Holding Common Stock) expressly agrees in writing to be bound by the
terms of Sections 9.03, 9.04, 9.05 and 9.06 hereof and O&M is given prior
written notice of such Transfer.
9.05 Standstill. Each Shareholder agrees that so long as (i) he owns
any shares of O&M Holding Preferred Stock or (ii) the Shareholders,
collectively with their respective Affiliates, own 5% or more of the issued
and outstanding shares of O&M Holding Common Stock, without the prior written
consent of O&M Holding, he will not and will cause his Affiliates not to:
(a) acquire, offer to acquire or agree to acquire, directly or
indirectly, by purchase or otherwise, or initiate contact with any person
with the intent to advise, encourage or assist such or any other person to
purchase or acquire in any manner shares of any class of capital stock of O&M
Holding ("O&M Holding Capital Stock"), or participate with or provide
assistance to any person in the purchase or other acquisition of O&M Holding
Capital Stock;
(b) form, join or in any way participate in a "group" within the
meaning of Section 13(d)(3) of the Exchange Act with respect to O&M Holding
Capital Stock, except insofar as such group consists solely of the
Shareholders;
(c) "solicit" proxies with respect to O&M Holding Capital Stock
under any circumstance; or become a "participant" by taking a position
contrary to that of the Board of Directors of O&M Holding in any contest
relating to the election of directors of O&M Holding or any other matters
submitted to shareholders at an annual meeting or any special meeting (as
such defined terms are used in Regulation 14A under the Act); a Shareholder
shall be deemed to "solicit" or to be such a "participant" if he counsels or
advises or otherwise provides assistance to any person who undertakes or
makes such a "solicitation" or is such a "participant," but shall not, in any
event, be deemed to "solicit" or to be such a "participant" by reason of
exercise of his voting rights with respect to O&M Holding Capital Stock;
(d) deposit any O&M Holding Capital Stock, or any securities
convertible into O&M Holding Capital Stock, in a voting trust, or subject any
O&M Holding Capital Stock, or any securities convertible into O&M Holding
Capital Stock, to a voting or similar agreement, other than as required by
Section 9.06 hereof;
(e) directly or indirectly offer, sell, transfer, pledge or
otherwise dispose of or encumber any O&M Holding Capital Stock, or any
securities convertible into O&M Holding Capital Stock except, subject (in the
cases described in clauses (i) and (ii) below) to prior compliance with the
provisions of Section 9.04 hereof:
(i) sales of O&M Holding Capital Stock pursuant to an
underwritten distribution to the public, registered under the
Securities Act, in which the Shareholders use their best efforts
and direct the underwriters to use their best efforts to effect as
wide a distribution of such O&M Holding Capital Stock as reasonably
practicable and to prevent any one person or group from purchasing
through such offering a number of shares representing more than 2%
of the total number of shares of all O&M Holding Capital Stock;
(ii) sales of O&M Holding Capital Stock in open market
transactions pursuant to Rule 144 of the General Rules and
Regulations under the Securities Act (provided that any such sale
is in compliance with the requirements of paragraphs (c)(d)(e)(f)
and (g) of such rule notwithstanding the provisions of paragraph
(k) of such rule) and in accordance with Section 9.03 hereof;
(iii) a bona fide pledge of, or the granting of a security
interest in, such O&M Holding Capital Stock to an institutional
lender to secure a bona fide loan or guarantee, provided that the
lender acknowledges in writing that it has received a copy of this
Agreement and agrees that prior to making any offer to sell, sale,
transfer or other disposition of such O&M Holding Capital Stock,
whether upon foreclosure of such pledge or security interest or
otherwise, such lender will give O&M the opportunity to purchase
such O&M Holding Capital Stock in the manner specified in Section
9.04 hereof; or
(iv) sales of O&M Holding Capital Stock to O&M Holding or to
any person or group designated by O&M Holding; or
(f) initiate, commence or propose, or induce or attempt to induce
or give encouragement to any other person to initiate, commence or propose,
any tender or exchange offer for O&M Holding Capital Stock or any "affiliated
transaction" (as that term is defined in Section 13.1-725 of the Code of
Virginia, as in effect on the date of this Agreement, but with the phrase
"any other Person" substituted for the phrase "any interested shareholder").
9.06 Voting Agreement. Each Shareholder agrees that, so long as (a) he
owns any shares of O&M Holding Preferred Stock or (b) the Shareholders,
collectively with their respective Affiliates, own 5% or more of the issued
and outstanding shares of O&M Holding Common Stock, he shall vote all shares
of O&M Holding Preferred Stock or O&M Holding Common Stock, as the case may
be, with respect to each matter to be voted upon by the holders of such
shares, in the same proportion as the votes cast on such matter by all other
holders of the O&M Holding Common Stock (excluding for such purposes shares
held by any person or "group" within the meaning of Section 13(d)(3) of the
Exchange Act (other than any employee benefit plan of O&M Holding, O&M or the
O&M Subsidiaries or any person holding shares for or pursuant to the terms of
any such employee benefit plan) which beneficially owns 5% or more of the
issued and outstanding shares of O&M Holding Common Stock); provided,
however, that the provisions of this Section 9.06 shall not apply with
respect to (a) any matter to be voted upon by holders of O&M Holding Capital
Stock that would amend (i) the provisions of the Series B Preferred Stock or
(ii) any other provisions of the Articles of Incorporation or Bylaws of O&M
Holding if such amendment would affect adversely the relative rights or
preferences thereof and (b) the election of any director who may be elected
by the holders of O&M Holding Preferred Stock and any nominee to the Board of
Directors of O&M Holding designated by the Shareholders' Representative in
accordance with Section 9.09 hereof.
9.07 Noncompetition Covenant. Each of the Shareholders agrees that,
except for his ownership of shares of O&M Holding Preferred Stock or O&M
Holding Common Stock and without the prior written consent of O&M Holding,
for a period of three years after the Effective Time (the "Noncompete
Period"), he will not, directly or indirectly, either individually or as an
employee, agent, partner, investor, shareholder, consultant or in any other
capacity participate in or have a financial or other interest in any business
in the United States (the "Noncompete Area") which is competitive with the
business conducted by O&M, SMI or the O&M Subsidiaries as of the Effective
Time; provided, however, that the foregoing shall not preclude the
Shareholders or their respective Affiliates from owning in the aggregate,
directly or indirectly, up to 5% of the issued and outstanding shares of any
class of capital stock of a company, the stock of which is publicly traded on
a national securities exchange or in the over-the-counter market. The
parties acknowledge that the business conducted as of the date hereof by
Specialty is not competitive with the business conducted by O&M, the O&M
Subsidiaries or SMI.
If a judicial determination is made that any provision of this Section
9.07 constitutes an unreasonable or otherwise unenforceable restriction
against the Shareholders, the provisions of this Section 9.07 shall be
rendered void only to the extent that such judicial determination finds such
provisions to be unreasonable or otherwise unenforceable. In this regard,
the parties hereto hereby agree that any judicial authority construing this
provision shall be empowered to sever any portion of the Noncompete Area or
any prohibited business activity from the coverage of this Section 9.07 and
to apply the provisions of this Section 9.07 to the remaining portion of the
Noncompete Area or the remaining business activities not so severed by such
judicial authority.
The Shareholders hereby agree that any remedy at law for any breach of
the provisions contained in this Section 9.07 shall be inadequate and that
O&M Holding shall be entitled to injunctive relief in addition to any other
remedy it might have hereunder.
The running of the Noncompete Period shall be tolled during, and the
Noncompete Period shall be extended by, any period of time during which any
Shareholder violates the terms of this Section 9.07 as determined by a court
of competent jurisdiction.
9.08 Tax Returns.
(a) O&M Holding and the Shareholders acknowledge that the status
of SMI as an "S corporation" will be terminated by the SMI Exchange, that
SMI's taxable year will end at the close of the day before the Effective Time
(the "Last SMI Year"), that SMI's books shall be closed for income tax
purposes as of the close of the Last SMI Year, and that a new taxable year
for SMI will begin on the date of the Effective Time (the "First C Year").
The Shareholders shall cause to be prepared and timely filed (taking into
account permitted extensions of the due date) all income tax returns of SMI
for the Last SMI Year and, if not filed before the day of the Effective Time,
SMI's preceding taxable year (e.g., IRS Form 1120S, Schedule K-1(1120S) and
state income tax returns). A photocopy of each such tax return shall be
furnished to O&M Holding at least 30 days before the due date (including any
extensions) for filing the tax return. The Shareholders' Representative
shall deliver to O&M Holding, with the photocopy of the proposed IRS Form
1120S for the Last SMI Year, a schedule updating the tax basis information
provided by the Shareholders pursuant to Section 8.16(l) hereof. If O&M
Holding disagrees with the amount or treatment of any item on any such
return, O&M Holding shall notify the Shareholders' Representative, and O&M
Holding and the Shareholders' Representative shall proceed in good faith to
resolve any dispute regarding the return before the due date. All income tax
returns filed after the date of the Effective Time for taxable years of SMI
beginning before such date shall be based on the same tax accounting methods
and elections as used for its taxable year immediately preceding the year of
such return, except as otherwise required by law or as agreed upon by O&M
Holding and the Shareholders' Representative.
(b) The Shareholders, O&M Holding and SMI will cooperate with each
other to the extent reasonably required to facilitate the preparation and
timely filing of (i) any income tax return of SMI for its Last SMI Year, the
preceding taxable year, or its First C Year and (ii) any tax information
return, report, or statement with respect to the SMI Exchange.
9.09 Board Nominee. Commencing when and continuing for so long as the
Shareholders, collectively, have the right to vote at least 5% of the
outstanding shares of O&M Holding Common Stock, O&M Holding will exercise all
authority under applicable law (subject to the fiduciary obligations of the
Board of Directors of O&M Holding to O&M Holding's shareholders) to cause one
nominee designated by the Shareholders' Representative and reasonably
acceptable to the Board to be included in the slate of nominees recommended
by such Board to O&M Holding's shareholders for election as directors at each
annual meeting of shareholders of O&M Holding.
9.10 Financial Statements. The Shareholders shall cause E&Y to prepare
and deliver to O&M Holding by February 28, 1994 audited balance sheets as of
December 31, 1993 and 1992 and April 30, 1992 and 1991 and audited statements
of income and cash flow for the year ended December 31, 1993, the fiscal
years ended April 30, 1992 and 1991 and the eight months ended December 31,
1992 and any other financial statements of SMI and Midwest as may be required
by Rule 3-05(b) of Regulation S-X of the SEC audited by E&Y that have not
been delivered previously pursuant to Section 6.09 hereof.
9.11 Tax Status of Exchanges. O&M, O&M Holding, SMI and the
Shareholders acknowledge that the Exchanges are intended to qualify as a
transaction described in Section 351 of the Code and that the Exchanges are
intended to be pursuant to a single plan for purposes of Section 351 of the
Code and the regulations thereunder. O&M, O&M Holding, SMI and the
Shareholders covenant that they will report the Exchanges in accordance with
such intent for federal income tax purposes.
9.12 Shareholders' Representative. Each of the Shareholders hereby
appoints C. G. Grefenstette or his designee (as appointed in writing), as the
agent, proxy, and attorney-in-fact for the Shareholders for all purposes
under this Agreement (including without limitation full power and authority
to act on the Shareholders' behalf) (a) to consummate the transactions
contemplated under this Agreement, (b) in the event of such consummation, to
receive on behalf of the Shareholders each of such Shareholder's SMI Exchange
Consideration, (c) to pay in accordance with Section 11.01 hereof the
Shareholders' share of the transaction expenses, (d) to execute and deliver
the Certificates and such further instruments of assignment as O&M Holding
shall reasonably request, (e) to execute and deliver on behalf of the
Shareholders any amendment to this Agreement, provided that such amendment
does not change the definition or manner of calculating the SMI Exchange
Consideration to be received by the holders of the SMI Common Stock or does
not increase the Shareholders' liabilities in any material respect and does
not alter Article IV hereof in a manner adverse to the Shareholders, and (f)
to take all other actions to be taken by or on behalf of the Shareholders and
exercise any and all rights which the Shareholders are permitted or required
to do or exercise under this Agreement. The Shareholders' Representative
shall not be liable to the Shareholders for any error in judgment for any act
or step taken, or permitted to be taken, in good faith, or for doing anything
in connection herewith, except for his own willful misconduct or gross
negligence. As between themselves and the Shareholders' Representative, the
Shareholders, jointly and severally, agree to indemnify the Shareholders'
Representative against, and hold the Shareholders' Representative harmless
from, any and all losses, costs, damages, expenses, claims and attorneys'
fees suffered or incurred by the Shareholders' Representative as a result of,
in connection with, or arising from or out of, the acts or omissions of the
Shareholders Representative in performance of, or pursuant to, this
Agreement, except such acts or omissions as may result from the Shareholders'
Representative's willful misconduct or gross negligence.
9.13 Books and Records. O&M Holding agrees to cooperate with and make
available to the Shareholders during normal business hours, all books,
records and information relating to SMI that are necessary or useful in
connection with any tax inquiry, audit, investigation or dispute, any
litigation or investigation or any other matter. The Shareholder(s)
requesting any such books, records, information or employees shall bear all
of the out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for salaries and employee
benefits) reasonably incurred in connection with providing such books,
records, information or employees.
9.14 Phantom Stock Plans. Immediately following the Effective Time, SMI
shall pay to the participants in the Phantom Stock Plans an aggregate of
$1,800,000 in satisfaction in full of SMI's obligations under such plan.
9.15 New York Stock Exchange Listing Application. O&M Holding agrees to
use its best efforts to cause the shares of O&M Holding Common Stock issuable
upon conversion of the O&M Preferred Stock to be listed on the New York Stock
Exchange.
9.16 Midwest Accounts Receivable Guarantee.
(a) SMI shall have the right, at any time after the 150th day
following the Effective Time, to assign to the Shareholders a face amount of
Midwest Receivables (the "Assigned Receivables") equal to the uncollected
portion of any Midwest Receivable included on the Closing Balance Sheet that
has not been collected by SMI within 150 days after the Effective Time;
provided, however, that prior to such reassignment, SMI shall use reasonable
and customary efforts to collect such Midwest Receivables (which shall not
require SMI to employ commercial collection agencies or file suit). SMI
shall deliver to the Shareholders' Representative all documents that relate
to the Assigned Receivables and any similar documents generated by SMI after
the Effective Time. Upon receipt of a document from SMI transferring the
Assigned Receivables to the Shareholders, the Shareholders shall have the
joint and several obligation to promptly pay to SMI the face amount of the
Assigned Receivables (less any reserve for the Midwest Receivables on the
Closing Balance Sheet). SMI shall cooperate with the Shareholders in any
reasonable collection efforts relating to the Assigned Receivables, including
remitting to the Shareholders' Representative any proceeds received by SMI
with respect to such Assigned Receivables.
(b) All payments on the relevant accounts received by SMI during
the period beginning at the Effective Time and ending on the 150th day
following the Effective Time shall be allocated among the Midwest Receivables
and the relevant accounts receivable arising after the Effective Time in the
manner specified in the remittance advice accompanying such payment. If such
allocation is not so specified in any remittance advice, SMI will contact the
customer and request instructions as to how such payment should be allocated.
If the customer then declines to give such instructions, the amount of such
payment shall be applied against the oldest outstanding invoices.
ARTICLE X
Termination, Amendment and Waiver
10.01 Termination. This Agreement may be terminated and the
Exchanges may be abandoned, by written notice promptly given to the other
parties hereto, at any time prior to the Effective Time:
(a) By mutual written consent of SMI, the Shareholders, O&M and
O&M Holding;
(b) By SMI and the Shareholders, if O&M enters into a definitive
agreement with respect to (i) any acquisition or purchase of assets of, or
any equity interest in, or any exchange offer, merger, consolidation,
business combination, sale of all or substantially all of the assets, sale of
securities, liquidation, dissolution or similar transactions involving O&M,
or (ii) any acquisition by O&M of another corporation or other entity, in any
such case in which the value of the aggregate consideration to be paid would
exceed $100,000,000;
(c) By SMI and the Shareholders, if O&M fails to perform in any
material respect any of its obligations under this Agreement;
(d) By SMI and the Shareholders, if there has been a material
breach by O&M of any representation and warranty contained in this Agreement;
(e) By O&M and O&M Holding if there has been a material breach by
SMI or the Shareholders of any representation and warranty contained in this
Agreement except to the extent the material breach of such representation or
warranty shall result in the indemnification therefor by the Shareholders
pursuant to Section 9.01(a)(vii);
(f) By O&M and O&M Holding, if SMI or any of the Shareholders
fails to perform in any material respect any of its obligations under this
Agreement;
(g) By O&M or the Shareholders, if the O&M Exchange is not
approved by the shareholders of O&M at the O&M Shareholders' Meeting; or
(h) By any of SMI, the Shareholders, O&M or O&M Holding, if the
Effective Time shall not have occurred on or before June 30, 1994.
10.02 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of SMI, O&M or the
Shareholders except as set forth in Sections 6.02, 10.03 and 11.02. Nothing
herein shall relieve any party from liability for its breach of this
Agreement, except to the extent that Section 11.02 hereof limits the amount
of such liability under the circumstance specified therein.
10.03 Post-Termination Covenants.
(a) If this Agreement terminates for any reason pursuant to
Section 10.01, no party hereto will utilize the fact that this Agreement has
been terminated in order to disparage the commercial interests, including
without limitation the customer, vendor and employee relationships, of the
other. Each party agrees that, upon any breach of this covenant by either
party, the aggrieved party shall be entitled to injunctive relief as well as
damages.
(b) If this Agreement terminates for any reason pursuant to
Section 10.01, for one year after such termination, neither SMI nor O&M nor
any of their respective Affiliates shall solicit for employment any person
currently employed by the other as long as such employee remains in the
employ of the other party.
ARTICLE XI
General Provisions
11.01 Expenses. Except as provided below, the Shareholders each
shall be responsible for the fees and expenses of SMI's and their respective
counsel, accountants, and other expenses incident to the negotiation and
preparation of this Agreement and consummation of the transactions
contemplated hereby incurred after December 10, 1993. For purposes of this
Section 11.01, (a) the fees and expenses of Cohen & Grigsby, Steptoe &
Johnson or any other legal advisors to SMI or the Shareholders incident to
the negotiation and preparation of this Agreement and the consummation of the
transactions contemplated hereby, and (b) any fees and expenses of E&Y or any
other accountants or financial advisors to SMI or the Shareholders, including
preparation of the Closing Balance Sheet and the financials required by
Sections 6.09 and 9.10 hereof (other than expenses up to a maximum of
$216,000 related to the ordinary 1993 year-end audit conducted in accordance
with GAAP which shall be borne by SMI) shall be the sole obligation of the
Shareholders. For purposes of this Section 11.01, the fees and expenses of
Hunton & Williams, KPMG, J.P. Morgan or any other legal or financial advisors
to O&M Holding and O&M shall be the sole obligation of O&M Holding and O&M.
11.02 Break-up Fee. If this Agreement is terminated by SMI or the
Shareholders pursuant to Section 10.01(d) hereof, then O&M shall pay to SMI
as liquidated damages within ten days after the date of such termination
$2,000,000 (by wire transfer of immediately available funds to an account
designated by SMI for such purpose).
If this Agreement is terminated by O&M or O&M Holding pursuant to
Section 10.01(e) hereof, then SMI shall pay to O&M as liquidated damages
within ten days after the date of such termination $2,000,000 (by wire
transfer of immediately available funds to an account designated by O&M for
such purpose).
11.03 Publicity. Except to the extent otherwise expressly required
by Law, prior to the Effective Time no party hereto shall make or cause to be
made any news release or other public statement, including communications to
employees, suppliers, distributors and customers of SMI or O&M, pertaining to
the matters contemplated by this Agreement unless approved by SMI and O&M,
which approval shall not be unreasonably withheld. Without limiting the
foregoing, in all announcements, press releases, notices to customers,
vendors, employees and other third parties, and in all other communications
in which this Agreement and the transactions contemplated hereby are
described by any party hereto, each of SMI and O&M will, and will instruct
their directors, officers, employees, agents and other representatives to,
characterize such transactions as a merger or a business combination of SMI
and O&M.
11.04 Further Assurances. SMI, the Shareholders, O&M and O&M
Holding each agree that at the request of the other parties hereto it will
execute and deliver all such further assignments, endorsements and other
documents and perform all such other acts and things as the other party may
reasonably request to evidence the consummation of the transactions
contemplated by this Agreement.
11.05 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by certified mail, overnight mail, telecopier or telex to
the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
(a) if to SMI or the Shareholders:
C. G. Grefenstette
2000 Grant Building
Pittsburgh, PA 15219
(412) 338-3689
Telecopy: (412) 338-3696
with a copy to:
Cohen & Grigsby, P.C.
2900 CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222
(412) 391-3382
Attention: David J. Kalson
Telecopy: (412) 391-3382
(b) if to O&M or O&M Holding:
Owens & Minor, Inc.
4800 Cox Road
Glen Allen, VA 23060
(804) 747-9794
Attention: G. Gilmer Minor, III
Telecopy: (804) 747-9270
with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, VA 23219-4074
(804) 788-8200
Attention: C. Porter Vaughan, III
Telecopy: (804) 788-8218
11.06 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
11.07 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except as provided in
Section 9.01(a) hereof, nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
11.08 Severability. If any of the provisions of this Agreement
shall be declared by any court of competent jurisdiction illegal, void or
unenforceable, the other provisions shall not be affected, but shall remain
in full force and effect.
11.09 Miscellaneous. This Agreement (including the Schedules and
Exhibits hereto and the certificates of the parties delivered in connection
herewith and referred to herein) and the Related Agreements: (a) constitute
the entire agreement and supersede all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof; (b) may not be assigned; and (c) shall
be governed in all respects, including validity, interpretation and effect,
by the internal laws of the Commonwealth of Virginia (other than the SMI Plan
of Exchange which shall be governed by the internal laws of the Commonwealth
of Pennsylvania), without giving effect to the principles of conflict of laws
thereof.
11.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
11.11 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties hereto.
11.12 Waiver. At any time prior to the Effective Time, any party
hereto may extend the time for the performance of any of the obligations or
other acts of any other parties hereto or waive compliance with any of the
agreements of any other party or with any conditions to its own obligations.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf
of such party.
11.13 Remedies. The Shareholders acknowledge and agree that O&M
would be irreparably damaged in the event any of the provisions of Sections
9.03 through 9.07 were violated or not performed by the Shareholders in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that O&M shall be entitled to an injunction or injunctions
to prevent breaches of such Sections and to specifically enforce such
Sections and the terms and provisions thereof in any action instituted in any
court of the United States or any state thereof having subject matter
jurisdiction, in addition to any other remedy to which O&M may be entitled,
at law or in equity.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by SMI, O&M and the O&M Holding,
by their respective officers thereunto duly authorized, and by each of the
Shareholders.
STUART MEDICAL, INC.
By: __________________________
Mark J. Laskow
Title: Chairman of the Board
of Directors
OWENS & MINOR, INC.
By: __________________________
G. Gilmer Minor, III
Title: President and Chief
Executive Officer
OMI HOLDING, INC.
By: __________________________
G. Gilmer Minor, III
Title: President
<PAGE>
Henry L. Hillman, Elsie H. Hillman and C. G.
Grefenstette, Trustees under the Henry L.
Hillman Trust under agreement of trust dated
November 18, 1985
By______________________________________
Trustee
______________________________________
Juliet Lea Hillman Simonds
______________________________________
Audrey Hillman Fisher
______________________________________
Henry L. Hillman, Jr.
______________________________________
William T. Hillman
______________________________________
Howard B. Hillman
______________________________________
Tatnall L. Hillman
<PAGE>
Exhibit A
PLAN OF EXCHANGE OF
SHARES OF OWENS & MINOR, INC.
FOR SHARES OF OMI HOLDING, INC.
Section 1. Parties to the Exchange
The name of the corporation proposing to exchange its shares is Owens
& Minor, Inc. ("O&M"), a Virginia corporation. The name of the corporation
that is to acquire all outstanding shares of O&M is OMI HOLDING, INC.
("Holding Company"), a Virginia corporation.
Section 2. Exchange of Shares
Upon the effective time specified in Articles of Exchange filed with
respect to this Plan of Exchange with the State Corporation Commission of
Virginia (the "Effective Time"), by virtue of this Plan of Exchange and
without any action on the part of the holders thereof:
(a) Each outstanding share of common stock, $2 par value, of O&M
shall automatically be converted into and exchanged for one share
of common stock, $2 par value, of Holding Company;
(b) Each right outstanding to acquire a share of common stock, $2 par
value, of O&M, whether by stock option, conversion right or
otherwise, shall automatically be converted into and exchanged
for the right to acquire a share of common stock, $2 par value,
of Holding Company;
(c) Each right outstanding to acquire a share of Series A
Participating Preferred Stock, $10 par value, of O&M shall
automatically be converted into and exchanged for the right to
acquire a share of Series A Participating Preferred Stock, $100
par value, of Holding Company;
(d) Holding Company shall become the owner and holder of all
outstanding shares of common stock, $2 par value, of O&M; and
(e) Each outstanding share of common stock, $2 par value, of Holding
Company outstanding immediately prior to the Effective Time shall
be cancelled and converted into the right to receive $10 from
Holding Company.
Section 3. Certificates Representing Common Stock
At the Effective Time, each certificate evidencing ownership of
outstanding shares of common stock, $2 par value, of O&M shall
automatically and without any action on the part of the holder thereof be
deemed to evidence an identical number of shares of common stock, $2 par
value, of Holding Company.
Section 4. Amendment or Termination
With the approval of their respective Board of Directors, the parties
hereto may amend this Plan of Exchange before the Effective Time, provided
that any amendment made subsequent to the submission of this Plan of
Exchange to the shareholders of the parties hereto shall not:
(a) alter or change the amount or kind of shares, securities, cash,
property or rights to be received in exchange for or on conversion of all
or any of the shares of any class or series of such corporation;
(b) alter or change any of the terms and conditions of the plan if
such alteration or change would adversely affect the shares of any class or
series of such corporation; or
(c) alter or change any terms of the Articles of Incorporation of any
corporation whose shareholders must approve this Plan of Exchange.
This Plan of Exchange may be terminated before the Effective Time by
the affirmative vote of a majority of the members of O&M's Board of
Directors whether or not the holders of common stock, $2 par value, of O&M
have cast their votes with regard to the exchange.
<PAGE>
Exhibit B
REGISTRATION RIGHTS AGREEMENT
Dated ________________, 1994
by and among
OMI HOLDING, INC.
and
Certain Former Shareholders of
STUART MEDICAL, INC.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT, entered into this ______ day of _______________, 1994,
by and among OMI Holding, Inc., a Virginia corporation (the "Company"), and
the Shareholders designated on the signature pages hereof (individually a
"Shareholder" and collectively the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Company, the Shareholders, Stuart Medical, Inc., a
Pennsylvania corporation ("SMI"), and Owens & Minor, Inc., a Virginia
corporation, have entered into an Agreement of Exchange, dated as of
December 22, 1993 (the "Agreement of Exchange"), pursuant to which shares
of Series B Preferred Stock, par value $100 per share, of the Company (the
"Preferred Stock") will be issued to the Shareholders pursuant to a plan of
exchange (the "Exchange");
WHEREAS, the shares of Preferred Stock, as a class, are convertible at
any time into shares of Common Stock, par value $2.00 per share, of the
Company (the "Common Stock"); and
WHEREAS, it is a condition to the obligations of the parties to the
Agreement of Exchange to consummate the transactions contemplated thereby
that each of the Shareholders and the Company execute and deliver this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual terms
and provisions hereof, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
have the following respective meanings, and any capitalized terms used
herein and not otherwise defined shall have the respective meanings given
to them in the Agreement of Exchange.
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
(b) "Demanding Person" shall have the meaning set forth in
Section 3 hereof.
(c) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute enacted hereafter, and the
rules and regulations of the Commission thereunder, all as the same shall
be in effect from time to time.
(d) "Holder" or "Holders" shall mean one or more of the
Shareholders (if the Shareholders hold Registrable Securities) and any
other person holding Registrable Securities to whom these registration
rights have been transferred pursuant to Section 12 of this Agreement;
provided, however, that any person who acquires any of the Common Stock or
Registrable Securities in a distribution pursuant to a registration
statement filed by the Company under the Act or pursuant to a sale under
Rule 144 under the Securities Act shall not be considered a Holder.
(e) "Option" shall have the meaning set forth in Section 4
hereof.
(f) The terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement
in compliance with the Securities Act and the declaration or order of
effectiveness of such registration statement by the Commission.
(g) "Registrable Securities" shall mean (i) the shares of Common
Stock into which the shares of Preferred Stock issued in the Exchange are
convertible and (ii) any Common Stock issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
Common Stock. For purposes of this Agreement, any shares of Preferred
Stock, with respect to which such Holder has surrendered his certificates
and given notice, satisfactory to the Company, of conversion subject to (x)
the closing of an offering covered by a registration effected under this
Agreement or (y) a purchase pursuant to Section 4 hereof, shall be deemed
Registrable Securities.
(h) "Registration Period" shall mean the period commencing 18
months after the Effective Time and ending seven years after the Effective
Time.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute enacted hereafter, and the rules
and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
2. Demand Registration. Subject to the other provisions of this
Agreement, on two occasions during the Registration Period, if the Holders
of at least fifty percent of the Registrable Securities request in writing
to register under the Securities Act an offering of Registrable Securities,
the reasonably anticipated price to the public (based on contemporaneous
market prices of the Common Stock) of which equals or exceeds $50,000,000
(to be determined without reduction for any purchase of Registrable
Securities by the Company pursuant to Section 4 hereof), the Company shall
promptly notify in writing all other Holders of such request. Within 20
calendar days after such notice has been given by the Company, any other
Holder may give written notice to the Company of such Holder's request to
include his Registrable Securities in the registration. As soon as
practicable after the expiration of such 20-day period, subject to the
provisions of Sections 4 and 6 hereof, the Company will use all reasonable
efforts to cause the offering of all Registrable Securities that the
Holders have so requested to be registered under the Securities Act;
provided, however, that the Company shall not be required to effect a
registration under this Section 2 unless such registration may be effected
using Form S-3 (or other comparable short form registration statement that
is a successor to Form S-3). The Company shall use its best efforts to
meet the registrant requirements of Form S-3. If any registration
requested under this Section 2 is not completed because the Company shall
fail to comply in any material respect with any of its obligations in
Section 5 with respect to the requested registration, the Holder's request
to register the offering of Registrable Securities shall not be counted in
determining the number of registrations to which the Holders are entitled
pursuant to this Section 2.
3. Piggyback Registration. Subject to the other provisions of this
Agreement, if at any time during the Registration Period the Company
proposes to register any shares of Common Stock under the Securities Act
for its own account or the account of holders of Common Stock who are not
Holders (a "Demanding Person") in connection with the public offering of
such securities solely for cash on a registration form that would also
permit the registration of Registrable Securities (except pursuant to any
registration statement relating solely to or in connection with (a)
employee benefit plans of the Company or any of its affiliates, (b) an
offering by the Company exclusively to its existing shareholders or (c) a
Registration Statement on Form S-4 or other registration statement filed in
connection with a merger, share exchange or other business combination),
the Company shall, each such time, promptly give each Holder written notice
of such proposal. Subject to the provisions of Sections 4 and 6 hereof,
upon the written request of any Holder given within 20 days after such
notice has been given by the Company, the Company shall use all reasonable
efforts to cause to be included in such registration all Registrable
Securities that each such Holder has requested to be registered.
4. Right to Purchase Stock. In the event that any Holders submit a
request for Registration to the Company pursuant to Section 2 or 3 hereof,
the Company (or any person or persons designated by the Company) shall have
the right and option (an "Option") to purchase for cash all or any part of
the Registrable Securities the Holders requested to be registered. An
Option shall be exercised by the Company (or any person or persons
designated by the Company) by giving notice to the selling Holders, within
30 days after receipt by the Company of the initial request for
registration. The purchase price per share of Registrable Securities
purchased pursuant to the exercise of the Option shall be the average of
the closing prices of the Common Stock on the New York Stock Exchange on
the 30 consecutive trading days preceding the date on which the Company
exercises its Option to purchase the Registrable Securities. The closing
of any such purchase shall take place on such date as shall be agreed upon
by the parties but in no event later than 120 days after receipt by the
Company of the request for registration. Upon exercise of the Option, the
Company (or the person or persons designated by the Company) shall be
legally obligated to consummate the purchase contemplated thereby and the
registration request by the selling Holders pursuant to which the Company
exercised the Option shall be counted for purposes of determining the
number of registrations to which the Holders thereafter are entitled
pursuant to Section 2.
5. Company Obligation in Connection with the Registrations.
Whenever required by Sections 2 or 3 to use all reasonable efforts to
effect the registration of any Registrable Securities, the Company shall:
(a) prepare and file with the Commission a registration
statement on Form S-3 (or other comparable short form registration
statement that is a successor to Form S-3) with respect to such Registrable
Securities and use all reasonable efforts to cause such registration
statement to become effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement;
(c) furnish to the selling Holders or their underwriter such
number of copies of any prospectus (including any preliminary prospectus),
and any amendments or supplements thereto, as the selling Holders may
reasonably request in order to effect the offering and sale of the
Registrable Securities to be offered and sold by such selling Holders;
(d) use its best efforts to qualify the offering under
applicable blue sky laws or such other state securities laws as may be
reasonably requested by and necessary to enable the selling Holders to
offer and sell the Registrable Securities; provided, however, that the
Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then
qualified, to subject itself to taxation in any such jurisdiction or to
file any general consent to service of process;
(e) use its best efforts to cause the registration statement to
remain current until the earlier of (i) 120 days following its effective
date and (ii) the completion of the sale of the Registrable Securities
being sold;
(f) instruct the transfer agent (or agents) and the registrar
(or registrars) of the Company's securities to release any applicable stop
transfer orders with respect to the Registrable Securities being sold;
(g) notify each selling Holder of Registrable Securities and the
managing underwriter (i) when a prospectus or any prospectus supplement or
amendment to a prospectus has been filed and, with respect to a
registration statement or any post-effective amendment thereto, when the
same has become effective and (ii) of the issuance by the Commission of any
stop order suspending the effectiveness of a registration statement or the
initiation of any proceedings for any such purpose; and
(h) promptly notify each selling Holder of such Registrable
Securities at any time when a prospectus relating thereto is required to be
delivered under the Securities Act upon the happening of any event as a
result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits any fact necessary
to make the statements therein not misleading, and the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
will not contain an untrue statement of a material fact or omit to state
any fact necessary to make the statements therein not misleading.
6. Limitations, Conditions and Qualifications to Obligations of the
Company. The obligations of the Company to use all reasonable efforts to
cause Registrable Securities owned by the selling Holders to be registered
are subject to each of the following limitations, conditions and
qualifications:
(a) The Company shall be entitled to postpone for a reasonable
period of time the filing of any registration statement otherwise required
to be prepared and filed by it pursuant to Section 2 above, as follows:
(i) if, in the reasonable judgment of the Company, a
registration at the time and on the terms requested would adversely affect
any securities offering by the Company that had been formally proposed by
the Company prior to the Company's receipt of notice by the Holders
requesting registration, the Company shall not be required to commence
using all reasonable efforts to effect a registration pursuant to Section 2
until the later of (A) 10 days after the completion or abandonment of such
securities offering and related distribution and (B) the termination of any
"black out", hold-out or lock-up period or the like, if any, required by
any underwriters in connection with such securities offering; provided,
however, that such delay shall not exceed 120 days; and provided further
that the Holders requesting registration will not unreasonably withhold
their consent to a request by the Company to extend such period; and
provided further that the Company may not invoke against any Holder the
suspension of commencement of reasonable efforts to effect a registration
pursuant to Section 2 by reason of a securities offering more than two
times in any 12-month period; and
(ii) if, while a request for registration pursuant to
Section 2 is pending, the Company determines in its reasonable judgment
that (A) the filing of a registration statement would require the
disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential, (B) that the Company would
be unable to comply with Commission requirements, or (C) the filing of a
registration statement would interfere with any material transaction of the
Company then pending, the Company shall not be required to commence using
all reasonable efforts to effect a registration pursuant to Section 2 until
the earlier of (x) 10 days after the date upon which such material
information is disclosed to the public or ceases to be material, the
Company becomes able to comply with Commission requirements, or such
registration would no longer interfere with a material transaction, as the
case may be, or (y) 120 days after the Company makes such good faith
determination; provided, however, that the Holders requesting registration
will not unreasonably withhold their consent to a request by the Company to
extend such period.
If the Company shall so postpone the filing of a registration
statement, the selling Holders shall have the right to withdraw the request
for registration by giving written notice to the Company within 30 days
after the Company's notice of postponement (and, in the event of such
withdrawal, such request shall not be counted for purposes of determining
the number of registrations to which the Holders are entitled pursuant to
Section 2).
(b) The selling Holders shall furnish to the Company such
information regarding them, the Registrable Securities held by them, and
the intended method of disposition of such securities as the Company shall
reasonably request and as shall be required under the Securities Act or
other applicable laws in connection with the action to be taken by the
Company.
(c) In the event the Holders request registration pursuant to
Section 2 above, (i) the offering or distribution of the Registrable
Securities shall be pursuant to a firm commitment underwriting, (ii) the
underwriter selected by the selling Holders shall be a nationally
recognized investment banking firm approved by the Company (which approval
shall not be unreasonably withheld) and (iii) the Company will, if
requested, enter into an underwriting agreement containing representations,
warranties and agreements (including an agreement with respect to
contribution) not substantially different from those customarily made as of
the date hereof by an issuer in underwriting agreements with respect to
secondary distributions; provided, however, that except for the inclusion
therein of an agreement with respect to contribution, the Company will not
be obligated to enter into an agreement with respect to indemnification of
the underwriters substantially different from that set forth in Section 8
below.
(d) In connection with any offering involving an underwriting of
shares being issued by the Company, the Company shall not be required under
Section 3 hereof to include any of the Holders' Registrable Securities in
such underwriting unless the Holders accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by the
Company, and then only in such quantity as will not, in the opinion of the
underwriters, materially impair the success of the offering by the Company.
If the total amount of Registrable Securities that all Holders request to
be included in such offering exceeds the amount of securities that the
managing underwriter believes compatible with the success of the offering,
the Company shall only be required to include in the offering so many of
the securities of the selling Holders and the securities to be offered for
the account of any other shareholders of the Company to be included in the
offering as the underwriters believe will not materially impair the success
of the offering (the securities so included to be apportioned pro rata
among the selling shareholders according to the total amount of securities
owned by such selling shareholders, or in such other proportions as shall
mutually be agreed to by such selling shareholders), provided that no such
reduction shall be made with respect to any securities offered by the
Company for its own account.
(e) In connection with any offering by a Demanding Person not
involving an underwriting of shares being issued by the Company, the
Company shall not be required under Section 3 hereof to include any of the
Holders' Registrable Securities in such underwriting unless the Holders
accept the terms of the underwriting as agreed upon between the Demanding
Person, the Company and the underwriters selected by the Company or such
Demanding Person and then only in such quantity as will not, in the opinion
of the underwriters, materially impair the success of the offering by the
Demanding Person. If the total amount of Registrable Securities that all
Holders request to be included in such offering exceeds the amount of
securities that the managing underwriter reasonably believes compatible
with the success of the offering, the Company and the Demanding Person
shall only be required to include in the offering so many of the securities
of the selling Holders and the securities to be offered for the account of
any other shareholders of the Company (other than the Demanding Person) to
be included in the offering as the underwriters believe will not materially
impair the success of the offering (the securities so included to be
apportioned pro rata among the selling shareholders (other than the
Demanding Person) according to the total amount of securities owned by such
selling shareholders, or in such other proportions as shall mutually be
agreed to by such selling shareholders), provided that no such reduction
shall be made with respect to any securities offered by the Demanding
Person.
7. Registration Expenses. (a) Except as required by the
Commission, any other federal or state regulatory authority or the New York
Stock Exchange, all expenses incurred in connection with a registration
pursuant to Section 2 hereof (excluding underwriters' discounts and
commissions), including without limitation all registration and
qualification fees, printers' and accounting fees, and fees and
disbursements of counsel for the Company shall be borne by the Company;
provided, however, that the Company shall not be required to pay the fees
and expenses of any separate counsel retained by the Holders; and provided,
further, that the Company shall not be required to pay for any expenses of
any registration proceeding begun pursuant to Section 2 hereof if the
registration request is subsequently withdrawn, unless the Holders agree to
forfeit one of their rights to a demand registration pursuant to Section 2
hereof.
(b) In the case of any registration effected pursuant to Section
3 hereof, the Holders of Registrable Securities shall bear any additional
registration and qualification fees and expenses (including underwriters'
discounts and commissions), and any additional costs and disbursements of
counsel for the Company that result from the inclusion of the Registrable
Securities in such registration, with such additional expenses of the
registration being borne by all selling Holders and other selling
shareholders participating in such registration pro rata on the basis of
the amount of securities so registered.
8. Indemnification.
(a) In the case of each registration effected by the Company
pursuant to Section 2 or 3, the Company agrees to indemnify and hold
harmless the selling Holders, their officers, directors, employees,
representatives and agents, each underwriter of the Registrable Securities
so registered and each person who controls any such person or underwriter
within the meaning of Section 15 of the Securities Act, against any and all
losses, claims, damages or liabilities to which they or any of them may
become subject under the Securities Act or any other statute or common law,
including any amount paid in settlement of any litigation, commenced or
threatened, if such settlement is effected with the written consent of the
Company, and to reimburse them for any reasonable legal or other expenses
incurred by them in connection with investigating any claims and defending
any actions, insofar as any such losses, claims, damages, liabilities or
actions arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement or prospectus relating to the sale of such Registrable
Securities, or any post-effective amendment thereto, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; or (ii)
any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, if used prior to the effective
date of such registration statement, or contained in the final prospectus
(as amended or supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereto) if used within the
period during which the Company is required to keep the registration
statement to which such prospectus relates current pursuant to this
Agreement, or the omission or alleged omission to state therein (if so
used) a material fact necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading;
provided, however, that the indemnification agreement contained in this
Section 8(a) shall not (i) apply to such losses, claims, damages,
liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged
omission, if such statement or omission was made in reliance upon and in
conformity with information furnished to the Company by a Holder or such
underwriter in writing specifically for use in connection with preparation
of the registration statement, any preliminary prospectus or final
prospectus contained in the registration statement, or any amendment or
supplement thereto, or (ii) inure to the benefit of any underwriter or any
person controlling such underwriter, if such underwriter failed to send or
give a copy of the final prospectus to the person asserting the claim at or
prior to the written confirmation of the sale of such Registrable
Securities to such person and if the untrue statement or omission concerned
had been corrected in such final prospectus.
(b) In the case of each registration effected by the Company
pursuant to Section 2 or 3 hereof, each selling Holder agrees, and each
underwriter of the Registrable Securities to be registered (each such party
and such underwriters being referred to severally in this subparagraph (b)
as the "indemnifying party") shall agree (in the case of the underwriters,
to the extent customary at the time) to indemnify and hold harmless the
Company, each person (if any) who controls the Company within the meaning
of Section 15 of the Securities Act, the directors of the Company and those
officers of the Company who shall have signed any such registration
statement, against any and all losses, claims, damages or liabilities to
which they or any of them may become subject under the Securities Act or
any other statute or common law, including any amount paid in settlement of
any litigation, commenced or threatened, if such settlement is effected
with the written consent of the indemnifying party, and to reimburse them
for any reasonable legal or other expenses incurred by them in connection
with investigating any claims and defending any actions, insofar as any
such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement or any post-effective
amendment thereto or any preliminary prospectus or final prospectus (as
amended or as supplemented, if amended or supplemented as aforesaid)
contained in such registration statement, if such statement or omission was
made in reliance upon and in conformity with information furnished to the
Company by such indemnifying party in writing specifically for use in
connection with the preparation of such registration statement or any
preliminary prospectus or final prospectus contained in such registration
statement or any such amendment or supplement thereto.
(c) Each indemnified party will, with reasonable promptness
after its receipt of written notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought
from an indemnifying party on account of an indemnity agreement contained
herein, notify the indemnifying party in writing of the commencement
thereof. In case any such action shall be brought against any indemnified
party and it shall so notify an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and
to the extent it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel satisfactory
to such indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party under
this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnity agreements in this
Section 8 shall be in addition to any liabilities which the indemnifying
parties may have pursuant to law.
9. Reports Under Exchange Act. With a view to making available to
the Holders of Registrable Securities the benefits of Rule 144 promulgated
under the Securities Act and any other comparable rule or regulation of the
Commission that is a successor to Rule 144 that may at any time permit a
Holder to sell Registrable Securities of the Company to the public without
registration, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Exchange Act; and
(c) furnish upon request to any Holder, so long as such Holder
owns any of the Registrable Securities, a written statement by the Company
that it has complied with the reporting requirements of Rule 144, a copy of
the most recent annual or quarterly report of the Company filed as required
under the Exchange Act, and such other reports and documents so filed by
the Company as may be reasonably requested in availing any Holder of any
rule or regulation of the Commission permitting the sale of the Registrable
Securities without registration.
10. Lockup Agreement.
(a) In consideration for the Company agreeing to its obligations
under this Agreement, the Holders agree in connection with any registration
of the Company's securities, upon the request of the Company or the
underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Registrable Securities (other
than Registrable Securities (i) included in the registration or (ii)
transferred by (A) a gift, (B) by descent or distribution, (C) to
beneficiaries pursuant to a trust existing as of the date of the Agreement
of Exchange, or (D) to a Shareholder; provided, that, in any such case, the
transferee (other than a charitable institution holding less than 1% of
outstanding shares of Common Stock) expressly agrees in writing to be bound
by the terms of this Section 10) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the effective date of
such registration as the Company or the underwriters may specify.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into
or exchangeable for such securities, during the seven days prior to and
during the 180-day period (or such shorter period as the managing
underwriters may specify) beginning on the effective date of any
registration statement related to an underwritten offering pursuant to
which Registrable Securities are to be sold (except as part of such
underwritten registration or pursuant to employee benefit plans of the
Company or any of its affiliates, an offering by the Company exclusively to
its existing shareholders or a Registration Statement on Form S-4 or other
registration statement filed in connection with a merger, share exchange or
other business combination), unless the underwriters managing the
registered public offering otherwise agree and (ii) to use its best efforts
to cause each holder of at least 5% (on a fully diluted basis) of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, purchased from the Company at any time
after the date of this Agreement (other than a registered public offering)
to agree not to effect any sale or distribution of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered
public offering otherwise agree.
11. Certain Limitations in Connection with Future Grants of
Registration Rights.
(a) From and after the date of this Agreement, the Company shall
not enter into any agreement with any holder or prospective holder of any
securities of the Company providing for the granting to such holder of
registration rights unless such agreement:
(i) includes the equivalent of Section 10 as a term; and
(ii) includes a provision that, in the case of a public
offering involving an underwritten registered offering under Section 2
hereof, protects the Holders of Registrable Securities if marketing factors
require a limitation on the number of securities to be included in the
underwriting in the manner in which the Company is protected under
Section 6(d); and
(b) If at any time on or after the date of this Agreement the
Company shall enter into any agreement granting to any person rights to the
registration of equity securities of the Company, it will include terms
that preserve for the Holders the treatment provided in Sections 6(d) and
(e) hereof.
12. Transfer of Registration Rights. Except as provided below, the
registration rights provided by this Agreement may be assigned to a
Holder's transferee, provided that (a) any such Transfer is permitted under
the provisions of the Agreement of Exchange, (b) the Company is given
written notice by the Holder at the time of such Transfer stating the name
and address of the transferee and the number of Registrable Securities and
shares of Preferred Stock being Transferred, (c) the transferee has agreed
to be bound by the transfer restrictions set forth in the Agreement of
Exchange and (d) after the Transfer, the transferee holds at least 100,000
shares of Registrable Securities. Notwithstanding the foregoing, the
registration rights provided by this Agreement may not be assigned to any
transferee in a distribution pursuant to a registration statement filed by
the Company under the Securities Act or pursuant to a sale in accordance
with Rule 144 under the Securities Act.
13. Suspension of Disposition of Registrable Securities. Each
selling Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 5(h) hereof,
such Holder will forthwith discontinue disposition of Registrable
Securities until such Holder's receipt of copies of a supplemental or
amended prospectus contemplated by Section 5(h) hereof, or until it is
advised in writing (the "Advice") by the Company that the use of the
prospectus may be resumed and has received copies of any additional or
supplemental filings which are incorporated by reference in the prospectus,
and, if so directed by the Company, such Holder will deliver to the Company
(at the expense of the Company) all copies, other than permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In
the event the Company shall give any such notice, the time period specified
in Section 5(e) hereof shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 5(h) hereof to and including the date when each selling Holder of
Registrable Securities shall have received the copies of the supplemented
or amended prospectus contemplated by Section 5(h) hereof or the Advice.
14. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given unless the Company has obtained the written consent
of Holders of at least a majority of the Registrable Securities at the time
outstanding.
15. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery:
(a) if to a Holder, initially c/o C.G. Grefenstette, 2000 Grant
Building, Pittsburgh, PA 15219 and thereafter at such other address set
forth in a notice which is given in accordance with the provisions of this
Section 14; and
(b) if to the Company, initially at 4800 Cox Road, Glen Allen,
VA 23060, to the attention of its President, and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 14.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
16. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
17. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
18. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
19. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be affected or
impaired thereby.
20. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties
hereto in respect of the registration of the Registrable Securities. There
are no restrictions, promises, warranties or undertakings, other than those
set forth or referred to herein with respect to the registration rights
granted by the Company with respect to the Registrable Securities. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
21. Parties Benefitted. Nothing in this Agreement, express or
implied, is intended to confer upon any third party any rights, remedies,
obligations or liabilities.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OMI HOLDING, INC.
By:
G. Gilmer Minor, III
Title: President
NAMES OF SHAREHOLDERS:
Henry L. Hillman, Elsie H. Hillman and C. G.
Grefenstette, Trustees under the Henry L. Hillman
Trust under agreement of trust dated November 18,
1985
By
Trustee
Juliet Lea Hillman Simonds
Audrey Hillman Fisher
Henry L. Hillman, Jr.
William T. Hillman
Howard B. Hillman
Tatnall L. Hillman
<PAGE>
Exhibit C
PLAN OF SHARE EXCHANGE
OF SHARES OF SERIES B PREFERRED
STOCK OF OMI HOLDING, INC.
FOR
SHARES OF COMMON STOCK OF
STUART MEDICAL, INC.
This Plan of Share Exchange ("Plan of Exchange") by and between STUART
MEDICAL, INC., a Pennsylvania corporation ("SMI"), and OMI HOLDING, INC.
("OMI Holding"), a Virginia corporation.
RECITAL
1. Owens & Minor, Inc., OMI Holding, SMI and certain holders of the
issued and outstanding Common Stock, $.0025 par value per share, of SMI
("SMI Common Stock") are parties to an Agreement of Exchange dated as of
December 22, 1993 (the "Agreement of Exchange").
2. The respective Boards of Directors of SMI and OMI Holding have by
resolution duly approved the Agreement of Exchange and this Plan of
Exchange, and the Board of Directors of SMI has directed that this Plan of
Exchange be submitted to its shareholders for adoption.
ARTICLE I
EFFECTIVE TIME
After filing of Articles of Exchange with the Department of State of
the Commonwealth of Pennsylvania, at the effective time specified in such
Articles (the "Effective Time"), all of the issued and outstanding shares
of SMI Common Stock shall, by operation of law, be converted into and
exchanged for (the "Exchange") $40,200,000 in cash and 1,150,000 shares of
Series B Preferred Stock, $100 par value per share, of OMI Holding ("OMI
Holding Preferred Stock"), subject to adjustment for Dissenting Shares (as
defined in Section 3.06 hereof) and fractional shares, all pursuant to the
terms and conditions of this Plan of Exchange and of the Agreement of
Exchange.
ARTICLE II
GENERAL EFFECTS OF THE EXCHANGE
The Exchange shall have the effects set forth herein and in Section
1931 of the Pennsylvania Business Corporation Law (the "BCL"). Pursuant to
the Exchange, OMI Holding shall become the owner and holder of all of the
outstanding shares of SMI Common Stock.
ARTICLE III
MANNER AND BASIS OF CONVERTING
SHARES OF SMI; EXCHANGE PROCEDURES
Section 3.01 Effect on Shares. At the Effective Time, by virtue of
the Exchange and without any action on the part of OMI Holding, SMI or any
holder of capital stock of either of them:
(a) Exchange of Outstanding Shares. Each share of SMI Common
Stock outstanding immediately prior to the Effective Time (except for
Dissenting Shares) with respect to which an election to receive cash (a
"Cash Election") has been made and not revoked ("Electing Shares"), and
that has not been prorated pursuant to Section 3.03(c) hereof, shall be
converted into and shall represent the right to receive the Cash
Consideration (as defined in Section 3.02(b) hereof).
(b) Each share of SMI Common Stock outstanding immediately prior
to the Effective Time, except Dissenting Shares and Electing Shares ("Non-
Electing Shares"), shall be converted into and shall represent the right to
receive that fraction of a share of OMI Holding Preferred Stock having a
par value equal to the Preferred Stock Consideration (as defined in Section
3.02(c) hereof).
Section 3.02 Certain Definitions. (a) SMI shall obtain an opinion
as to the aggregate fair market value of the OMI Holding Preferred Stock
("Aggregate Fair Market Value") as of a day that is not more than ten
business days before the Effective Time. The term "Gross Valuation Amount"
shall mean the sum of the Aggregate Fair Market Value plus $40,200,000.
(b) The term "Cash Consideration" shall mean the quotient of the
Gross Valuation Amount divided by 2,000,000.
(c) The term "Preferred Stock Consideration" shall mean the
result of the following formula:
$115,000,000 divided by [2,000,000 - ($40,200,000/Cash Consideration)]
Section 3.03 Elections. (a) Any holder of shares of SMI Common
Stock may make a Cash Election for up to 75% of the outstanding shares of
SMI Common Stock held by such holder. A form of election (the "Form of
Election") shall be provided to each holder of SMI Common Stock as early as
practicable before the Effective Time. Any such shareholder's Cash
Election shall have been properly made only if OMI Holding shall have
received, no later than 5:00 p.m. Eastern Time on the last business day
before the Effective Time (the "Election Cutoff Time"), a Form of Election
properly completed and signed and accompanied by certificates for the
shares of SMI Common Stock to which such Form of Election relates, duly
endorsed in blank or otherwise in form acceptable for transfer on the books
of SMI.
(b) Any Form of Election may be revoked or amended only by
written notice from the appropriate holder received by OMI Holding no later
than the Election Cutoff Time.
(c) Anything in this Section 3.03 to the contrary
notwithstanding, in the implementation of this Article III, OMI Holding
shall make cash payments as nearly as practicable equal to but not less
than $40,200,000 in the aggregate (the "Aggregate Cash Consideration"). In
the event the product of the Cash Consideration multiplied by the number of
Electing Shares exceeds the Aggregate Cash Consideration by more than
$1,000, the Aggregate Cash Consideration shall be prorated among the number
of Electing Shares to the end that the cash payments made by OMI Holding
pursuant to Section 3.01 shall exceed by the smallest amount practicable
the Aggregate Cash Consideration, and the remaining shares (or portions
thereof) of Electing Shares shall be deemed to be shares (or portions
thereof) of Non-Electing Shares and shall be converted into shares of OMI
Holding Preferred Stock as provided in Section 3.01(b) hereof. In the
event the product of the Cash Consideration multiplied by the number of
Electing Shares is less than the Aggregate Cash Consideration, a number of
Non-Electing Shares (determined pro rata among the total Non-Electing
Shares) shall be deemed to be Electing Shares to the end that the cash
payments made by OMI Holding pursuant to Section 3.01 shall equal or exceed
by the smallest amount practicable the Aggregate Cash Consideration.
Section 3.04 Fractional Shares. No fractional shares of OMI Holding
Preferred Stock shall be issued in the Exchange. Instead the number of
shares of OMI Holding Preferred Stock that a holder of SMI Common Stock
receives as a result of the Exchange shall be rounded to the nearest full
share (with a fraction of .5 or greater being rounded to the next highest
full share).
Section 3.05 Treasury Shares. Each share of SMI Common Stock held
in the treasury of SMI immediately prior to the Effective Time shall be
automatically cancelled and retired and cease to exist, and no cash or
securities or other payment shall be paid or payable in respect thereof.
Section 3.06 Dissenting Shares. Notwithstanding anything in this
Plan of Exchange to the contrary, shares of SMI Common Stock issued and
outstanding immediately prior to the Effective Time that are held by a
shareholder who objects to the Exchange and complies with all provisions of
the BCL concerning the right of such holders to dissent from the Exchange
and demand appraisal rights of their shares (the "Dissenting Shares") shall
not be converted as described in Section 3.01 but shall from and after the
Effective Time represent only the right to receive such consideration as
may be determined to be due to such Dissenting Holder pursuant to the BCL;
provided, however, that all shares of SMI Common Stock outstanding
immediately prior to the Effective Time and held by a Dissenting Holder who
shall, after the Effective Time, withdraw his demand for appraisal or lose
his right of appraisal, in either case pursuant to the BCL, shall be deemed
to be converted, as of the Effective Time, into the right to receive shares
of OMI Holding Preferred Stock in the amount and otherwise as specified in
Section 3.01(b), without interest.
Section 3.07 Exchange Procedures. At the Effective Time, OMI
Holding shall make available to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represent
outstanding shares of SMI Common Stock (the "Certificates") whose shares
were converted into the right to receive the Cash Consideration or shares
of OMI Holding Preferred Stock, or both, pursuant to Section 3.01 hereof,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to OMI Holding and shall be in such form
and have such other provisions as OMI Holding may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Cash Consideration, certificates representing shares of
OMI Holding Preferred Stock, or both, as the case may be. Upon surrender
of a Certificate for cancellation to OMI Holding, together with such letter
of transmittal, duly executed, and any other required documents, the holder
of such Certificate shall be entitled to receive (subject to deduction of
any required withholding tax) in exchange therefor a check in the amount of
any Cash Consideration that such holder has the right to receive pursuant
to this Article III and a certificate representing that number of shares of
OMI Holding Preferred Stock that such holder has the right to receive
pursuant to the provisions of this Article III, and the Certificates so
surrendered shall forthwith be cancelled. Until surrendered as
contemplated by this Section 3.07, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon
such surrender any Cash Consideration and the certificate representing
shares of OMI Holding Preferred Stock as contemplated by this Section 3.07.
Section 3.08 Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time
with respect to OMI Holding Preferred Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of OMI Holding Preferred Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, following surrender
of any such Certificate, there shall be paid (subject to deduction of any
required withholding tax) to the record holder of the certificates
representing shares of OMI Holding Preferred Stock issued in exchange
therefor, without interest, (i) any Cash Consideration to which such holder
is entitled, (ii) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such shares of OMI Holding Preferred Stock and (iii)
at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender, payable with respect
to such shares of OMI Holding Preferred Stock.
ARTICLE IV
TERMINATION
This Plan of Exchange may be terminated and the Exchange contemplated
hereby may be abandoned at any time (notwithstanding approval hereof by the
shareholders of SMI) prior to the Effective Time if the Agreement of
Exchange is terminated in accordance with its terms.
<PAGE>
Exhibit D
6. Series B Preferred Stock. The second series of Cumulative
Preferred Stock shall be designated "Series B Cumulative Preferred
Stock" ("Series B Preferred Stock") and the number of shares
constituting such series shall be 1,150,000. The preferences,
limitations and relative rights of shares of Series B Preferred Stock
shall be as follows:
(a) Dividends and Distributions.
(1) The holders of shares of Series B Preferred Stock,
in preference to the holders of Common Stock and of any
other capital stock of the Corporation ranking junior to the
Series B Preferred Stock as to payment of dividends, shall
be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available therefor,
a per annum cash dividend of $4.50 per share, and no more,
payable in equal quarterly amounts of $1.125 each on the
last day of each January, April, July and October of each
year, beginning _____________, 1994 (each such date being
referred to herein as a "Quarterly Dividend Payment Date"),
to holders of record on the fifteenth day of each such
respective month, commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share of Series B
Preferred Stock.
(2) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series B Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of
issue of such shares of Series B Preferred Stock, unless the
date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of
Series B Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series B Preferred Stock in
an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such
shares at the time outstanding.
(b) Voting Rights. The holders of shares of Series B
Preferred Stock shall be entitled to vote on all matters
submitted to a vote of the shareholders of the Corporation,
voting together with the holders of shares of other series
of the Preferred Stock entitled to vote thereon and the
Common Stock as a single voting group. Each share of Series
B Preferred Stock shall entitle the holder thereof to a
number of votes equal to the number of shares of Common
Stock into which such Series B Preferred share could be
converted in accordance with Section 6(g) on the record date
for determining the shareholders entitled to vote; it being
understood that whenever the "Conversion Price" (as defined
in Section 6(g)(1)) is adjusted as provided in Section
6(g)(5) the number of votes to which each share of Series B
Preferred Stock is entitled shall also be similarly
adjusted.
(c) Certain Restrictions.
(1) Whenever quarterly dividends or other dividends or
distributions payable on Series B Preferred Stock as
provided in Section 6(a) are in arrears, thereafter and
until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series B Preferred
Stock outstanding shall have been paid in full, or declared
and set apart for payment, the Corporation shall not:
(i) declare or pay or set apart for payment any
dividends (other than dividends payable in shares of
any class or classes of stock of the Corporation
ranking junior to Series B Preferred Stock as to
payment of dividends or warrants or rights to acquire
such stock) or make any other distributions on, any
class of stock of the Corporation ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to Series B Preferred Stock
("Junior Stock"), other than distributions of rights
("Rights") pursuant to the Rights Agreement, dated as
of June 22, 1988, between Owens & Minor, Inc. and the
rights agent thereunder, as heretofore amended and as
it may be further amended, in accordance with it terms,
or replaced from time to time (such agreement, as so
amended or replaced, being hereinafter referred to as
the "Rights Agreement"), and shall not redeem, purchase
or otherwise acquire, directly or indirectly, whether
voluntarily, for a sinking fund, or otherwise any
shares of Junior Stock, provided that, notwithstanding
the foregoing, the Corporation may at any time redeem,
purchase or otherwise acquire shares of Junior Stock in
exchange for, or out of the net cash proceeds from the
concurrent sale of, other shares of Junior Stock or
warrants or rights to acquire Junior Stock;
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series B Preferred
Stock ("Parity Stock"), except dividends paid or
distributions made ratably on Series B Preferred Stock
and all such Parity Stock on which dividends are
payable or in arrears in proportion to the total
amounts of such dividends to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any Parity Stock, provided that
the Corporation may at any time redeem, purchase or
otherwise acquire shares of any Parity Stock in
exchange for shares of any Junior Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series B Preferred Stock,
or any shares of Parity Stock, except as permitted by
the Articles of Incorporation of the Corporation or in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the
Board of Directors, after consideration of the
respective annual dividend rates, the amount of
dividends in arrears and other relative rights and
preferences of the respective series and classes, shall
determine in good faith will result in fair and
equitable treatment among the respective series or
classes.
(2) Notwithstanding the foregoing, nothing in this
Section 6(c) shall prevent the Corporation from (i)
declaring a dividend or distribution of Rights or issuing
Rights in connection with the issuance of Series B Preferred
Stock, Junior Stock or Parity Stock, or (ii) redeeming
Rights at a price not to exceed $.01 per Right.
(3) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless
the Corporation could, under paragraph (1) of Section 6(c),
purchase or otherwise acquire such shares at such time and
in such manner.
(d) Reacquired Shares. Any shares of Series B Preferred
Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after
the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance
set forth herein.
(e) Liquidation, Dissolution or Winding Up.
(1) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock
ranking junior upon liquidation, dissolution or winding up
to Series B Preferred Stock unless, prior thereto, the
holders of shares of Series B Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and
unpaid dividends thereon, whether or not declared, to the
date of such payment, and no more (the "Series B Liquidation
Preference").
(2) In the event, however, that there are not
sufficient assets available to permit payment in full of the
Series B Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any,
then such remaining assets shall be distributed ratably to
the holders of all such shares in proportion to their
respective liquidation preferences.
(f) Redemption. The outstanding shares of Series B
Preferred Stock may be redeemed at the option of the Corporation
as a whole or in part at any time on or after April 30, 1997, or
from time to time thereafter, at a cash price per share equal to
(i) the par value thereof, plus (ii) all accrued and unpaid
dividends thereon, whether or not declared, to the redemption
date; provided, however, that: (i) any such redemption made
before April 30, 2004 may be made solely to the extent of the sum
of (x) the net proceeds from the sale or issuance by the
Corporation for cash from time to time after January 1, 1994 of
shares of capital stock of the Corporation or any other
securities convertible into, or exchangeable or exercisable for
such capital stock, plus (y) the fair market value (as determined
in good faith by the Board of Directors of the Corporation) of
all such capital stock or other securities sold or issued by the
Corporation from time to time after January 1, 1994 in exchange
for other property (including, without limitation, any thereof
issued in exchange for stock, securities or assets of other
corporations or other entities); and (ii) any redemption in part
may only be made if the aggregate market value (based on the
average of the closing prices of the Common Stock on the New York
Stock Exchange for the ten trading days immediately preceding the
date the Redemption Notice (as defined below) is given) of the
total number of shares of Common Stock into which the Series B
Preferred Stock to be redeemed are at the time convertible
pursuant to Section (g)(1) is at least $50,000,000.
Not less than 30 days nor more than 60 days prior to the
date fixed by the Corporation for redemption (the "Redemption
Date"), written notice (the "Redemption Notice") shall be mailed
by the Corporation, postage prepaid, to each holder of record of
the Series B Preferred Stock at such holder's address as it
appears on the stock transfer books of the Corporation. The
Redemption Notice shall state:
(i) the total number of shares of Series B Preferred Stock
to be redeemed;
(ii) the number of shares of Series B Preferred Stock held
by the holder which the Corporation will redeem;
(iii) the Redemption Date and the redemption price;
(iv) the fact that the holder's conversion rights will
continue until the close of business on the second business day
preceding the Redemption Date;
(v) that the holder is to surrender to the Corporation, in
the manner and at the place designated, his certificate or
certificates representing the shares of Series B Preferred Stock
to be redeemed; and
(vi) if the redemption is in part, the Corporation's
calculations showing compliance with clause (ii) of the proviso
in the first paragraph of this Section 6(f).
(g) Conversion.
(1) Subject to and upon compliance with the provisions
of this Section (g), the holders of a majority of the shares of
Series B Preferred Stock outstanding at the time shall have the
right, at such holders' option and upon written notice to the
Corporation, at any time to convert all of the outstanding shares
of Series B Preferred Stock into the number of fully paid and
nonassessable shares of Common Stock (calculated as to each
conversion, for the purpose of determining the amount of any cash
payments provided in Section (g)(4), to the nearest cent or to
the nearest .01 of a share of Common Stock, as the case may be,
with one-half cent and .005 of a share, respectively, being
rounded upward), obtained by dividing $100 by the Conversion
Price (as defined below) and multiplying such resulting number by
the number of shares of Series B Preferred Stock to be converted.
Such conversion shall be effective at the close of business on
the first business day following the Corporation's receipt of
such notice. Except as provided in paragraph (2), no shares of
Series B Preferred Stock may be converted unless all outstanding
shares of Series B Preferred Stock are surrendered for
conversion.
The term "Conversion Price" shall mean $24.735, as
adjusted in accordance with the provisions of this Section (g).
(2) Notwithstanding the requirement of conversion in
Section (g)(1), any shares of Series B Preferred Stock called for
redemption may be converted at any time before the close of
business on the second business day preceding the Redemption
Date, without causing the conversion of any other shares. Upon
any conversion pursuant to this Section (g)(2), the Corporation
shall pay to the holder of Series B Preferred Stock so converted
an amount in cash equal to all accrued and unpaid dividends on
such shares to and including the date of conversion, whether or
not declared (with such amount being pro rated with respect to
the then current dividend period).
(3) In order to exercise the conversion privilege in
the case of a conversion specified in Section (g)(2), or in order
to receive certificates evidencing Common Stock issuable upon a
conversion specified in Section (g)(1) or (g)(2), the holder of
each share of Series B Preferred Stock to be converted, or so
converted, as the case may be, shall surrender the certificate
representing such share at the office of any transfer agent for
the Common Stock and shall give written notice to the Corporation
at such office that such holder elects to convert the same,
specifying the name or names and denominations in which such
holder wishes the certificate or certificates for the Common
Stock to be issued (which notice may be in the form of a notice
of election to convert which may be printed on the reverse side
of the certificates for the shares of Series B Preferred Stock).
Unless the shares issuable on conversion are to be issued in the
same name as the name in which such share of Series B Preferred
Stock is registered, each certificate evidencing shares
surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed
by the holder or his duly authorized attorney, and by an amount
in cash sufficient to pay any transfer or similar tax.
The holders of shares of Series B Preferred Stock at
the close of business on a Quarterly Dividend Payment Date shall
be entitled to receive any previously declared dividend payable
on such shares on such date notwithstanding the Corporation's
default in payment of the dividend due on such Quarterly Dividend
Payment Date. Except as provided in Section (g)(2) and above in
this Section (g)(3), and without limiting the effect of Section
(g)(5)(b), the Corporation shall not be obligated to make any
payment or allowance for unpaid dividends, whether or not in
arrears, on converted shares or for dividends on the shares of
Common Stock issued upon such conversion, payable in respect of
any period before such conversion.
As promptly as practicable after the surrender of the
certificates for shares of Series B Preferred Stock as provided
above, the Corporation shall issue and shall deliver at the
office of any transfer agent for the Common Stock to such holder,
or on his written order, a certificate or certificates for the
number of full shares of Common Stock issuable upon the
conversion of such shares in accordance with the provisions of
this Section (g), together with a certificate or certificates
representing any shares of Series B Preferred Stock that are not
to be converted but shall have constituted part of the shares of
Series B Preferred Stock represented by the certificate or
certificates so surrendered, and any fractional interest in
respect of a share of Common Stock arising upon such conversion
shall be settled as provided in Section (g)(4).
Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which
the certificates for shares of Series B Preferred Stock shall
have been surrendered and such notice received by the Corporation
as provided above (or such later time as may be specified in such
notice), and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby at
such time on such date, and such conversion shall be at the
Conversion Price in effect at such time on such date, unless the
stock transfer books of the Corporation shall be closed on such
date, in which event such person or persons shall be deemed to
have become such holder or holders of record at the close of
business on the next succeeding day on which such stock transfer
books are open, but such conversion shall be at the Conversion
Price in effect on the date upon which such shares shall have
been surrendered and such notice received by the Corporation.
All shares of Common Stock delivered upon conversion of the
shares of Series B Preferred Stock will upon delivery be duly and
validly issued and fully paid and nonassessable, free of all
liens and charges and not subject to any preemptive rights.
(4) No fractional shares or scrip representing
fractions of shares of Common Stock shall be issued upon
conversion of shares of Series B Preferred Stock. Instead of any
fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Series
B Preferred Stock, the Corporation shall pay to the holder of
such share of Series B Preferred Stock an amount in cash
(computed to the nearest cent, with one-half cent being rounded
upward) equal to the Conversion Price multiplied by the fraction
of a share of Common Stock represented by such fractional
interest. If more than one share of Series B Preferred Stock
shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the
aggregate Conversion Price of the shares of Series B Preferred
Stock so surrendered.
(5) The Conversion Price shall be adjusted (and the
other actions specified herein shall be taken) from time to time
as follows:
(a) In case the Corporation shall (x) pay a
dividend or make a distribution on the Common Stock in
shares of Common Stock, (y) subdivide the outstanding Common
Stock into a greater number of shares or (z) combine the
outstanding Common Stock into a smaller number of shares,
the Conversion Price shall be adjusted so that the holder of
any share of Series B Preferred Stock thereafter surrendered
for conversion shall be entitled to receive the number of
shares of Common Stock of the Corporation that he would have
been entitled to receive after the happening of any of the
events described above had such share been converted
immediately prior to the record date, in the case of a
dividend, or the effective date, in the case of subdivision
or combination. An adjustment made pursuant to this
subparagraph (a) shall become effective immediately after
the record date in the case of a dividend, and shall become
effective immediately after the effective date, in the case
of a subdivision or combination.
(b) In case the Corporation shall distribute to
holders of Common Stock generally any shares of capital
stock of the Corporation (other than Common Stock) or
evidences of its indebtedness or assets (excluding cash
dividends or distributions paid from retained earnings or
other legally permitted sources of the Corporation or
dividends payable in Common Stock, but including any
distribution of securities or other property pursuant to the
Rights Agreement) or rights or warrants to subscribe for or
purchase any of its securities including any rights issued
at any time under the Rights Agreement (any of the foregoing
being hereinafter in this subparagraph (b) called the
"Securities"), then, in each such case, the Corporation
shall make appropriate provisions to reserve an adequate
amount of such Securities for distribution to the holders of
the shares of Series B Preferred Stock upon the conversion
of the shares of Series B Preferred Stock so that any such
holder converting shares of Series B Preferred Stock will
receive upon such conversion, in addition to the shares of
Common Stock to which such holder is entitled, the amount
and kind of such Securities that such holder would have
received if such holder had, immediately prior to the record
date for the distribution of the Securities or the event
that required the distribution of the Securities, as the
case may be, converted its shares of Series B Preferred
Stock into Common Stock.
(c) Whenever the Conversion Price is adjusted as
herein provided, the Corporation shall prepare and retain at
its principal office a certificate, signed by the Chairman
of the Board, any Vice Chairman, the President, any Senior
Vice President or any Vice President of the Corporation,
setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment; provided, however, that the failure of the
Corporation to prepare and retain such officer's certificate
shall not invalidate any corporate action by the
Corporation.
(6) Whenever the Conversion Price is adjusted as
provided in subparagraph (c) of Section (g)(5), the Corporation
shall cause to be mailed to each holder of shares of Series B
Preferred Stock at his then registered address by first-class
mail, postage prepaid, a notice of such adjustment of the
Conversion Price setting forth such adjusted Conversion Price and
the effective date of such adjusted Conversion Price; provided,
however, that the failure of the Corporation to give such notice
shall not invalidate any corporate action by the Corporation.
(7) The Corporation covenants that it will at all
times reserve and keep available, free from preemptive rights,
out of the aggregate of its authorized but unissued shares of
Common Stock, for the purpose of effecting conversions of shares
of Series B Preferred Stock, the full number of shares of Common
Stock deliverable upon the conversion of all outstanding shares
of Series B Preferred Stock not theretofore converted. For
purposes of this Section (g)(7), the number of shares of Common
Stock that shall be deliverable upon the conversion of all
outstanding shares of Series B Preferred Stock shall be computed
as if at the time of computation all such outstanding shares were
held by a single holder.
(8) The Corporation will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of shares of Common Stock on conversions of
shares of Series B Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be required to pay any
tax that may be payable in respect of any transfer involved in
the issue or delivery of shares of Common Stock in a name other
than that of the holder of shares of Series B Preferred Stock to
be converted and no such issue or delivery shall be made unless
and until the person requesting such issue or delivery has paid
to the Corporation the amount of any such tax or has established,
to the satisfaction of the Corporation, that such tax has been
paid.
(9) Notwithstanding any other provision herein to the
contrary, if any of the following events occur: (i) any
reclassification or change of outstanding shares of Common Stock
(other than a change in par value, or from par value to no par
value or from no par value to par value, or as a result of
subdivision or combination of the Common Stock), (ii) any
consolidation, merger or combination of the Corporation with or
into another corporation or a statutory share exchange as a
result of which holders of Common Stock shall be entitled to
receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock, or
(iii) any sale or conveyance of all or substantially all the
properties and assets of the Corporation as, or substantially as,
an entirety to any other entity as a result of which holders of
Common Stock shall be entitled to receive stock, securities or
other property or assets (including cash) with respect to or in
exchange for such Common Stock, then appropriate provision shall
be made so that the holder of each share of Series B Preferred
Stock then outstanding shall have the right to convert such share
into the kind and amount of shares of stock and other securities
and property or assets that would have been receivable upon such
reclassification, change, consolidation, merger, combination,
exchange, sale or conveyance by a holder of the number of shares
of Common Stock issuable upon conversion of such share of Series
B Preferred Stock immediately prior to such reclassification,
change, consolidation, merger, combination, exchange, sale or
conveyance. If, in the case of any such consolidation, merger,
combination, exchange, sale or conveyance, the stock or other
securities and property receivable thereupon by a holder of
shares of Common Stock includes shares of stock, securities or
other property or assets (including cash) of an entity other than
the successor or acquiring entity, as the case may be, in such
consolidation, merger, combination, exchange, sale or conveyance,
then the Corporation shall enter into an agreement with such
other entity for the benefit of the holders of Series B Preferred
Stock that shall contain such provisions to protect the interests
of such holders as the Board of Directors of the Corporation
shall reasonably consider necessary by reason of the foregoing.
(10) Upon any conversion of any shares of Series B
Preferred Stock, the shares of Series B Preferred Stock so
converted shall have the status of authorized and unissued shares
of Preferred Stock, without designation as to series, until such
shares are once more designated as part of a particular series by
the Board of Directors of the Corporation.
(h) Mandatory Conversion. Except as provided in Section
(g)(2), each share of Series B Preferred Stock shall be converted
automatically into the number of shares of Common Stock
determined as provided in Section (g)(1) immediately upon the
conversion of shares of Series B Preferred Stock pursuant to such
Section.
(i) Ranking. The Series B Preferred Stock shall rank on a
parity with all other series of Preferred Stock as to the payment
of dividends and the distribution of assets upon liquidation.
(j) Series B Director. (a) So long as any share of Series
B Preferred Stock remains outstanding, the Series B Preferred
Stock, voting as a separate voting group, shall be entitled to
elect one member of the Board of Directors of the Corporation.
Such director (the "Series B Director") shall be in addition to
the number of Directors of the Corporation otherwise prescribed
by the Articles of Incorporation or Bylaws. Such voting right of
the holders of Series B Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph
(2) of this Section 6(j) or at any annual meeting of
shareholders, and thereafter at annual meetings of shareholders,
(or by unanimous written consent in lieu of any such meeting)
provided that such voting right at any such meeting may not be
exercised unless the holders of ten percent (10%) in number of
shares of Series B Preferred Stock outstanding shall be present
in person or by proxy. The absence of a quorum of the holders of
Common Stock at any such meeting shall not affect the exercise by
the holders of Series B Preferred Stock of such voting right.
(b) Unless the holders of Series B Preferred Stock
shall have previously exercised their right to elect the Series B
Director, the Board of Directors may order, or any holder or
holders owning in the aggregate not less than ten percent (10%)
of the total number of shares of Series B Preferred Stock
outstanding, may request, the calling of a special meeting of the
holders of Series B Preferred Stock for the purpose of electing
the Series B Director, which meeting shall thereupon be called by
the Chairman, President, a Vice-President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at
which holders of Preferred Stock are entitled to vote pursuant to
this Section 6(j) shall be given to each holder of record of
Series B Preferred Stock by mailing a copy of such notice to him
at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier
than 10 days and not later than 60 days after such order or
request. In the event such meeting is not called within 60 days
after such order or request, such meeting may be called on
similar notice by any holder or holders owning in the aggregate
not less than ten percent (10%) of the total number of shares of
Series B Preferred Stock outstanding. Notwithstanding the
provisions of this 6(j), no such special meeting shall be called
during the period within 60 days immediately preceding the date
fixed for the next annual meeting of the holders.
Immediately upon the retirement (whether upon redemption,
conversion or otherwise), of all outstanding shares of the Series
B Preferred Stock, (x) the right of the holders of Preferred
Stock, as a separate voting group, to elect a Director shall
cease, (y) the term of the Series B Director shall terminate, and
(z) the number of Directors shall be such number as may then be
provided for in, or pursuant to, the Articles of Incorporation or
Bylaws.
(k) Amendment. The Articles of Incorporation shall not be
further amended in any manner that would (i) amend this Section 6
or (ii) adversely affect the preferences, rights or powers of
Series B Preferred Stock without the affirmative vote of the
holders of a majority of the outstanding shares of Series B
Preferred Stock, if any, voting separately as one voting group.
<PAGE>
Exhibit E
Opinion of Hunton & Williams
(a) Each of OMI and Holding has been duly incorporated and is validly
existing and in good standing under the laws of the Commonwealth of
Virginia, with the corporate power and authority to own and to enter into
the transactions contemplated by the Agreement of Exchange, and in the case
of OMI Holding, the Agreement of Exchange and the Related Agreements to
which it is a party.
(b) Each of OMI and OMI Holding, to our knowledge, is qualified to do
business as a foreign corporation and is in good standing under the laws of
each jurisdiction which requires such qualification wherein it owns or
leases material properties except in such jurisdictions where the failure
to be so qualified and in good standing would not individually or in the
aggregate have a material adverse effect on the business, operations or
financial condition of OMI and OMI Holding taken as a whole.
(c) The Agreement of Exchange has been duly authorized by all
necessary corporate action and has been duly executed and delivered by OMI.
The Agreement of Exchange constitutes the valid and binding obligation of
OMI, enforceable against OMI in accordance with its terms, except as may be
limited or otherwise affected by bankruptcy, insolvency, reorganization,
fraudulent conveyance and other laws affecting the rights of creditors
generally and principles of equity, whether considered at law or in equity.
(d) The Agreement of Exchange and the Registration Rights Agreement
have been duly authorized by all necessary corporate action and has been
duly executed and delivered by OMI Holding. Each of such agreements
constitutes the valid and binding obligation of OMI Holding, enforceable
against OMI Holding in accordance with its terms, except as may be limited
or otherwise affected by bankruptcy, insolvency, reorganization, fraudulent
conveyance and other laws affecting the rights of creditors generally and
principles of equity, whether considered at law or in equity.
(e) Other than the filing of articles of exchange with the State
Corporation Commission of Virginia, no further filing with or consent,
approval, authorization or order of any court or governmental agency or
body or official is required to be obtained on or prior to the date hereof
in connection with the execution, delivery and performance of the Agreement
of Exchange by OMI and OMI Holding, except that no opinion is expressed
herein with respect to compliance with state securities laws.
(f) The OMI Holding Preferred Stock to be issued pursuant to the OMI
Exchange has been duly authorized and when issued in accordance with the
terms of the OMI Plan of Exchange will be validly issued, fully paid and
nonassessable.
<PAGE>
Exhibit F
Opinion of Cohen & Grigsby, P.C.
(g) SMI has been duly incorporated and is validly subsisting and in
good standing under the laws of the Commonwealth of Pennsylvania, with the
corporate power and authority to own its properties and conduct its
business and to enter into the transactions contemplated by the Agreement
of Exchange.
(h) To our knowledge, SMI is qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction
which requires such qualification wherein it owns or leases material
properties except in such jurisdictions where the failure to be so
qualified and in good standing would not individually or in the aggregate
have a material adverse effect on the business, operations or financial
condition of SMI.
(i) The Agreement of Exchange has been duly authorized by all
necessary corporate action and has been duly executed and delivered by SMI.
Such agreement constitutes the valid and binding obligation of SMI,
enforceable against SMI in accordance with its terms, except as may be
limited or otherwise affected by bankruptcy, insolvency, reorganization,
fraudulent conveyance and other laws affecting the rights of creditors
generally and principles of equity, whether considered at law or in equity.
(j) Other than the filing of Articles of Exchange with the Secretary
of State of the Commonwealth of Pennsylvania, no further filing with or
consent, approval, authorization or order of any court or governmental
agency or body or official is required to be obtained on or prior to the
date hereof in connection with the execution, delivery and performance of
the Agreement of Exchange by SMI (except that no opinion is expressed
herein with respect to compliance with federal or state securities laws).
(k) The authorized capital stock of SMI consists of 10,000,000
shares of SMI Common Stock of which 2,000,000 shares are issued and
outstanding. Such shares of SMI Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights.
<PAGE>
Exhibit G
Opinion of Counsel to Shareholders
(1) The Agreement of Exchange has been duly authorized by all
necessary action and has been duly executed and delivered by each of the
Shareholders. Such agreement constitutes the valid and binding obligation
of each of the Shareholders, enforceable against each of the Shareholders
in accordance with its terms, except as may be limited or otherwise
affected by bankruptcy, insolvency, reorganization, fraudulent conveyance
and other laws affecting the rights of creditors generally and principles
of equity, whether considered at law or in equity.
(2) Other than the filing of Articles of Exchange with the Secretary
of State of the Commonwealth of Pennsylvania, no further filing with or
consent, approval, authorization or order of any court or governmental
agency or body or official is required to be obtained on or prior to the
date hereof in connection with the execution, delivery and performance of
the Agreement of Exchange by each of the Shareholders (except that no
opinion is expressed herein with respect to compliance with federal or
state securities laws).
<PAGE>
The Disclosure Schedules set forth on page viii of this Agreement have
been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant
hereby undertakes to file supplementally with the Commission upon request a
copy of the omitted schedules.
$40,000,000
CREDIT AGREEMENT
Dated as of November 1, 1993
Among
OWENS & MINOR, INC.
CRESTAR BANK
and
NATIONSBANK OF VIRGINIA, N.A.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
LOANS
SECTION 1.01 Commitment.. . . . . . . . . . . . . 1
SECTION 1.02 Funding of the Loans . . . . . . . . 1
SECTION 1.03 Notes. . . . . . . . . . . . . . . . 2
SECTION 1.04 Principal. . . . . . . . . . . . . . 3
SECTION 1.05 Interest . . . . . . . . . . . . . . 3
SECTION 1.06 Commitment Fee . . . . . . . . . . . 4
SECTION 1.07 Termination and Reduction of
Commitments. . . . . . . . . . . . . 4
SECTION 1.08. Additional Interest. . . . . . . . . 4
SECTION 1.09. Alternate Rate of Interest . . . . . 4
SECTION 1.10. Continuation and Conversion of
Loans. . . . . . . . . . . . . . . . 5
SECTION 1.11. Optional Prepayment. . . . . . . . . 6
SECTION 1.12. Mandatory Prepayment . . . . . . . . 7
SECTION 1.13. Change in Circumstances. . . . . . . 7
SECTION 1.14. Change in Legality . . . . . . . . . 8
SECTION 1.15. Indemnity. . . . . . . . . . . . . . 9
SECTION 1.16. Negotiated Rates . . . . . . . . . . 10
ARTICLE II
CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . 10
SECTION 2.01. Initial Borrowing . . . . . . . . . 10
SECTION 2.02. Each Borrowing. . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . 11
SECTION 3.01. Corporate Authority . . . . . . . . 11
SECTION 3.02. Good Standing . . . . . . . . . . . 11
SECTION 3.03. Binding Agreements. . . . . . . . . 12
SECTION 3.04. Litigation. . . . . . . . . . . . . 12
SECTION 3.05. No Conflicting Agreements . . . . . 12
SECTION 3.06. Financial Condition . . . . . . . . 12
SECTION 3.07. Subsidiaries. . . . . . . . . . . . 12
SECTION 3.08. Employee Benefit Pension Plans. . . 13
SECTION 3.09. No Default. . . . . . . . . . . . . 13
ARTICLE IV
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.01. Note Agreement. . . . . . . . . . . 13
SECTION 4.02. Mergers, Consolidations and
Acquisitions . . . . . . . . . . . 14
SECTION 4.03. No Amendment. . . . . . . . . . . . 14
SECTION 4.04. Financial Statements and Reports. . 14
SECTION 4.05. Taxes . . . . . . . . . . . . . . . 15
SECTION 4.06. Payment of Obligations. . . . . . . 15
SECTION 4.07. Insurance . . . . . . . . . . . . . 15
SECTION 4.08. Corporate Existence . . . . . . . . 15
SECTION 4.09. Properties. . . . . . . . . . . . . 15
SECTION 4.10. Employee Benefit Pension Plans. . . 15
SECTION 4.11. Compliance With Laws. . . . . . . . 16
SECTION 4.12. Notice of Environmental Matters. . . . . . . . . . 16
SECTION 4.13. Licenses and Permits. . . . . . . . 16
ARTICLE V
NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . 16
SECTION 5.01. Mergers, Consolidations and
Acquisitions. . . . . . . . . . . . 17
SECTION 5.02. Mortgages and Pledges . . . . . . . 17
SECTION 5.03. Total Debt to Capitalization Ratio. 18
SECTION 5.04. Environmental Law Compliance. . . . 18
SECTION 5.05. Capital Expenditures. . . . . . . . 18
SECTION 5.06. Dividends and Purchase of Stock . . 18
SECTION 5.07. Sale and Leaseback. . . . . . . . . 19
SECTION 5.08. Transactions with Affiliates. . . . 19
SECTION 5.09. Contingent Liabilities. . . . . . . 19
ARTICLE VI
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . 19
SECTION 6. 01. Events of Default. . . . . . . . . 19
ARTICLE VII
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 7.01 Definitions . . . . . . . . . . . . 21
SECTION 7.02 Accounting Terms. . . . . . . . . . 28
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 28
SECTION 8.01. Costs and Expenses. . . . . . . . . 28
SECTION 8.02. Participations in Commitments and
Notes . . . . . . . . . . . . . . . 28
SECTION 8.03 Several Obligations of Banks. . . . 29
SECTION 8.04 Cumulative Rights and No Waiver . . 29
SECTION 8.05 Notices . . . . . . . . . . . . . . 29
SECTION 8.06 Applicable Law. . . . . . . . . . . 30
SECTION 8.07 Modifications . . . . . . . . . . . 30
SECTION 8.08 Survivorship. . . . . . . . . . . . 30
SECTION 8.09 Execution in Counterparts . . . . . 31
SECTION 8.10 Headings. . . . . . . . . . . . . . 31
SECTION 8.11 Repayments in Bankruptcy. . . . . . 31
SECTION 8.12 Capital Adequacy. . . . . . . . . . 31
ARTICLE IX
RELATIONSHIP BETWEEN BANKS. . . . . . . . . . . . . . . 32
SECTION 9.01. Representations of Banks to Each
Other . . . . . . . . . . . . . . . 32
SECTION 9.02. Set-Offs and Sharing of Payments. . 32
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 34
EXHIBIT A - Form of promissory notes. . . . . . . . . . . . . . . 35
EXHIBIT B - Form of legal opinion . . . . . . . . . . . . . . . . 38
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of November 1, 1993, among OWENS &
MINOR, INC. (the "Company"), a Virginia corporation, CRESTAR BANK
("Crestar"), a Virginia banking corporation, and NATIONSBANK OF VIRGINIA,
N.A. ("NationsBank"), a national banking association, such banks being
hereinafter referred to collectively as the "Banks".
RECITALS
The Company, Crestar and NationsBank of North Carolina, N.A. are
parties to a Credit Agreement dated as of February 28, 1992 (the "Prior
Credit Agreement") and wish to replace that agreement with a new agreement
among the Company and the Banks, and the Banks are willing to extend credit
to the Company in an aggregate principal amount up to $40,000,000 for the
purposes of (i) refinancing the Company's obligations to Crestar and
NationsBank of North Carolina, N.A. under the Prior Credit Agreement, and
(ii) to provide working capital and funds for other proper corporate
purposes; and
WHEREAS, the Banks are willing to extend such credit on the terms
and subject to the conditions herein set forth,
NOW THEREFORE, in consideration of the mutual promises herein and
for other valuable consideration, the parties agree as follows:
ARTICLE I
LOANS
SECTION 1.01. Commitment. Subject to the terms and conditions
and relying upon the representations and warranties in Article III, each
Bank, severally and not jointly, agrees to make Loans to the Company, from
time to time at the Company's request, until the Commitment Termination
Date, in an aggregate principal amount at any time outstanding not
exceeding the amount of such Bank's Commitment. Within such limits, the
Company may borrow, repay and reborrow on or after the date hereof and
prior to the Commitment Termination Date, subject to the terms, provisions
and limitations set forth herein. Nothing herein contained shall obligate
the Company to borrow ratably from the Banks.
SECTION 1.02. Funding of the Loans. (a) Loans made by either
Bank in any one borrowing shall be in a minimum aggregate principal amount
of $1,000,000 and in an integral multiple of $500,000.
(b) Each Loan shall be, at the Company's election, either a CD
Loan, a Eurodollar Loan, a Base Rate Loan or a Negotiated Rate Loan.
Subject to the other provisions of this Section and the provisions of
Section 1.09, Loans of more than one type may be outstanding at the same
time.
(c) The Company shall give the lending Bank at least two
Business Days' prior telephonic notice, in the case of a CD Loan, and at
least three Business Days' prior telephonic notice, in the case of a
Eurodollar Loan, of each borrowing under Section 1.01. In each case, such
notice shall be irrevocable and shall specify the aggregate amount of the
proposed borrowing and the date thereof (which shall be a Business Day, and
in the event the date specified is not a Business Day the notice shall be
deemed a request for a borrowing on the next succeeding Business Day). Such
notice, to be effective, must be received by the lending Bank not later
than 10:00 a.m., Richmond, Virginia, time, on the second Business Day prior
to the date specified for a borrowing consisting of a CD Loan, and on the
third Business Day prior to the date specified for a borrowing consisting
of a Eurodollar Loan. Such notice shall specify whether the Loan then
being requested is to be or be converted to (or what portion or portions
thereof are to be or be converted to) a Base Rate Loan, a CD Loan, a
Eurodollar Loan or a Negotiated Rate Loan and, if such Loan or any portion
or portions thereof is to be a Eurodollar Loan, a CD Loan or a Negotiated
Rate Loan, the Interest Period or Interest Periods with respect thereto.
If no such pricing election is specified in the notice, such Loan (or the
portion thereof as to which no election is specified) shall be a Base Rate
Loan.
(d) Notwithstanding any provision in this Agreement to the
contrary, the Company shall not in any notice of borrowing under this
Section 1.02 request any Eurodollar Loan or CD Loan that, if made, would
result in an aggregate of more than 5 separate Eurodollar Loans and CD
Loans of the lending Bank being outstanding at any one time. For purposes
of the foregoing, Loans having different Interest Periods, regardless of
whether they commence or end on the same date, shall be considered separate
Loans. The Company may continue any CD Loan or Eurodollar Loan, or convert
all or any part of any Base Rate Loans, CD Loans or Eurodollar Loans into
Loans or another type, in accordance with Section 1.10 and subject to the
limitations set forth therein.
SECTION 1.03. Notes. The Loans by each Bank and the Company's
obligation to repay the Loans with interest in accordance with this
Agreement shall be evidenced by this Agreement, the records of such Bank
and a Note, substantially in the form of Exhibit A hereto, dated the
Closing Date, payable to the order of the Bank in a principal amount equal
to the Commitment of such Bank. Each Note shall bear interest from its
date on the outstanding principal balance thereof in accordance with
Section 1.05. Each Bank is hereby authorized by the Company to endorse on
the schedule attached to its Note (or on a continuation of such schedule
attached to such Note and made a part thereof) an appropriate notation
evidencing the date and amount of each Loan made, each payment of principal
and the other information provided for on such schedule; provided, however,
that the failure of either Bank to set forth such Loans, principal payments
and other information on such schedule shall not in any manner affect the
obligation of the Company to repay principal, interest, and any other
obligations in accordance with the terms of the applicable Note and this
Agreement. The outstanding aggregate unpaid amount of the Loans of each
Bank at any time shall be the principal amount owing on the Note of such
Bank at such time. The records of each Bank shall be prima facie evidence
of the Loans of such Bank and accrued interest thereon and of all payments
made in respect thereof.
SECTION 1.04. Principal. Prior to the Commitment Termination
Date, the outstanding principal amount of each Loan shall be payable on the
last day of the Interest Period of such Loan; provided that, if any such
day is not a Business Day, such principal shall be payable on the next
succeeding Business Day (unless, in the case of a Eurodollar Loan, the same
would fall in a succeeding month, in which case such principal shall be
payable on the first preceding Business Day). If not paid prior thereto,
the unpaid principal balance of each Note shall be due and payable on the
Maturity Date. Not later than 45 days before the Maturity Date, the
Company may by written notice request that each of the Banks extend the
Maturity Date by one year. If each of the Banks agrees in writing to such
extension, the Maturity Date shall be extended for one year.
SECTION 1.05. Interest. (a) Each Loan that is a Base Rate Loan
and each other amount payable under this Agreement shall bear interest at a
rate per annum (computed on the basis of the actual number of days elapsed
over a year of 360 days) equal to the Base Rate.
(b) Subject to the provisions of Section 1.09, each Loan that is
a CD Loan shall bear interest at a rate per annum (computed on the basis of
the actual number of days elapsed over a year of 360 days) equal to the
Adjusted CD Rate plus the Applicable Margin. The lending Bank shall
determine the applicable Adjusted CD Rate for each such Loan at 10:00 a.m.,
Richmond, Virginia, time, or as soon as practicable thereafter, on the
first day of the applicable Interest Period and shall notify the Company of
the Adjusted CD Rate so determined.
(c) Subject to the provisions of Section 1.09, each Loan that is
a Eurodollar Loan shall bear interest at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days) equal
to the Adjusted Eurodollar Rate plus the Applicable Margin. The lending
Bank shall determine the applicable Adjusted Eurodollar Rate for each such
Loan at 11:00 a.m., Richmond, Virginia, time, or as soon as practicable
thereafter, on the date when such determination is to be made in respect of
such Interest Period and shall notify the Company of the Adjusted
Eurodollar Rate so determined.
(d) Interest on each Loan shall be payable on each applicable
Interest Payment Date, commencing with the first of such dates after the
date of such Loan, and on each Conversion Date, and on the Maturity Date.
SECTION 1.06. Commitment Fee. In consideration of the
Commitments hereunder, the Company shall pay to each Bank on the last day
of each calendar quarter, commencing with the first such date after the
date hereof, and on the date of any reduction or termination of the
Commitments, a commitment fee (hereinafter called the "Commitment Fee")
equal to 1/4 of 1% per annum (computed on the basis of the actual number of
days elapsed over a year of 365 days) times the average amount of the
unused portion of the Commitment of such Bank during the preceding quarter.
The Commitment Fee shall commence to accrue as of the date hereof, and
shall cease to accrue on the earlier of the Conversion Date or the
Commitment Termination Date.
SECTION 1.07. Termination and Reduction of Commitments. The
Company may terminate in full, or from time to time permanently reduce in
part, the Commitment of either Bank, in each case upon at least three
Business Days' prior telephonic notice to the Bank, provided that a
termination or reduction that would require the prepayment under Section
1.12 of a Fixed Rate Loan may be made only on the last day of the Interest
Period in effect for such Loan. Each partial reduction of a Bank's
Commitment shall be in a minimum aggregate principal amount of $1,000,000
or in an integral multiple thereof. Once reduced, a Bank's Commitment
cannot be reinstated without its written consent.
SECTION 1.08. Additional Interest. Any amount which is not paid
when due, whether at the stated maturity thereof, by acceleration or
otherwise, shall bear interest thereafter at the Post-Default Rate.
SECTION 1.09. Alternate Rate of Interest. (a) If on the day two
Business Days prior to the commencement of any Interest Period for a
Eurodollar Loan, the lending Bank shall have determined (which
determination shall be conclusive and binding upon the Company) that dollar
deposits in the amount of the principal of such Eurodollar Loan are not
generally available in the relevant interbank market, or that the rate at
which such dollar deposits are being offered will not adequately and fairly
reflect the cost to the Bank of making or maintaining the principal amount
of such requested Eurodollar Loan during such Interest Period, or that
reasonable means do not exist for ascertaining the Adjusted Eurodollar
Rate, the lending Bank shall, as soon as practicable thereafter, give
telephonic notice of such determination to the Company, and any request by
the Company for a Eurodollar Loan or for conversion to or maintenance of a
Eurodollar Loan pursuant to Section 1.02, 1.07 or 1.10 shall be deemed a
request for a Base Rate Loan. After such notice shall have been given and
until the circumstances giving rise to such notice no longer exist, each
request for a Eurodollar Loan shall be deemed to be a request for a Base
Rate Loan. Each determination by the lending Bank hereunder shall be
conclusive absent manifest error.
(b) If on or before the day on which the Adjusted CD Rate for a
CD Loan is to be determined, the lending Bank shall have determined (which
determination shall be conclusive and binding upon the Company) that such
Adjusted CD Rate for such Loan cannot be ascertained for any reason,
including, without limitation, the inability of the lending Bank to obtain
sufficient bids in accordance with the terms of this Agreement or the
lending Bank shall determine that the Adjusted CD Rate for such CD Loan
will not adequately and fairly reflect the cost to the Bank of making or
maintaining such principal amount during the Interest Period for such Loan,
the lending Bank shall, as soon as practicable thereafter, give telephonic
notice of such determination to the Company, and any request by the Company
for a CD Loan or for conversion to or maintenance of a CD Loan pursuant to
Sections 1.02 or 1.07 shall be deemed to be a request for a Base Rate Loan.
After such notice shall have been given and until the circumstances giving
rise to such notice no longer exist, each request for a CD Loan shall be
deemed to be a request for a Base Rate Loan. Each determination by the
lending Bank hereunder shall be conclusive absent manifest error.
SECTION 1.10. Continuation and Conversion of Loans. Subject to
Sections 1.13 and 1.14, the Company may, at any time in the case of
conversion into or continuation of CD Loans, and on two Business Days'
notice in the case of conversion into or continuation of Eurodollar Loans
(which notice, to be effective, must be received by the lending Bank not
later than 10:00 a.m., Richmond, Virginia, time) preceding the date of any
continuation or conversion, elect (i) to continue any Eurodollar Loan, CD
Loan, or portion thereof, into a subsequent Interest Period and (ii) to
convert any Loan or portion thereof into a Loan of a different type,
subject in each case to the selection of Interest Periods, if applicable,
and the payment in full of each Loan on the last day of the Interest Period
therefor and subject in each case to the following:
(a) no Default (except in the case of conversion to Base Rate
Loans) shall have occurred and be continuing at the time of such notice or
such continuation or conversion;
(b) in the case of a continuation or conversion of less than all
Loans, the aggregate principal amount of Loans continued or converted shall
not be less than $1,000,000, and shall be in integral multiples of
$500,000;
(c) each conversion shall be effected by each Bank as if the
proceeds of the new Base Rate Loan, Eurodollar Loan or CD Loan, as the case
may be, were applied to payment of the Loan (or portion thereof) being
converted, and accrued interest on the Loan (or portion thereof) being
converted shall be paid by the Company on and as of the Conversion Date;
(d) if the new Loan made in respect of a conversion shall be a
Eurodollar Loan or a CD Loan, the first Interest Period with respect
thereto shall commence on the Conversion Date;
(e) no Loan may be converted to a Eurodollar Loan less than one
month before the Maturity Date, and no Loan may be converted to a CD Loan
less than 30 days before the Maturity Date;
(f) no Fixed Rate Loan shall have an Interest Period that would
extend beyond the Maturity Date;
(g) a Eurodollar Loan or CD Loan may be converted to another
type of Loan only on the last day of the current Interest Period;
(h) the Conversion Date shall be a Business Day with respect to
the new Loan;
(i) no Loan (or portion thereof) may be converted to a
Eurodollar Loan or CD Loan if, after such conversion, and after giving
effect to any prepayment of Loans, an aggregate of more than 5 separate
Eurodollar Loans and CD Loans of either Bank would be outstanding hereunder
(determined as set forth in Section 1.02(d)); and
(j) each request for a Eurodollar Loan or CD Loan or a
continuation thereof that fails to state an applicable Interest Period
shall be deemed to be a request for an Interest Period of a one-month or
30-day duration, respectively.
In the event that the Company shall not give notice to continue any
Eurodollar Loan or CD Loan into a subsequent Interest Period or convert any
such Loan into a Loan of the other type, such Loan (unless repaid in full)
shall automatically become a Base Rate Loan at the expiration of the then
current Interest Period.
SECTION 1.11. Optional Prepayment. (a) The Company shall have
the right at any time and from time to time to prepay any Base Rate Loan,
in whole or in part, without premium or penalty, upon telephonic notice to
the Banks; provided however, that each such partial prepayment shall be in
the principal amount of at least $500,000 or in an integral multiple
thereof.
(b) The Company shall have the right to prepay any Eurodollar
Loan, CD Loan or Negotiated Rate Loan, in whole or in part, on the last day
of the Interest Period in effect for such Loan upon at least two Business
Days', in the case of a CD Loan, and three Business Days', in the case of a
Eurodollar Loan, prior telephonic notice to the Bank; provided, however,
that each such partial prepayment shall be in the principal amount of at
least $500,000 or an integral multiple thereof. The Company shall not
prepay any Eurodollar Loan, CD Loan or Negotiated Rate Loan, except on the
last day of the Interest Period in effect for such Loan as provided above
(subject to Section 1.14).
(c) Each notice of prepayment shall specify the Loan(s) to be
prepaid, the prepayment date and the principal amount of each Loan to be
prepaid, shall be irrevocable and shall commit the Company to prepay each
such Loan by the amount stated in such notice. All prepayments under this
Section shall be accompanied by accrued interest on the principal amount
being prepaid to the date of prepayment. Amounts prepaid pursuant to this
Section prior to the Commitment Termination Date shall be available to be
reborrowed from the Banks hereunder in accordance with the terms hereof to
the extent such reborrowings do not cause the outstanding Loans to exceed
the then outstanding Commitments of the Banks.
SECTION 1.12. Mandatory Prepayment. The Company shall prepay
the Loans upon reduction of the Commitments pursuant to Section 1.07 in an
amount sufficient to reduce the outstanding principal balance of the Loans
to an amount not greater than the
reduced Commitments. All prepayments under this Section shall be
accompanied by accrued interest on the principal amount being prepaid to
the date of prepayment.
SECTION 1.13. Change in Circumstances. (a) In the event of any
Regulatory Change or any change after the date hereof in conditions with
respect to cost of funding or otherwise affecting the transactions
contemplated by this Agreement or the Notes that:
(i) subjects any Bank to any tax with respect to any Eurodollar
Loan or CD Loan (other than any tax on the overall net income of such Bank
or of the lending office or affiliate of such Bank making any Eurodollar
Loan hereunder) imposed by the United States or by the jurisdiction in
which such Bank has its principal office (or in which such lending office
or affiliate is located) or any political subdivision or taxing authority
therein; or
(ii) changes the basis of taxation of any payment to either Bank
of principal of or interest on any Eurodollar Loan or CD Loan or other fees
and amounts payable hereunder, or any combination of the foregoing; or
(iii) imposes, modifies or deems applicable any reserve (other
than, in the case of Fixed Rate Loans, any reserve taken into account in
the computation of CD Statutory Reserves or Eurodollar Statutory Reserves,
as the case may be), deposit or similar requirement against any assets held
by, deposits with or for the account of or loans or commitments by an
office of such Bank; or
(iv) imposes upon such Bank or the relevant interbank market any
other condition with respect to the Eurodollar Loans, upon such Bank any
other conditions with respect to CD Loans or upon such Bank any other
condition with respect to this Agreement, and the result of any of the
foregoing is to increase the cost to such Bank of making or maintaining any
Eurodollar Loan or CD Loan hereunder or to reduce the amount of any payment
(whether of principal, interest or otherwise) received or receivable by
such Bank, or to require such Bank to make any payment in connection with
any Eurodollar Loan or CD Loan, then and in each such case the Company
shall pay to such Bank, as provided in paragraph (b) below, such amounts as
shall be necessary to compensate such Bank for such cost, reduction or
payment; provided, however, that the Company may, at its option and upon
notice to the Banks, either (i) elect to convert such Loan of such Bank
into a Base Rate Loan upon the payment by the Company of the increased
costs described above incurred prior to such conversion and any amount
owing in respect of Section 1.15 hereof, it being understood that (A) for
purposes of Sections 1.10, 1.11 and 1.12, such Base Rate Loan shall be
subject to prepayment or conversion only at such times and on such
conditions as the Loan from which it was converted and (B) upon such
increased costs being eliminated, or reduced by an amount deemed sufficient
by the Company, such Base Rate Loan will be converted into a Loan of the
same type as the Loan previously converted into such Base Rate Loan having
an Interest Period expiring on the same date as the Loan previously
converted into such Base Rate Loan or (ii) with the prior consent of the
Bank, elect to convert all (but not less than all) Loans of such Bank of
the same type and Interest Period as the Loan subject to such change into
Loans of a different type upon the payment of all amounts that are due
under Section 1.15, such conversion to be subject to the provisions of
Section 1.10 (other than clause (i) thereof).
(b) Each Bank shall promptly deliver to the Company from time to
time one or more certificates setting forth the amounts due to such Bank
under paragraph (a) above, the basis for the computation thereof and the
changes as a result of which such amounts are due. Each certificate shall
be conclusive in the absence of manifest error. The Company shall pay to
each Bank the amounts shown as due on any such certificate within 10 days
after its receipt of the same. No failure on the part of either Bank to
demand compensation under paragraph (a) or (b) above on any one occasion
shall constitute a waiver of its right to demand such compensation on any
other occasion. The protection of this Section shall be available to each
Bank regardless of any possible contention of the invalidity or
inapplicability of any law, regulation or other condition that gives rise
to any right of such Bank for compensation hereunder.
SECTION 1.14. Change in Legality. (a) Notwithstanding anything
to the contrary contained elsewhere in this Agreement, if any Regulatory
Change shall make it unlawful for a Bank to make or maintain a Eurodollar
Loan or a CD Loan or to give effect to its obligations as contemplated
hereby with respect to a Eurodollar Loan or a CD Loan, then, by written
notice to the Company, such Bank may:
(i) declare that Eurodollar Loans or CD Loans, as the case may
be, will not thereafter be made by such Bank hereunder, whereupon the
Company shall be prohibited from requesting Eurodollar Loans or CD Loans,
as the case may be, from such Bank unless such declaration is subsequently
withdrawn; and
(ii) require that all outstanding Eurodollar Loans or CD Loans,
as the case may be, made by it be converted to Base Rate Loans, whereupon
all of such Eurodollar Loans or CD Loans, as the case may be, shall be
automatically converted to Base Rate Loans as of the effective date of such
notice as provided in paragraph (b) below (notwithstanding the provisions
of Section 1.07).
(b) For purposes of this Section 1.14, a notice to the Company
by any Bank pursuant to paragraph (a) above shall be effective with respect
to outstanding Eurodollar Loans or CD Loans, as the case may be, on the
last day of the then current Interest Period; in all other cases, such
notice shall be effective on the date of receipt by the Company.
SECTION 1.15. Indemnity. The Company shall reimburse each Bank
on demand for any loss incurred or to be incurred by it in the reemployment
of the funds released by any prepayment or conversion of any Eurodollar
Loan, CD Loan or Negotiated Rate Loan required or permitted by any
provision of this Agreement if such Loan is prepaid or converted other than
on the last day of the Interest Period for such Loan. Such loss shall be
the difference as reasonably determined by such Bank between the amount
that would have been realized by such Bank for the remainder of such
Interest Period for such Loan based on the interest rate applicable thereto
during such Interest Period and any lesser amount that would be realized by
such Bank in reemploying the funds received in prepayment (or realized from
the Loan so converted) by making a Loan of the same type, in the principal
amount prepaid or converted during the period from the date of prepayment
or conversion to the last day of the Interest Period of the Loan being
prepaid or converted. Without duplication of the foregoing indemnity
payments, the Company will indemnify each Bank against any actual loss or
expense that such Bank may sustain or incur as a consequence of any default
in payment or prepayment of the principal amount of any Loan or any part
thereof or interest accrued thereon, as and when due and payable (at the
due date thereof, by notice of prepayment or otherwise), or the occurrence
of any Event of Default, including but not limited to any loss or expense
sustained or incurred in liquidating or employing deposits from third
parties acquired to effect or maintain such Loan or any part thereof. Each
Bank demanding indemnification under this Section 1.15 shall provide to the
Company a statement, signed by an officer of such Bank and supported where
applicable by documentary evidence, explaining the amount of any such
actual loss or expense, which statement shall, in the absence of manifest
error, be conclusive with respect to the parties hereto.
SECTION 1.16. Negotiated Rates. Either Bank may at its sole
option from time to time offer to make a Loan to the Company at a
Negotiated Rate, but neither Bank shall be obligated to offer a Negotiated
Rate at any time. Each Negotiated Rate Loan shall be subject to such terms
and conditions, including amount, notice and Interest Period as the lending
Bank may determine in its sole discretion.
ARTICLE II
CONDITIONS OF LENDING
SECTION 2.01. Initial Borrowing. The obligations of the Banks
to make an initial Loan hereunder are subject to the following conditions,
each of which shall be satisfied on or before the Closing Date:
(a) The Company shall have terminated the commitments of Crestar
and of NationsBank of North Carolina, N.A. to make loans to it under the
Prior Credit Agreement.
(b) The Company shall have delivered to each of the Banks a
duplicate original of this Agreement executed on the Company's behalf by
its duly authorized officer.
(c) Each Bank shall have received a duly executed Note payable
to its order and otherwise complying with the provisions of Section 1.03.
(d) Each Bank shall have received certified copies of corporate
resolutions and other documents evidencing corporate action taken by the
Company to authorize this Agreement, the Notes and the borrowings
hereunder.
(e) The representations and warranties contained in Article III
shall be true and correct in all material respects, and the Banks shall
have received a certificate to such effect signed by a duly authorized
representative of the Company.
(f) Each Bank shall have received the written opinion of Drew
St. J. Carneal, Esq., Senior Vice President, Corporate Counsel and
Secretary of the Company, substantially in the form of Exhibit B hereto.
(g) All legal matters incident to this Agreement and the Loans
shall be satisfactory to Mays & Valentine.
SECTION 2.02. Each Borrowing. As a condition to each Loan to be
made hereunder:
(a) Each Bank shall have received a notice of such Loan as
required by Section 1.02.
(b) Each representation and warranty set forth in Article III
shall be true and correct on and as of the date of such borrowing with the
same effect as though such representations and warranties had been made on
and as of such date, both before and after giving effect to such Loan and
the application of the proceeds thereof. The representations and
warranties set forth in Section 3.06 shall be deemed to apply to the most
recent financial statements furnished by the Company to the Banks pursuant
to Section 4.04.
(c) At the time of each borrowing, and after giving effect
thereto, the Company shall be in compliance with all terms and provisions
of this Agreement on its part to be observed or performed, and at the time
of and immediately after such borrowing no Default shall have occurred and
be continuing.
(d) Such Loan will not contravene any Legal Requirement
applicable to either Bank.
Each borrowing hereunder shall be deemed to be a representation and
warranty by the Company on the date of such borrowing as to the matters
specified in paragraphs (b) and (c) of this Section.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
As an inducement to the Banks to enter into this Agreement and to
make Loans hereunder, the Company represents and warrants to the Banks
that:
SECTION 3.01. Corporate Authority. The Company has full
corporate power and authority to enter into this Agreement, to make the
borrowings hereunder, to execute and deliver the Notes and to incur the
obligations provided for herein and therein, all of which have been duly
authorized by all proper and necessary corporate action. No consent or
approval of stockholders or consent or approval of, notice to or filing
with, any public authority is required as a condition to the validity of
this Agreement or the Notes.
SECTION 3.02. Good Standing. The Company and its Subsidiaries
(other than Owens & Minor Minnesota, Inc.) are each a corporation organized
and existing in good standing under the laws of the jurisdiction of their
respective incorporation, and each corporation has the corporate power to
own its property and to carry on its business as now being conducted, is in
good standing, and is duly qualified to do business in each jurisdiction in
which the failure to qualify could have a material adverse effect on the
financial condition of the Company or its ability to perform its
obligations hereunder or under the Notes.
SECTION 3.03. Binding Agreements. This Agreement constitutes,
and the Notes when issued and delivered pursuant hereto for value received
will constitute, the valid and binding obligations of the Company
enforceable in accordance with their terms.
SECTION 3.04. Litigation. There are no proceedings pending or,
so far as the officers of the Company know, threatened before any court or
administrative agency that, in the opinion of the officers of the Company,
will materially adversely affect the financial condition or operations of
the Company or any of its Subsidiaries.
SECTION 3.05. No Conflicting Agreements. There is no charter,
by-law or preference stock provision of the Company or any of its
Subsidiaries and no provision of any existing mortgage, indenture, contract
or agreement binding on the Company or any Subsidiary or affecting their
respective properties, that would conflict with or in any way prevent the
execution, delivery, or carrying out of the terms of this Agreement or the
Notes.
SECTION 3.06. Financial Condition. The consolidated balance
sheet of the Company and its Subsidiaries as of December 31, 1992, and the
related consolidated statements of income, stockholders' equity and cash
flows for the period then ended, certified by KPMG Peat Marwick, heretofore
delivered to the Banks, are complete and correct and fairly present the
financial condition of the Company and its Subsidiaries and the results of
their operations and transactions in their surplus accounts as of the date
and for the period referred to therein and have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis. There are no material liabilities, direct or indirect, fixed or
contingent, of the Company or any of its Subsidiaries as of the date of
such balance sheet that are not reflected therein or in the notes thereto.
There has been no material adverse change in the financial condition or
operations of the Company or any of its Subsidiaries since the date of said
balance sheet, and there has been no other material adverse change in the
Company.
SECTION 3.07. Subsidiaries. The Company has the following
Subsidiaries and no others:
Owens & Minor West, Inc.
Koley's Medical Supply, Inc.
Lyons Physician Supply Company
A. Kuhlman & Co.
Owens & Minor Minnesota, Inc.
National Medical Supply Corporation
Harbor Medical, Inc.
Each of the above Subsidiaries is wholly-owned.
SECTION 3.08. Employee Benefit Pension Plans. No Reportable
Event exists in connection with any employee benefit plan of the Company or
any Subsidiary covered by ERISA (including any plan of any member of a
controlled group of corporations and all trades and businesses (whether or
not incorporated) under common control which, together with the Company or
any of its Subsidiaries, are treated as a single employer under Section 414
of the Code, which might constitute grounds for the termination of any such
plan by the PBGC or for the appointment of any trustee to administer any
such plan by the appropriate United States district court.
SECTION 3.09. No Default. No default in payment or performance
by the Company or any of its Subsidiaries, and no event which, with the
giving of notice or the lapse of time, or both, would constitute such a
default, has occurred and is continuing in connection with any indebtedness
for borrowed money of the Company or any of its Subsidiaries.
ARTICLE IV
AFFIRMATIVE COVENANTS
From and after the Closing Date and so long as any amount remains
unpaid under the Notes or under this Agreement and until the Commitment
Termination Date, the Company shall:
SECTION 4.01. Financial Statements and Reports. Furnish to each
Bank (i) as soon as available, but in no event more than forty-five (45)
days after the end of each of its first three (3) quarterly periods in each
fiscal year, a consolidated balance sheet of the Company and its
Subsidiaries as of the close of such quarter and a consolidated profit and
loss statement to the close of such quarter, certified by the chief
financial officer or treasurer of the Company and accompanied by a
certificate of that officer (x) stating that the Company is in compliance
with all of the terms and conditions of this Agreement and that no Default
has occurred, or if a Default has occurred, stating the facts with respect
thereto and (y) containing information in sufficient detail to allow the
Banks to confirm that the Company is then in compliance with the financial
covenants contained herein; (ii) as soon as available, but in no event more
than ninety (90) days after the close of each of the Company's fiscal
years, a copy of the annual audit report of the Company and its
Subsidiaries in reasonable detail, substantially similar to the audited
financial statements referred to in Section 3.06 above, prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with that of the preceding year and certified by KPMG Peat
Marwick, or other independent certified public accountants satisfactory to
the Banks, which report shall include a consolidated balance sheet of the
Company and its Subsidiaries as of the end of such fiscal year, a
consolidated income statement of the Company and its Subsidiaries for such
fiscal year, and consolidated statements of stockholders' equity and cash
flows of the Company and its Subsidiaries for such fiscal year, accompanied
by a certificate of said accountants stating whether any Default existed as
of the end of such fiscal year, and, if so, stating the facts with respect
thereto; (iii) as soon as available, but in no event more than sixty (60)
days after the close of each of the Company's fiscal years, a copy of the
projected budget of the Company for the following fiscal year; (iv)
promptly upon their becoming available, copies of all financial statements,
reports, notices, and proxy statements sent by the Company or any of its
Subsidiaries to stockholders and of all regular, periodic and special
reports filed by the Company or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission or any governmental
authority succeeding to any or all of the functions of the Securities and
Exchange Commission; and (v) such additional information, reports, and
statements as the Banks or either of them may from time to time reasonably
request. The Company will also upon request permit the Banks, or either of
them, and their respective agents to inspect its books and records and
those of its Subsidiaries and discuss its affairs with its officers.
SECTION 4.02. Working Capital Ratio. Maintain as of the end of
each fiscal quarter of the Company a ratio of total Consolidated Current
Assets to total Consolidated Current Liabilities of not less than 1.4 to 1.
SECTION 4.03. Tangible Net Worth. Maintain Consolidated
Tangible Net Worth as of the end of each fiscal quarter of the Company of
not less than Seventy-Five Million Dollars ($75,000,000) plus fifty percent
(50%) of the consolidated net income of the Company and its Subsidiaries
for the period beginning on January 1, 1993 and extending through the end
of such fiscal quarter.
SECTION 4.04. Minimum Fixed Charge Coverage Ratio. Maintain a
ratio, measured as of the end of each fiscal quarter, of (a) the sum of its
consolidated net income before income taxes, plus interest expense,
consolidated rental expense, depreciation and amortization for the four
fiscal quarters ending on such date to (b) the sum of (i) the current
maturities of long-term debt as shown on the consolidated balance sheet as
of such date, (ii) consolidated interest expense for the four quarters
ending on such date, consolidated rental expense for the four quarters
ending on such date (other than rent on capitalized leases), and dividends
paid during such four quarters, all as determined in accordance with
generally accepted accounting principles, of not less than 1.5 to 1. The
ratio computed as provided in this Section 4.04 is herein referred to as
the "Fixed Charge Coverage Ratio".
SECTION 4.05. Taxes. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge all taxes, assessments and governmental
charges upon it, its income, and its properties prior to the date on which
penalties are attached thereto, unless and to the extent only that such
taxes, assessments, and governmental charges shall be contested by it in
good faith and by appropriate proceedings, and the Company shall have set
aside on its books adequate reserves with respect to any such tax,
assessment or charge so contested.
SECTION 4.06. Payment Of Obligations. Pay and discharge and
cause each of its Subsidiaries to pay and discharge at or before their
maturity all their respective indebtedness and other obligations and
liabilities, except when the same may be contested in good faith and by
appropriate proceedings, and the Company shall have set aside on its books
adequate reserves with respect to any such obligation or liability.
SECTION 4.07. Insurance. Maintain, and cause each of its
Subsidiaries to maintain adequate insurance with responsible companies
satisfactory to the Banks in such amounts and against such risks as is
customarily carried by owners of similar businesses and property.
SECTION 4.08. Corporate Existence. Maintain, and cause each of
its Subsidiaries (other than Owens & Minor Minnesota, Inc.) to maintain its
corporate existence in good standing, provided that nothing contained
herein shall prohibit the merger of any Subsidiary into the Company or into
any other wholly-owned Subsidiary or the dissolution of any Subsidiary
which has no assets.
SECTION 4.09. Properties. Maintain, preserve, and protect, and
cause each of its Subsidiaries to maintain, preserve, and protect, all
material franchises and trade names and preserve all the remainder of its
property material to the conduct of its business and keep the same in good
repair, working order, and condition, and from time to time make or cause
to be made all needful and proper repairs, renewals, replacements,
betterments, and improvements thereto (subject to the limitations of
Section 5.05 hereof) so that the business carried on in connection
therewith may be properly and efficiently conducted at all times, and
permit the Banks and their respective agents to enter upon and inspect such
properties during normal business hours with prior reasonable notice,
provided that nothing contained herein shall prevent the Company or any
Subsidiary from selling or otherwise disposing of any such property if such
property is no longer material to the business of the Company or such
Subsidiary, nothing contained in this Section 4.09 shall prohibit the sale
by the Company of other assets if the fair market value of all such assets
sold after December 31, 1992 does not exceed 15% of the Consolidated
Tangible Net Worth at the end of the most recently ended fiscal year of the
Company, and nothing contained in this Section 4.09 shall prohibit any
Subsidiary from transferring any property to the Company or to any other
wholly-owned Subsidiary.
SECTION 4.10. Employee Benefit Pension Plans. Promptly during
each year pay, or cause a Subsidiary to pay, contributions that in the
judgment of the chief executive and chief financial officers of the Company
after reasonable inquiry are believed adequate to meet at least all
applicable minimum funding standards set forth in Sections 302 through 305
of ERISA, with respect to each employee benefit plan of the Company covered
by ERISA (including any plan of any member of a controlled group of
corporations and all trades and businesses (whether or not incorporated)
under common control which, together with the Company, are treated as a
single employer, under Section 414 of the Code); file or cause to be filed
each annual report required to be filed pursuant to Section 103 of ERISA in
connection with each such plan for each year; and notify the Banks within
ten (10) days of the occurrence of a Reportable Event that could constitute
grounds for termination of any such plan by PBGC or for the appointment by
the appropriate United States District Court of a trustee to administer any
such plan, provided that nothing contained herein shall prohibit the
Company or any Subsidiary from terminating any such plan if it has
theretofore complied with the provisions of this Section.
SECTION 4.11. Compliance With Laws. Comply and cause each of
its Subsidiaries to comply in all material respects with all material
applicable laws, rules, regulations and orders of any governmental
authority having jurisdiction over it, including without limitation the
Occupational Safety and Health Act of 1970, the Americans with Disabilities
Act of 1990 and those laws, rules, regulations and orders relating to the
environment.
SECTION 4.12. Notice of Environmental Matters. Immediately
advise Banks in writing of (a) any and all enforcement, cleanup, remedial,
removal, or other governmental or regulatory actions instituted, completed
or, to the knowledge of the Company, threatened pursuant to any applicable
federal, state, or local laws, ordinances or regulations relating to any
Hazardous Materials affecting the business operations of the Company or any
Subsidiary, and (b) all claims made or, to the knowledge of the Company or
any Subsidiary, threatened by any third party against the Company or any
Subsidiary relating to damages, contribution, cost recovery compensation,
loss or injury resulting from any Hazardous Materials and immediately
notify Bank of any remedial action taken by the Company or any Subsidiary
in response to any such action or claim or threatened action or claim with
respect to the business operations of the Company or any of its
Subsidiaries.
SECTION 4.13. Licenses and Permits. Keep in force and effect
all licenses and permits necessary to the proper conduct of its business
and that of its Subsidiaries.
ARTICLE V
NEGATIVE COVENANTS
From and after the Closing Date and so long as any amount remains
unpaid under the Notes or under this Agreement and until the Commitment
Termination Date, without the prior written consent of both of the Banks
the Company will not:
SECTION 5.01. Mergers, Consolidations and Acquisitions. Enter
into any merger or consolidation with, or acquiring all or substantially
all of the assets of any person, firm, joint venture or corporation, and
refrain from permitting any Subsidiary so to do, if the aggregate cost to
the Company or such Subsidiary (including any indebtedness, subordinated or
otherwise, incurred or liabilities assumed in connection with any such
transaction) exceeds 30% of Consolidated Tangible Net Worth at the end of
the Company's fiscal year next preceding such transaction.
SECTION 5.02. Mortgages and Pledges. Create, incur, assume, or
suffer to exist any mortgage, pledge, lien, or other encumbrance of any
kind upon, or any security interest in, any of its property or assets,
whether now owned or hereafter acquired, or permit any Subsidiary so to do,
except (i) liens for taxes not yet delinquent or being contested in good
faith and by appropriate proceedings; (ii) liens in connection with
worker's compensation, unemployment insurance, or other social security
obligations; (iii) deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety or appeal bonds, and other obligations of like nature
arising in the ordinary course of business; (iv) mechanic's, workman's,
materialman's, landlord's, carrier's, or other like liens arising in the
ordinary course of business with respect to obligations that are not due or
that are being contested in good faith; (v) mortgages, pledges, liens, and
encumbrances in favor of the Banks ratably securing obligations under this
Agreement; (vi) liens existing as of the date of this Agreement; (vii)
zoning restrictions, easements, licenses, restrictions on the use of real
property or minor irregularities in the title thereto, which do not, in the
opinion of the Company, materially impair the use of such property in the
operation of the business of the Company or the value of such property for
the purposes of such business; (viii) any mortgage, encumbrance or other
lien upon, or security interest in, any property hereafter acquired by the
Company or such Subsidiary created contemporaneously with such acquisition
to secure or provide for the payment or financing of any part of the
purchase price thereof, or the assumption of any mortgage, encumbrance or
lien upon, or security interest in, any such property hereafter acquired
existing at the time of such acquisition, or the acquisition of any such
property subject to any mortgage, encumbrance or other lien or security
interest without the assumption thereof, provided that each such mortgage,
encumbrance, lien or security interest shall attach only to the property so
acquired and fixed improvements thereon; (ix) any judgment which is
adequately insured or indemnified against or which does not remain
undischarged for a period of thirty (30) days during which time execution
is not effectively stayed; (x) liens on assets of Subsidiaries to secure
amounts owing the Company; and (xi) the extension, renewal or replacement
of any lien or charge permitted by the foregoing clauses (vi) and (viii)
with respect to the same property and the extension, renewal or replacement
(without increase in the principal amount) of any obligations secured
thereby. Nothing contained in this Section 5.02 shall prohibit the Company
from entering into any lease required to be capitalized by generally
accepted accounting principles in accordance with the Financial Accounting
Standards Board Statement No. 13 (Accounting for Leases) in effect on
June 1, 1992, provided such lease is not otherwise prohibited by the terms
of this Agreement.
SECTION 5.03. Total Debt to Capitalization Ratio. Permit the
ratio of (a) the sum without duplication of consolidated Total Funded Debt
and consolidated contingent obligations of the Company and its Subsidiaries
to (b) the sum without duplication of consolidated Total Funded Debt,
consolidated contingent obligations and stockholders' equity to exceed
.60 to 1 as of the end of any fiscal quarter of the Company. The ratio
computed as provided in this Section 5.03 is herein referred to as the
Total Debt to Capitalization Ratio.
SECTION 5.04. Environmental Law Compliance. Use or permit any
other party to use any Hazardous Materials at any place of business of the
Company or any Subsidiary except such materials as are incidental to the
normal course of business, maintenance and repair of the Company or such
Subsidiary, and are in strict accordance with applicable laws. The Company
agrees to permit the Banks and their respective agents, contractors and
employees to enter and inspect any of the places of business of the Company
or any Subsidiary at the Banks' expense at any reasonable times upon three
(3) days' prior notice for the purposes of conducting an environmental
investigation and audit (including taking physical samples) to insure that
the Company and its Subsidiaries are complying with this covenant. The
Company shall provide the Banks and their respective agents, contractors,
employees and representatives with access to and copies of any and all data
and documents relating to or dealing with any Hazardous Materials used,
generated, manufactured, stored or disposed of by the business operations
of the Company and its Subsidiaries within five (5) days of the request
therefor.
SECTION 5.05. Capital Expenditures. If the Total Debt to
Capitalization Ratio exceeds .45 to 1 as of the end of any fiscal quarter
of the Company, make any capital expenditures in the next fiscal quarter
which when added to the capital expenditures made in the prior quarters of
such fiscal year exceed 200% of the projected depreciation and amortization
expense (exclusive of amortization of goodwill) for such fiscal year. For
purposes of determining compliance with this Section 5.05 the projected
amounts shall be those shown in the projected budget delivered to the Banks
pursuant to Section 4.01.
SECTION 5.06. Dividends and Purchase of Stock. Declare or pay
any dividends (other than dividends payable in capital stock of the
Company) on any shares of any class of its capital stock, or apply any of
its property or assets to the purchase, redemption, or other retirement of,
or set apart any sum for the payment of any dividends on, or for the
purchase, redemption, or other retirement of, or make any other
distribution by reduction of capital or otherwise in respect of, any shares
of any class of capital stock of the Company, if after the declaration or
payment of such dividend or distribution, the Company could not be in
compliance with any provision of this Agreement.
SECTION 5.07. Sale and Leaseback. Directly or indirectly enter
into any arrangement whereby the Company or any Subsidiary shall sell or
transfer any of its fixed assets then owned by it and shall thereupon or
within one year thereafter rent or lease the assets so sold or transferred,
other than transactions between the Company and a wholly-owned Subsidiary,
if after giving effect thereto the aggregate net proceeds of all such sales
and transfers made after December 31, 1992 shall exceed ten percent (10%)
of Consolidated Tangible Net Worth.
SECTION 5.08. Transactions with Affiliates. Enter into or be a
party to, or permit a Subsidiary to enter into or be a party to, any
transaction or arrangement with any Affiliate (including without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any Affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of the Company's or
such Subsidiary's business and upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would obtain in a
comparable arm's-length transaction with a person other than an Affiliate.
SECTION 5.09. Contingent Liabilities. Assume, guarantee,
endorse or otherwise become surety for or upon the obligation of any
person, firm, joint venture or corporation, or permit any of its
Subsidiaries to do so, other than guaranties by the Company of lease
obligations of Subsidiaries, unless the amount of such contingent
obligation is limited to a stated maximum dollar exposure.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. Each of the following shall
constitute an "Event of Default":
(a) Default shall be made by the Company in the payment of any
interest upon any Note when such interest is due and payable, and such
default shall continue unremedied for a period of five (5) days after the
Company shall have been given notice thereof by the holder of such Note; or
(b) Default shall be made by the Company in the payment of any
Commitment Fee payable hereunder and such default shall continue unremedied
for a period of five (5) days after the Company shall have been given
notice thereof; or
(c) Default shall be made in the payment of any installment of
principal of any Note, when and as the same becomes due and payable whether
at the stated maturity thereof or by acceleration or otherwise and such
default shall continue unremedied for a period of five (5) days; or
(d) Default shall be made in the due observance or performance
of any other term, covenant or agreement contained in this Agreement and
such default shall continue unremedied for a period of fifteen (15) days
after the Company shall have been given notice thereof; or
(e) A custodian, other than a trustee, receiver or agent
appointed or authorized to take charge of less than substantially all of
the property of the Company or any Subsidiary for the purpose of enforcing
a lien against such property, is appointed for, or takes possession of any
property or assets of, the Company or any Subsidiary; or
(f) Any representation or warranty made by the Company herein or
any statement or representation made in any certificate, report, or opinion
delivered pursuant hereto shall prove to have been incorrect in any
material respect when made; or
(g) The Company or any Subsidiary shall be generally not paying
its debts as such debts become due, shall become insolvent or unable to
meet its obligations as they mature, shall make an assignment for the
benefit of creditors, shall consent to the appointment of a trustee or a
receiver, or shall admit in writing its inability to pay its debts as they
mature; or
(h) A trustee or receiver (other than a custodian described in
subsection (e)) shall be appointed for the Company or any Subsidiary or for
a substantial part of its properties without the consent of the Company or
such Subsidiary and not be discharged within thirty (30) days; or
(i) Any case in bankruptcy shall be commenced, or any
reorganization, arrangement, insolvency, or liquidation proceeding shall be
instituted by or against the Company or any Subsidiary, and if commenced or
instituted against it, be consented to by the Company or such Subsidiary or
remain undismissed for a period of thirty (30) days; or
(j) Any default shall be made with respect to any other
obligation incurred in connection with any indebtedness for borrowed money
of the Company, or any Subsidiary, if the effect of such default is to
accelerate the maturity of such indebtedness or to permit the holder
thereof (or a trustee on behalf of such holder) to cause such indebtedness
to become due prior to its stated maturity or to do so with the giving of
notice or lapse of time, or both, and such default is not cured within
thirty (30) days of its occurrence, or any such indebtedness becomes due
prior to its stated maturity or shall not be paid when due, or default
shall be made by the Company or any Subsidiary in the performance of any
payment obligation or any other material provision of any material lease;
or
(k) Any final judgment for the payment of money in excess of ONE
MILLION DOLLARS ($1,000,000.00) which is not adequately insured or
indemnified against shall be rendered against the Company or any Subsidiary
and the same shall remain undischarged for a period of thirty (30) days
during which execution shall not be effectively stayed; or
(l) Any substantial part of the properties of the Company or any
Subsidiary shall be sequestered or attached and shall not have been
returned to the possession of the Company or such Subsidiary or released
from such attachment within thirty (30) days; or
(m) The occurrence of a Reportable Event, which might constitute
grounds for termination of any employee benefit plan of the Company or any
Subsidiary covered by ERISA (including any plan of any member of a
controlled group of corporations and all trades and businesses (whether or
not incorporated) under common control which, together with the Company or
any of its Subsidiaries, are treated as a single employer under Section 414
of the Code) by the PBGC or grounds for the appointment by the appropriate
United States District Court of a trustee to administer any such plan.
Upon the occurrence of any of the events hereinabove set
forth, at any time during the continuance of any such event, either Bank
may, if it deems appropriate, by sending written notice to the Company take
either or both of the following actions, at the same or different times:
(i) terminate forthwith its Commitment hereunder, and/or (ii) declare the
Note or Notes held by it to be forthwith due and payable, whereupon such
Note or Notes shall be forthwith due and payable, both as to principal and
interest, without presentment, demand, protest, or any other notice of any
kind, all of which are hereby expressly waived, anything contained herein
or in the Notes to the contrary notwithstanding. The Banks also agree that
in the event either of them accelerates the maturity of any Note held by it
or terminates its Commitment pursuant to the provisions of this Section
5.01, it will give prompt written notice of such acceleration or
termination to the other Bank. The failure of either Bank to give such
notice shall not however affect the validity or effectiveness of such
acceleration or termination, nor give the Company any cause of action or
other right against either Bank.
ARTICLE VII
DEFINITIONS
SECTION 7.01. Definitions. For purposes of this Agreement,
unless the context otherwise requires, the following terms shall have the
respective meanings assigned to them in this Article VII:
"Adjusted CD Rate" means, with respect to any CD Loan for any
Interest Period, an interest rate per annum determined by the lending Bank
(rounded upwards, if necessary, to the next 1/100 of 1%) equal to the sum
of (a) an interest rate per annum equal to the product of (i) the Fixed
Certificate of Deposit Rate in effect for the Interest Period applicable to
such Loan and (ii) CD Statutory Reserves, plus (b) the Assessment Rate,
adjusted to reflect all additional actual costs, including brokers' fees
and other acquisition costs, and Taxes as determined by the lending Bank,
that are incurred by the lending Bank in connection with making such CD
Loan. For purposes hereof, the term "Fixed Certificate of Deposit Rate"
shall mean the arithmetic average (rounded upwards, if necessary, to the
next 1/100 of 1%) of the prevailing rates per annum bid on or about 10:00
a.m., New York City time, or as soon thereafter as is practicable, to the
lending Bank on the first Business Day of the Interest Period applicable to
such CD Loan by not less than two New York City negotiable certificate of
deposit dealers of recognized standing selected by the lending Bank for the
purchase at face value of negotiable certificates of deposit of major
United States money center banks in an amount approximately equal to the
principal amount of the CD Loan and with a maturity comparable to such
Interest Period. "CD Statutory Reserves" means on any date, a fraction,
the numerator of which is one and the denominator of which is one minus the
aggregate of the maximum reserve percentages (including, without
limitation, any marginal, special, emergency, or supplemental reserves)
established by the Federal Reserve Board and any other banking authority or
Legal Requirement to which the lending Bank is subject for time deposits in
dollars issued by domestic offices of the lending Bank. Such reserve
percentages shall include, without limitation, those imposed under
Regulation D. "Assessment Rate" shall mean the then current annual
assessment rate (expressed as a percentage and rounded upwards, if
necessary, to the next 1/100 of 1%) for determining the net annual
assessment payable by the lending Bank to the Federal Deposit Insurance
Corporation (or any successor agency) for insuring domestic Dollar time
deposits at the Bank, as estimated from time to time by the lending Bank.
The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of each change in the Assessment Rate or CD Statutory
Reserves. Each determination by the lending Bank of any Adjusted CD Rate
and of the Assessment Rate, CD Statutory Reserves and Taxes shall be
conclusive and binding on the Company and the lending Bank absent manifest
error. The Banks and the Company acknowledge that either Bank may from
time to time determine the Fixed Certificate of Deposit Rate from
quotations of such Bank's money desk or by reference to Reuter Screen or
similar quotations, in the discretion of such Bank, on and as of the date
of determination.
"Adjusted Eurodollar Rate" means, with respect to any Eurodollar
Loan for any Interest Period, an interest rate per annum determined by the
lending Bank (rounded upwards, if necessary, to the next 1/100 of 1%) equal
to the product of (a) the Fixed Eurodollar Rate in effect for the Interest
Period applicable to such Loan and (b) Eurodollar Statutory Reserves,
adjusted to reflect all additional actual costs, including brokers' fees
and other acquisition costs, and Taxes as determined by the lending Bank,
which are incurred by the lending Bank in connection with making such
Eurodollar Loan. For purposes hereof, the term "Fixed Eurodollar Rate"
shall mean the arithmetic average of the interest rates at which deposits
of U.S. Dollars approximately equal in principal amount to the Eurodollar
Loan and for a maturity equal to the applicable Interest Period are offered
in immediately available funds to the lending Bank by leading banks in the
interbank market selected by the lending Bank for such deposits at
approximately 11:00 a.m. (London time), or as soon thereafter as is
practicable, two business days prior to the commencement of the Interest
Period. "Eurodollar Statutory Reserves" shall mean, on any date, a
fraction, the numerator of which is one and the denominator of which is one
minus the maximum reserve percentages (including without limitation, basic,
supplemental, marginal and emergency reserves) expressed by the Federal
Reserve Board and any other banking authority to which the lending Bank is
subject with respect to "Eurodollar liabilities" as currently defined in
regulation D, or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding. The Adjusted Eurodollar
Rate shall be adjusted automatically on and as of the effective date of
each change in Eurodollar Statutory Reserves. Each determination by the
lending Bank of any Adjusted Eurodollar Rate and of Eurodollar Statutory
Reserves and Taxes shall be conclusive and binding on the Company and the
lending Bank absent manifest error. The Banks and the Company acknowledge
that either Bank may from time to time determine the Fixed Eurodollar Rate
from quotations of such Bank's money desk or by reference to Reuter Screen
or similar quotations, in the discretion of such Bank, on and as of the
date of determination.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with, such first Person. For the
purposes of this definition, "control" (including the terms "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
Unless otherwise specified, "Affiliate" means an Affiliate of the Company.
"Agreement" means this Credit Agreement among the Company and the
Banks, dated as of November 1, 1993, as the same may be amended, modified,
supplemented or restated from time to time.
"Applicable Margin" shall be one percent (1%) per annum initially
and shall be one percent (1%) per annum except as otherwise provided
herein. In the event the Total Debt to Capitalization Ratio shall be less
than .5 to 1, but not less than .4 to 1 as of the end of any fiscal quarter
of the Company, commencing on the forty-fifth (45th) day after the end of
such fiscal quarter and continuing until the forty-fifth (45th) day after
the end of the following fiscal quarter, the Applicable Margin shall be
six-tenths of one percent (.6 of 1%) per annum. In the event the Total
Debt to Capitalization Ratio shall be less than .4 to 1, but not less than
.3 to 1 as of the end of any fiscal quarter of the Company, commencing on
the forty-fifth (45th) day after the end of such fiscal quarter and
continuing until the forty-fifth (45th) day after the end of the following
fiscal quarter, the Applicable Margin shall be one-half of one percent (.5
of 1%) per annum. In the event the Total Debt to Capitalization Ratio
shall be less than .3 to 1, but not less than .2 to 1 as of the end of any
fiscal quarter of the Company, commencing on the forty-fifth (45th) day
after the end of such fiscal quarter and continuing until the forty-fifth
(45th) day after the end of the following fiscal quarter, the Applicable
Margin shall be forty-five hundredths of one percent (.45 of 1%) per annum.
In the event the Total Debt to Capitalization Ratio shall be less than
.2 to 1 as of the end of any fiscal quarter of the Company, commencing on
the forty-fifth (45th) day after the end of such fiscal quarter and
continuing until the forty-fifth (45th) day after the end of the following
fiscal quarter, the Applicable Margin shall be three hundred seventy-five
thousandths of one percent (.375 of 1%) per annum.
"Banks" means the institutions indicated as Banks on the
signature pages hereof.
"Base Rate" means the rate of interest publicly announced from
time to time by the lending Bank as its prime rate of interest (which rate
of interest may not be the lowest rate charged by such Bank on similar
loans). Each change in the Base Rate shall become effective without prior
notice to the Company automatically as of the date such change is publicly
announced as effective.
"Base Rate Loan" means a Loan on which interest accrues based on
the Base Rate in accordance with Article I.
"Business Day" means any day other than Saturday, Sunday or a day
on which banks are required or authorized to be closed for business in
Richmond, Virginia, and, with respect to any Eurodollar Loan, means any
such Business Day on which transactions are effected in deposits of U.S.
Dollars in the relevant interbank foreign currency deposits market and on
which commercial banks are open for domestic and international business
(including dealings in Dollar deposits) in the jurisdiction in which such
interbank market is located.
"CD Loan" means a Loan on which interest accrues based on the
Adjusted CD Rate in accordance with Article I.
"Closing Date" means November 1, 1993 or such other date as the
parties may agree.
"Code" means the Internal Revenue Code of 1986, as amended,
together with all regulations and official rulings and interpretations
issued pursuant thereto.
"Commitment" means, with respect to each Bank, the amount of the
Commitment of such Bank set forth opposite such Bank's name on the
signature pages hereof as the same may be reduced from time to time
pursuant to this Agreement.
"Commitment Fee" shall have the meaning assigned to such term in
Section 1.06 hereof.
"Commitment Termination Date" means the earlier of (i) the
Maturity Date, or (ii) a date on which the Commitments may be terminated
hereunder.
"Consolidated Current Assets" and "Consolidated Current
Liabilities" shall mean such assets and liabilities of the Company and its
Subsidiaries on a consolidated basis as shall be determined in accordance
with generally accepted accounting principles to constitute current assets
and current liabilities, respectively.
"Consolidated Tangible Net Worth" shall mean, as of the date of
any determination thereof, total stockholders' equity of the Company less
the excess of the purchase price over net assets acquired, net of
amortization, goodwill and other items properly classified in "intangible
assets".
"Conversion Date" means the date on which any Loan is converted
from a Base Rate Loan, a CD Loan, a Eurodollar Loan or a Negotiated Rate
Loan to a Loan of a different type pursuant to Section 1.10 hereof.
"Default" means an Event of Default or any condition or event
that with the giving of notice or the lapse of time or both would become an
Event of Default.
"Dollars" and the sign "$" shall refer to lawful currency of the
United States of America.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with all regulations and official rulings and
interpretations issued pursuant thereto.
"Eurodollar Loan" means a Loan on which interest accrues based on
the Adjusted Eurodollar Rate in accordance with Article I.
"Event of Default" shall have the meaning assigned to such term
in Article VI.
"Federal Reserve Board" means the board of Governors of the
Federal Reserve System and any successor agency.
"Fixed Rate" means an Adjusted CD Rate, an Adjusted Eurodollar
Rate or a Negotiated Rate.
"Fixed Rate Loans" means Loans hereunder on which interest
accrues based on a Fixed Rate.
"Governmental Authority" means any government (or any political
unit thereof), court, bureau, agency or other governmental authority having
or claiming jurisdiction over the Company or a Subsidiary or any of their
respective businesses, operations or properties.
"Interest Payment Date" means with respect to each Loan, the last
day of each Interest Period for such Loan.
"Interest Period" means (i) as to any Eurodollar Loan, the period
commencing on the date of such Eurodollar Loan or continuation thereof and
ending on the numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is 1, 2 or 3
months thereafter, as the Company may elect, (ii) as to any CD Loan, a
period commencing on the date of such CD Loan or continuation thereof and
ending 30, 60 or 90 days thereafter as the Company may elect, (iii) as to
any Negotiated Rate Loan, the period commencing on the date of such
Negotiated Rate Loan and ending on the date agreed upon by the Company and
the lending Bank, which shall not exceed 90 days, and (iv) as to any Base
Rate Loan, the period commencing on the date of such Base Rate Loan or
continuation thereof and ending on the earlier of (A) the last day of the
calendar quarter in which such loan was made or continued and (B) the
Maturity Date, as applicable; provided, however, that (y) if any Interest
Period would end on a day that is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day unless, with respect
to Eurodollar Loans only, such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on
the next preceding Business Day and (z) no Interest Period with respect to
any Loan shall end later than the Maturity Date.
"Legal Requirement" means any requirement imposed upon any Bank
by any law of the United States of America or any other jurisdiction
exercising or claiming authority over such Bank, including without
limitation, any regulation, order, interpretation, ruling or official
directive (whether or not having the force of law) of the Federal Reserve
Board, the Federal Deposit Insurance Corporation (or any successor agency),
or any other board or governmental or administrative agency of the United
States of America or such other jurisdiction.
"Loan" means an amount advanced pursuant to Section 1.01 and a
Loan of a "type" means a Loan that bears, or is to bear, as the context may
require, interest based on either the Base Rate, Adjusted CD Rate, Adjusted
Eurodollar Rate or Negotiated Rate.
"Maturity Date" means May 31, 1996 or such later date as may be
established by a written agreement signed by the Company and each of the
Banks.
"Negotiated Rate" means the rate of interest applicable to a
Negotiated Rate Loan.
"Negotiated Rate Loan" means a Loan on which interest accrues at
a rate per annum and for a period of time agreed upon between the Company
and a Bank.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Plan" means any employee benefit plan of the Company or any
Subsidiary covered by ERISA.
"Post-Default Rate" means a rate per annum equal to the Base Rate
plus 2%.
"Prior Credit Agreement" shall have the meaning assigned to such
term in the Recitals on page 1 of this Agreement.
"Regulation D" means Regulation D of the Federal Reserve Board,
as the same is from time to time in effect, and all official rulings
thereunder or thereof.
"Regulatory Change" means (i) any new, or any change in any
existing, law, regulation, interpretation, directive or request (whether or
not having the force of law) or (ii) any change in the administration or
enforcement of any such applicable law, regulation, interpretation,
directive or request that becomes effective after the date of this
Agreement, whether as a result of an enactment by a Governmental Authority,
a determination of a court or a Governmental Authority, or otherwise.
"Reportable Event" shall have the meaning assigned to such term
in Title IV of ERISA.
"Subsidiary" means any corporation fifty percent (50%) or more of
the outstanding voting shares of which is owned or controlled, directly or
indirectly, by the Company or any of its Affiliates, and any partnership
fifty percent (50%) or more of the general or limited partnership interests
of which is owned or controlled, directly or indirectly, by the Company or
any of its Affiliates.
"Tax" means, in relation to any Fixed Rate Loan and the
applicable Fixed Rate, any federal, state, local or foreign tax, levy,
impost, duty, deduction, withholding or other charges of whatever nature
required by any Legal Requirement (i) to be paid by the Banks or (ii) to be
withheld or deducted from any payment otherwise required hereby to be made
by the Company to the Banks; provided, however, that the term "Tax" shall
not include any taxes imposed upon the net income of the Banks by the
United States, any political subdivision thereof or any other taxing
authority.
"Termination Event" means (i) a Reportable Event, (ii) the
termination of a Plan, or the filing of a notice of intent to terminate a
Plan, or the treatment of a Plan amendment as a termination under ERISA
Section 4041(c), (iii) the institution of proceedings to terminate a Plan
under ERISA Section 4042 or (iv) the appointment of a trustee to administer
any Plan under ERISA Section 4042.
"Total Debt to Capitalization Ratio" shall have the meaning
assigned to such term in Section 5.03.
"Total Funded Debt" means all indebtedness for borrowed money and
shall include long-term indebtedness for borrowed money, the current
maturities thereof, and other current obligations for borrowed money.
SECTION 7.02. Accounting Terms. All accounting terms used in
this Agreement which are not otherwise defined herein shall be construed in
accordance with generally accepted accounting principles unless otherwise
expressly stated herein.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Costs and Expenses. The Company will pay all out-
of-pocket expenses incurred by the Banks in connection with the preparation
of this Agreement and the Notes (whether or not the transactions hereby
contemplated shall be consummated), the making of the Loans hereunder, the
enforcement of the rights of the Banks in connection with this Agreement or
with the Loans made or the Notes issued hereunder, including but not
limited to, the reasonable fees and disbursements of special counsel for
the Banks.
SECTION 8.02. Participations in Commitments and Notes.
(a) Each Bank may grant participations in all or any part of its
Commitment, Loans and Notes; provided, however, no holder of any such
participation shall be entitled to require such Bank to take or omit to
take any action hereunder and no Bank shall, as among the Company and such
Bank, be relieved of any of its obligations hereunder as a result of any
such granting of a participation, but the participating Bank shall be
entitled to rely on, and possess all rights under, any opinions,
certificates, or other instruments delivered under or in connection with
this Agreement.
(b) The Company authorizes each Bank to disclose to any
participant (a "Transferee") and any prospective Transferee any and all
financial and other information in such Bank's possession concerning the
Company and its Subsidiaries which has been delivered to such Bank by the
Company pursuant to this Agreement or which has been delivered to such Bank
by the Company in connection with such Bank's credit evaluation of the
Company prior to entering into this Agreement.
(c) If, pursuant to this Section 8.02, any interest in this
Agreement or any Commitment, Loan or Note is transferred to any Transferee
which is organized under the laws of any jurisdiction other than the United
States or any state thereof, the transferor Bank shall cause such
Transferee, concurrently with the effectiveness of such transfer, (i) to
represent to the transferor Bank (for the benefit of the transferor Bank
and the Company) that under applicable law and treaties no taxes will be
required to be withheld by the Company or the transferor Bank with respect
to any payments to be made to such Transferee in respect of the Loans, (ii)
to furnish to the transferor Bank and the Company either U.S. Internal
Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001
(wherein such Transferee claims entitlement to complete exemption from U.S.
federal withholding tax on all interest payments hereunder) and (iii) to
agree (for the benefit of the transferor Bank and the Company) to provide
the transferor Bank and the Company a new Form 9224 or Form 1001 upon the
obsolescence of any previously delivered form and comparable statements in
accordance with applicable U.S. laws and regulations and amendments duly
executed and completed by such Transferee, and to comply from time to time
with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.
SECTION 8.03. Several Obligations of Banks. The obligation of
each Bank to make the loans provided for herein is several, and neither
Bank shall be liable in the event that the other Bank fails to make any
loan it has agreed to make hereunder.
SECTION 8.04. Cumulative Rights and No Waiver. Each and every
right granted to the Banks or either of them hereunder or under any other
document delivered hereunder or in connection herewith, or allowed them or
either of them by law or equity, shall be cumulative and may be exercised
from time to time. No failure on the part of the Banks or either of them
to exercise, and no delay in exercising, any right shall operate as a
waiver thereof, nor shall any single or partial exercise by the Banks or
either of them of any right preclude any other or future exercise thereof
or the exercise of any other right.
SECTION 8.05. Notices. Any notice shall be conclusively deemed
to have been received by a party hereto and be effective on the day on
which delivered to such party at the address set forth below (or at such
other address as such party shall specify to the other parties in writing)
or if sent by registered or certified mail, on the third business day after
the day on which mailed, addressed to such party at said address:
Owens & Minor, Inc.
If by hand or by courier:
4800 Cox Road
Glen Allen, Virginia 23060
Attn: Mr. Richard F. Bozard
Vice President and Treasurer
If by mail:
P. O. Box 27626
Richmond, Virginia 23261-7626
Attn: Mr. Richard F. Bozard
Vice President and Treasurer
Crestar Bank
919 East Main Street
P. O. Box 26665
Richmond, Virginia 23261
Attn: Mr. Brad H. Booker
Vice President
NationsBank of Virginia, N.A.
Fourth Floor Pavilion
1111 East Main Street
Richmond, Virginia 23277-0001
Attn: Mr. Robert Y. Bennett
Vice President
SECTION 8.06. Applicable Law. This Agreement and the Notes
shall be construed in accordance with and governed by the laws of the
Commonwealth of Virginia.
SECTION 8.07. Modifications. No modification, amendment or
waiver of any provision of this Agreement, nor consent to any departure by
the Company therefrom shall in any event be effective unless the same shall
be in writing and signed by both of the Banks and then such waiver or
consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand upon the Company in any
case shall entitle the Company to any other or further notice or demand in
the same or similar circumstances.
SECTION 8.08. Survivorship. All covenants, agreements,
representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the making by the Banks of the
Loans herein contemplated and the execution and delivery to the Banks of
the Notes evidencing such Loans and shall continue in full force and
effective so long as (i) any of the Notes is outstanding and unpaid or (ii)
the Commitments have not expired or been terminated. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of the Company which are
contained in this Agreement shall bind and inure to the benefit of the
successors and assigns of the Banks.
SECTION 8.09. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which taken together shall
constitute but one and the same instrument.
SECTION 8.10. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
SECTION 8.11. Repayments in Bankruptcy. In the event any amount
of the indebtedness of the Company to the Banks hereunder is paid by the
Company and because of bankruptcy or other laws relating to creditors
rights the Banks repay any such amounts to the Company or to any trustee,
receiver or otherwise, then the amounts so repaid shall again become part
of the Loans payable by the Company.
SECTION 8.12. Capital Adequacy. If, after the date hereof,
either Bank shall have determined that the adoption of any 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 by such Bank with
any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency,
has or would have the effect of reducing the rate of return on such Bank's
capital as a consequence of its obligations hereunder to a level below that
which such Bank could have achieved but for such adoption, change or
compliance, then from time to time, the Company shall pay to such Bank on
demand such additional amount or amounts as will compensate such Bank for
such reduction. A certificate of a Bank claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it
hereunder and the basis therefor shall be prepared by such Bank and shall
be conclusive in the absence of manifest error. In determining any such
amount, the Bank may use any reasonable averaging and attribution methods.
ARTICLE IX
RELATIONSHIP BETWEEN BANKS
SECTION 9.01. Representations of Banks to Each Other. Each Bank
represents and warrants to the other Bank (i) that the Loans made by it
shall constitute loans made in the ordinary course of its commercial
lending business, that it has made its own independent investigation of the
financial condition and affairs of the Company and its Subsidiaries prior
to entering into this Agreement and that it has made and will continue to
make its own appraisal of the creditworthiness of the Company and its
Subsidiaries, and (ii) that in entering into this Agreement, it has not
relied upon any representation of the other Bank as to the financial
condition, operations or creditworthiness of the Company or any Subsidiary.
Neither Bank shall have any duty or responsibility now or hereafter to make
any investigation or appraisal of the Company or any Subsidiary on behalf
of the other Bank or to provide the other Bank with any credit or other
information which may come to its attention now or hereafter, except as may
be specifically required by the express terms of this Agreement.
SECTION 9.02. Set-Offs and Sharing of Payments. Each Bank shall
have the right to set-off against all property of the Company now or at any
time hereafter in such Bank's possession in any capacity whatever
(including, without limitation, any balance or share of any deposit, trust
or agency account) as security for all liabilities of the Company to such
Bank. Each Bank agrees with the other Bank that in the event any deposit
or other sum credited by or due from such Bank to the Company is applied to
the indebtedness of the Company to such Bank at a time when the Company
owes such Bank both indebtedness evidenced by a Note and indebtedness which
is not evidenced by a Note, the Bank will apply to the indebtedness
evidenced by the Note not less than that fraction of the total amount so
applied that the principal amount evidenced by the Note represents of the
total principal indebtedness of the Company to such Bank. Each Bank agrees
that if it shall, through the exercise of a right of set-off against the
Company, obtain payment in respect of the Note held by it as a result of
which the ratio of the unpaid balance owing on the Note held by it to the
unpaid balance which existed on such Note at the start of business on the
date of such set-off is less than the ratio of the unpaid balance owing on
the Note held by the other Bank to the unpaid balance which existed on such
Note at the start of business on the date of such set-off, (i) it shall
simultaneously purchase from such other Bank a participation in the Note or
Notes held by such other Bank so that the aggregate unpaid principal amount
of the Note and participations held by each Bank shall be in the same
proportion to the aggregate unpaid principal amount of all Notes then
outstanding as the unpaid principal amount of the Note held by it at the
start of business on the date of such set-off was to the sum of the unpaid
principal amount of all the Notes at the start of business on such date and
(ii) such other adjustments shall be made from time to time as shall be
equitable to ensure that both Banks share such payment as herein provided.
Each Bank agrees that if it shall have accelerated the maturity of the Note
held by it and the other Bank shall have accelerated the maturity of the
Note held by it within two (2) Business Days from the date it first
received notice from the other Bank that such Bank has accelerated its
Note, and as a result of any voluntary payment by the Company or otherwise
(except by set-off) on or after the Due Date (as hereinafter defined), it
obtains payment in respect of the Note held by it, as a result of which the
ratio of the unpaid balance owing on the Note held by it to the unpaid
balance which existed on such Note at the start of business on the Due Date
is less than the ratio of the unpaid balance owing on the Note held by the
other Bank to the unpaid balance which existed on such Note at the start of
business on the Due Date, (x) it shall simultaneously purchase from the
other Bank a participation in the Note or Notes held by such Bank so that
the aggregate unpaid principal amount of the Note and participations held
by each Bank shall be in the same proportion to the aggregate unpaid
principal amount of all Notes then outstanding as the unpaid principal
amount of the Note held by it at the start of business on the Due Date was
to the sum of the unpaid principal amount of all the Notes at the start of
business on the Due Date and (y) such other adjustments shall be made from
time to time as shall be equitable to ensure that Banks share such payment
as herein provided. For purposes of this Section 8.02, the "Due Date"
shall mean the earliest date any Note became due in full, whether at the
stated maturity thereof, by acceleration or otherwise. In the event that
either Bank purchases a participation from the other Bank as a result of
any set-off or payment under the provision of this Section 8.02 and is
subsequently required to return all or any part of such set-off or payment
to the Company or to a trustee for the Company, the Bank from which it has
purchased a participation shall repurchase such participation to the extent
of its share of such returned amount.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their duly authorized officers as of the day and
year first above written.
OWENS & MINOR, INC.
By:_________________________________
Richard F. Bozard
Vice President
and Treasurer
Amount of
Commitment
CRESTAR BANK
$20,000,000
By:_________________________________
Brad H. Booker
Vice President
NATIONSBANK OF VIRGINIA, N.A.
$20,000,000
By:_________________________________
Robert Y. Bennett
Vice President
<PAGE>
EXHIBIT A
[FORM OF NOTE]
$20,000,000 Richmond, Virginia
November 1, 1993
FOR VALUE RECEIVED, OWENS & MINOR, INC., a Virginia corporation
(the "Company"), hereby promises to pay to the order of
______________________ (the "Bank"), at the principal office of the Bank at
____ East Main Street, Richmond, Virginia on the last day of the respective
Interest Periods set forth on the grid schedule or grid schedules attached
hereto and made a part hereof, but in no event later than the Maturity Date
as defined in the Credit Agreement (the "Credit Agreement") dated as of
November 1, 1993, among the Company and the Banks described in the Credit
Agreement, in lawful money of the United States of America, in immediately
available funds, the principal amount of Twenty Million Dollars
($20,000,000) or, if less than such principal amount, the aggregate unpaid
principal amount as shown on the grid schedule attached hereto of all Loans
(as defined in the Credit Agreement) made by the Bank to the Company
pursuant to the Credit Agreement, and to pay interest from the date hereof
on the unpaid principal amount hereof, in like money, at said office, on
the dates and at the rates selected in accordance with Article I of the
Credit Agreement.
The Company promises to pay interest, payable on demand, on any
overdue principal and, to the extent permitted by law, overdue interest
from their due dates at a rate or rates determined as set forth in the
Credit Agreement.
The Company hereby waives diligence, presentment, demand, protest
and notice of any kind whatsoever. The nonexercise by the holder of any of
its rights hereunder in any particular instance shall not constitute a
waiver thereof in that or any subsequent instance.
All borrowings evidenced by this Note and all payments and
prepayments of the principal hereof and interest hereon and the respective
dates thereof shall be endorsed by the holder on the schedule attached
hereto and made a part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof; provided, however, that any failure
to endorse such information on such schedule or continuation thereof shall
not in any manner affect the obligation of the Company to make payments of
principal and interest in accordance with the terms of this Note.
This Note is one of the Notes referred to in the Credit Agreement
which, among other things, contains provisions for the acceleration of the
maturity hereof upon the happening of certain events, for optional
prepayment of the principal hereof prior to the maturity thereof and for
the amendment or waiver of certain provisions of the Credit Agreement, all
upon the terms and conditions therein specified. This Note shall be
construed in accordance with and governed by the laws of the Commonwealth
of Virginia.
OWENS & MINOR, INC.
By_________________________________
Title:
<PAGE>
Loans and Payments
Name of Unpaid
Person Type Payments Principal
Making of Interest -------- Balance of
Notation Date Loan Period Principal Interest Note
- -------- ---- ---- ------- --------- -------- ----------
<PAGE>
EXHIBIT B
[Letterhead of Drew St. J. Carneal]
November ___, 1993
Crestar Bank
919 East Main Street
Richmond, Virginia 23219
NationsBank of Virginia, N.A.
1111 East Main Street
Richmond, Virginia 23277-0001
Dear Sirs:
I am Senior Vice President, Corporate Counsel and Secretary of
Owens & Minor, Inc. (the "Company"), a Virginia corporation, and have
represented the Company in connection with the preparation, execution and
delivery of the Credit Agreement dated as of November 1, 1993 (the "Credit
Agreement"), among you (collectively, the "Banks") and the Company. Terms
capitalized but not defined herein shall have the meanings given to them in
the Credit Agreement.
In rendering the opinions expressed below, I have examined
conformed copies of such corporate records, agreements and instruments of
the Company, certificates of public officials and of officers of the
Company and such other documents as I have deemed necessary as a basis for
the opinions hereafter expressed. With respect to certain matters of fact,
I have relied upon representations and certificates of the Company and its
officers and upon certificates of public officials.
Based on the foregoing, I am of the opinion that:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Virginia; each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization. Each of
the Company and its Subsidiaries has the corporate power and authority to
own its respective properties and to carry on its respective business as
now conducted. The Company has the corporate power to execute, deliver and
perform the Credit Agreement, to borrow thereunder and to execute, deliver
and perform under the Notes.
2. The execution, delivery and performance of the Credit
Agreement, the borrowings thereunder and the execution and delivery of the
Notes have been duly authorized by all requisite corporate action on the
part of the Company and will not violate any provision of law, the articles
of incorporation or by-laws of the Company or any Subsidiary, and, to best
of my knowledge, will not (i) violate (A) any applicable order of any court
or other agency of government or (B) any indenture, any agreement for
borrowed money, any bond, note or other similar instrument or any other
material agreement to which the Company or any Subsidiary is a party or by
which any of them or their respective properties are bound, (ii) be in
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement, bond,
note, instrument or other material agreement or (iii) result in the
creation or imposition of any lien, charge or encumbrance of any nature
upon any property or assets of the Company or any Subsidiary.
3. No action, consent or approval of, or registration or filing
with, or any other action by any governmental agency, bureau, commission or
court, or of stockholders, is required in connection with the execution,
delivery and performance by the Company of the Credit Agreement, the
borrowings thereunder or the execution, delivery and performance of the
Notes.
4. To the best of my knowledge, there are no actions, suits or
proceedings at law or in equity or by or before any governmental
instrumentality or other agency now pending or, threatened against or
affecting the Company or any of the Subsidiaries or any property or rights
of the Company or any of the Subsidiaries as to which there is a reasonable
possibility of an adverse determination and which, if adversely determined,
would individually or in the aggregate materially impair the ability of the
Company to perform under the terms of the Credit Agreement or the Notes, or
otherwise to carry on business substantially as now being conducted or
would result in any material adverse change in the business, assets or
condition (financial or otherwise) of the Company or, on a consolidated
basis, of the Company and the Subsidiaries.
5. To the best of my knowledge, neither the Company nor any of
its Subsidiaries is in default with respect to any judgment, writ,
injunction, decree, rule or regulation of any governmental instrumentality
or other agency where such default could have a material and adverse effect
on the financial condition of the Company or of the Company and the
Subsidiaries taken as a whole.
6. The Credit Agreement and the Notes have been duly
authorized, executed and delivered by the Company and constitute legal,
valid and binding obligation of the Company, enforceable in accordance with
the respective terms of each, subject, as to enforcement, to equitable
principles and applicable bankruptcy, reorganization, insolvency and
similar laws affecting creditors' rights generally and to moratorium laws
from time to time in effect.
Very truly yours,
OWENS & MINOR, INC.
1993 STOCK OPTION PLAN
<PAGE>
OWENS & MINOR, INC.
1993 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
1.01. Administrator means the Committee and any delegate of the
Committee that is appointed in accordance with Article III.
1.02. Affiliate means any "subsidiary or "parent" corporation (within
the meaning of Section 424 of the Code) of the Company.
1.03. Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the
terms and conditions of an Option or SAR granted to such Participant.
1.04. Board means the Board of Directors of the Company.
1.05. Change of Control means that (i) a third person, including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of
1934, acquires shares of the Company having 20% or more of the total number
of votes that may be cast for the election of the Board; or (ii) as the
result of any cash tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any combination of the
foregoing transactions (a "Transaction"), the persons who were directors of
the Company before the Transaction shall cease to constitute a majority of
the Board or of any successor to the Company.
1.06. Code means the Internal Revenue Code of 1986, and any
amendments thereto.
1.07. Committee means the Compensation Committee of the Board.
1.08. Common Stock means the Common Stock of the Company.
1.09. Company means Owens & Minor, Inc.
1.10. Corresponding SAR means an SAR that is granted in relation to
a particular Option and that can be exercised only upon the surrender to the
Company, unexercised, of that portion of the Option to which the SAR relates.
1.11. Fair Market Value means, on any given date, the closing price
of a share of Common Stock as reported on the New York Stock Exchange
composite tape on such date, or if the Common Stock was not traded on the New
York Stock Exchange on such day, then on the next preceding day that the
Common Stock was traded on such exchange, all as reported by such source as
the Administrator may select.
1.12. Option means a stock option that entitles the holder to
purchase from the Company a stated number of shares of Common Stock at the
price set forth in an Agreement.
1.13. Participant means an employee of the Company or an Affiliate,
including an employee who is a member of the Board, or an individual who
provides services to the Company or an Affiliate who satisfies the require-
ments of Article IV and is selected by the Administrator to receive an
Option, an SAR, or a combination thereof.
1.14. Plan means the Owens & Minor, Inc. 1993 Stock Option Plan.
1.15. SAR means a stock appreciation right that entitles the holder
to receive, with respect to each share of Common Stock encompassed by the
exercise of such SAR, the amount determined by the Administrator and
specified in an Agreement. In the absence of such a determination, the
holder shall be entitled to receive, with respect to each share of Common
Stock encompassed by the exercise of such SAR, the excess of the Fair Market
Value on the date of exercise over the Fair Market Value on the date of
grant. References to "SARs" include both Corresponding SARs and SARs granted
independently of Options, unless the context requires otherwise.
1.16. Ten Percent Shareholder means any individual owning more than
ten percent (10%) of the total combined voting power of all classes of stock
of the Company or of an Affiliate. An individual shall be considered to own
any voting stock owned (directly or indirectly) by or for his brothers,
sisters, spouse, ancestors or lineal descendants and shall be considered to
own proportionately any voting stock owned (directly or indirectly) by or for
a corporation, partnership, estate or trust of which such individual is a
shareholder, partner or beneficiary.
ARTICLE II
PURPOSES
The Plan is intended to assist the Company in recruiting and retaining
employees with ability and initiative by enabling such persons to participate
in its future success and to associate their interests with those of the
Company and its shareholders. The Plan is intended to permit the grant of
SARs and the grant of both Options qualifying under Section 422 of the Code
("incentive stock options") and Options not so qualifying. No Option that is
intended to be an incentive stock option shall be invalid for failure to
qualify as an incentive stock option. The proceeds received by the Company
from the sale of Common Stock pursuant to this Plan shall be used for general
corporate purposes.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Administrator. The Administrator
shall have authority to grant Options and SARs upon such terms (not
inconsistent with the provisions of this Plan) as the Administrator may
consider appropriate. Such terms may include conditions (in addition to
those contained in this Plan) on the exercisability of all or any part of an
Option or SAR. Notwithstanding any such conditions, the Administrator may,
in its discretion, accelerate the time at which any Option or SAR may be
exercised. Furthermore, each outstanding Option and SAR shall become
immediately and fully exercisable (in whole or in part at the discretion of
the holder) in the event of a Change in Control and during the period
(i) beginning on the first day following any tender offer or exchange offer
for shares of Common Stock (other than one made by the Company) provided that
shares of Common Stock are acquired pursuant to such offer and (ii) ending on
the thirtieth day following the expiration of such offer. In addition, the
Administrator shall have complete authority to interpret all provisions of
this Plan; to prescribe the form of Agreements; to adopt, amend, and rescind
rules and regulations pertaining to the administration of the Plan; and to
make all other determinations necessary or advisable for the administration
of this Plan. The express grant in the Plan of any specific power to the
Administrator shall not be construed as limiting any power or authority of
the Administrator. Any decision made, or action taken, by the Administrator
or in connection with the administration of this Plan shall be final and
conclusive. Neither the Administrator or any member of the Committee shall
be liable for any act done in good faith with respect to this Plan or any
Agreement, or the grant of any Option or SAR. All expenses of administering
this Plan shall be borne by the Company.
The Committee, in its discretion, may delegate to one or more officers
of the Company all or part of the Committee's authority and duties with
respect to grants and awards to individuals who are not subject to the
reporting and other provisions of Section 16 of the Securities Exchange Act
of 1934, as in effect from time to time. The Committee may revoke or amend
the terms of a delegation at any time but such action shall not invalidate
any prior actions of the Committee's delegate or delegates that were
consistent with the terms of the Plan.
ARTICLE IV
ELIGIBILITY
4.01. General. Any employee of the Company or an Affiliate
(including a corporation that becomes an Affiliate after the adoption of this
Plan) is eligible to participate in this Plan if the Administrator, in its
sole discretion, determines that such person has contributed significantly or
can be expected to contribute significantly to the profits or growth of the
Company or an Affiliate. Directors of the Company who are employees of the
Company or an Affiliate may be selected to participate in this Plan. A
member of the Committee may not participate in this Plan during the time that
his participation would prevent the Committee from being "disinterested" for
purposes of Securities and Exchange Commission Rule 16b-3 as in effect from
time to time.
4.02. Grants. The Administrator will designate individuals to whom
Options and SARs are to be granted and will specify the number of shares of
Common Stock subject to each grant. An Option may be granted with or without
a related SAR. An SAR may be granted with or without a related Option. All
Options and SARs granted under this Plan shall be evidenced by Agreements
which shall be subject to applicable provisions of this Plan and to such
other provisions as the Administrator may adopt. No Participant may be
granted incentive stock options or related SARs (under all incentive stock
option plans of the Company and its Affiliates) which are first exercisable
in any calendar year for stock having an aggregate Fair Market Value
(determined as of the date an Option is granted) that exceeds $100,000. The
preceding annual limitation shall not apply with respect to Options that are
not incentive stock options.
ARTICLE V
STOCK SUBJECT TO OPTIONS
Upon the exercise of any Option or SAR, the Company may deliver to the
Participant (or the Participant's broker if the Participant so directs),
shares from its authorized but unissued Common Stock. The maximum aggregate
number of shares of Common Stock that may be issued pursuant to the exercise
of Options and SARs under this Plan is 1,500,000. The maximum aggregate
number of shares of Common Stock that may be issued under this Plan shall be
subject to adjustment as provided in Article X. If an Option is terminated,
in whole or in part, for any reason other than its exercise or the exercise
of a Corresponding SAR, the number of shares of Common Stock allocated to the
Option or portion thereof may be reallocated to other Options and SARs to be
granted under this Plan. If an SAR is terminated, in whole or in part, for
any reason other than its exercise or the exercise of a related Option, the
number of shares of Common Stock allocated to the SAR or portion thereof may
be reallocated to other Options and SARs to be granted under this Plan.
ARTICLE VI
OPTION PRICE
The price per share for Common Stock purchased on the exercise of an
Option shall be determined by the Administrator on the date of grant;
provided, however, that the price per share for Common Stock purchased on the
exercise of any Option that is an incentive stock option shall not be less
than the Fair Market Value on the date the Option is granted and provided
further that the price per share shall not be less than 110% of such Fair
Market Value in the case of an incentive stock option granted to a Partici-
pant who is a Ten Percent Shareholder on the date such incentive stock option
is granted.
ARTICLE VII
EXERCISE OF OPTIONS
7.01. Maximum Option or SAR Period. The maximum period in which an
Option or SAR may be exercised shall be determined by the Administrator on
the date of grant, except that no Option that is an incentive stock option or
its Corresponding SAR shall be exercisable after the expiration of ten years
from the date such Option or Corresponding SAR was granted. In the case of
an incentive stock option or its Corresponding SAR that is granted to a
participant who is a Ten Percent Shareholder, such Option and Corresponding
SAR shall not be exercisable after the expiration of five years from the date
of grant. The terms of any Option that is an incentive stock option or
Corresponding SAR may provide that it is exercisable for a period less than
such maximum period.
7.02. Nontransferability. An Option or SAR granted under this Plan
shall be nontransferable except by will or by the laws of descent and
distribution. In the event of any such transfer, the Option and any
Corresponding SAR that relates to such Option must be transferred to the same
person or person(s). During the lifetime of the Participant to whom the
Option or SAR is granted, the Option or SAR may be exercised only by the
Participant. No right or interest of a Participant in any Option or SAR
shall be liable for, or subject to, any lien, obligation, or liability of
such Participant.
7.03. Employee Status. For purposes of determining the applicability
of Section 422 of the Code (relating to incentive stock options), or in the
event that the terms of any Option or SAR provide that it may be exercised
only during employment or continued service or within a specified period of
time after termination of employment or service, the Administrator may decide
to what extent leaves of absence for governmental or military service,
illness, temporary disability, or other reasons shall not be deemed
interruptions of continuous employment or service.
ARTICLE VIII
METHOD OF EXERCISE
8.01. Exercise. Subject to the provisions of Articles VII and X, an
Option or SAR may be exercised in whole at any time or in part from time to
time at such times and in compliance with such requirements as the Adminis-
trator shall determine; provided, however, that a Corresponding SAR that is
related to an incentive stock option may be exercised only to the extent that
the related Option is exercisable and when the Fair Market Value exceeds the
option price of the related Option. An Option or SAR granted under this Plan
may be exercised with respect to any number of whole shares less than the
full number for which the Option or SAR could be exercised. A partial
exercise of an Option or SAR shall not affect the right to exercise the
Option or SAR from time to time in accordance with this Plan and the appli-
cable Agreement with respect to the remaining shares subject to the Option or
related to the SAR. The exercise of either an Option or Corresponding SAR
shall result in the termination of the other to the extent of the number of
shares with respect to which the Option or Corresponding SAR is exercised.
8.02. Payment. Unless otherwise provided by the Agreement, payment
of the Option price shall be made in cash or a cash equivalent acceptable to
the Administrator. If the Agreement provides, payment of all or part of the
Option price may be made by surrendering shares of Common Stock to the
Company. The total amount of cash or cash equivalent paid and the Fair
Market Value (determined as of the day preceding the date of exercise) of any
Common Stock surrendered shall not be less than the aggregate option price
for the number of shares for which the option is being exercised.
8.03. Determination of Payment of Cash and/or Common Stock Upon
Exercise of SAR. At the Administrator's discretion, the amount payable as a
result of the exercise of an SAR may be settled in cash, Common Stock, or a
combination of cash and Common Stock. No fractional share shall be
deliverable upon the exercise of an SAR but a cash payment will be made in
lieu thereof.
8.04. Shareholder Rights. No Participant shall have any rights as a
stockholder with respect to shares subject to his Option or SAR until the
date of exercise of such Option or SAR.
ARTICLE IX
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options and SARs may be granted
under this Plan shall be proportionately adjusted, and the terms of
outstanding Options and SARs shall be adjusted, as the Administrator shall
determine to be equitably required in the event that (a) the Company (i)
effects one or more stock dividends, stock split-ups, subdivisions or
consolidations of shares or (ii) engages in a transaction to which Sec-
tion 424 of the Code applies or (b) there occurs any other event which, in
the judgment of the Administrator necessitates such action. Any determina-
tion made under this Article IX by the Administrator shall be final and con-
clusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to, outstanding Options or SARs.
The Administrator may grant Options and may grant SARs in substitution
for stock awards, stock options, stock appreciation rights, or similar awards
held by an individual who becomes an employee of the Company or an Affiliate
in connection with a transaction described in the first paragraph of this
Article IX. Notwithstanding any provision of the Plan (other than the
limitation of Article V), the terms of such substituted Option or SAR grants
shall be as the Administrator, in its discretion, determines is appropriate.
ARTICLE X
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES
No Option or SAR shall be exercisable, no Common Stock shall be issued,
no certificates for shares of Common Stock shall be delivered, and no payment
shall be made under this Plan except in compliance with all applicable
federal and state laws and regulations and any listing agreement to which the
Company is a party and the rules of all domestic stock exchanges on which the
Company's shares may be listed. The Company shall have the right to rely on
an opinion of its counsel as to such compliance. Any share certificate
issued to evidence Common Stock for which an Option or SAR is exercised may
bear such legends and statements as the Administrator may deem advisable to
assure compliance with federal and state laws and regulations. No Option or
SAR shall be exercisable, no Common Stock shall be issued, no certificate for
shares shall be delivered, and no payment shall be made under this Plan until
the Company has obtained such consent or approval as the Administrator may
deem advisable from regulatory bodies having jurisdiction over such matters.
ARTICLE XI
GENERAL PROVISIONS
11.01. Effect on Employment. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any
part thereof) shall confer upon any individual any right to continue in the
employ of the Company or an Affiliate or in any way affect any right and
power of the Company or an Affiliate to terminate the employment of any
individual at any time with or without assigning a reason therefor.
11.02. Unfunded Plan. The Plan, insofar as it provides for grants,
shall be unfunded, and the Company shall not be required to segregate any
assets that may at any time be represented by grants under this Plan. Any
liability of the Company to any person with respect to any grant under this
Plan shall be based solely upon any contractual obligations that may be
created pursuant to this Plan. No such obligation of the Company shall be
deemed to be secured by any pledge of, or other encumbrance on, any property
of the Company.
11.03. Disposition of Stock. A Participant shall notify the
Administrator of any sale or other disposition of Common Stock acquired
pursuant to an Option that was an incentive stock option if such sale or
disposition occurs (i) within two years of the grant of an Option or
(ii) within one year of the issuance of the Common Stock to the Participant.
Such notice shall be in writing and directed to the Secretary of the Company.
11.04. Tax Withholding. Each Participant shall be responsible for
satisfying any income and employment tax withholding obligation attributable
to participation in this Plan. In accordance with procedures established by
the Administrator, a Participant may surrender shares of Common Stock, or
receive fewer shares of Common Stock than otherwise would be issued, in
satisfaction of all or part of such withholding tax obligation.
11.05. Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
ARTICLE XII
AMENDMENT
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment may become effective until shareholder approval is
obtained if (i) the amendment increases the aggregate number of shares of
Common Stock that may be issued under the Plan or (ii) the amendment changes
the class of individuals eligible to become Participants. No amendment
shall, without a Participant's consent, adversely affect any rights of such
Participant under any Option or SAR outstanding at the time such amendment is
made.
ARTICLE XIII
DURATION OF PLAN
No Option or SAR may be granted under this Plan more than five years
after the earlier of the date that the Plan is adopted by the Board or the
date that the Plan is approved by shareholders as provided in Article XIV.
Options and SARs granted before that date shall remain valid in accordance
with their terms.
ARTICLE XIV
EFFECTIVE DATE OF PLAN
Options and SARs may be granted under this Plan upon its adoption by the
Board, provided that no Option or SAR will be exercisable unless this Plan is
approved by a majority of the votes entitled to be cast by the Company's
shareholders, voting either in person or by proxy, at a duly held
shareholders' meeting within twelve months of such adoption.
OWENS & MINOR, INC.
1993 DIRECTORS' COMPENSATION PLAN
<PAGE>
INTRODUCTION
The Owens & Minor, Inc. 1993 Directors' Compensation Plan (the
Plan) was adopted by the Board of Directors on February 25, 1993, subject to
the approval of the Plan by the Company's shareholders. Three programs
comprise the Plan: the Stock Option Program, the Deferred Fee Program and
the Stock Purchase Program.
The Stock Option Program provides for the automatic grant of
Options to purchase Common Stock. Options are granted on an annual basis and
are subject to the terms and conditions prescribed by the Plan. Participa-
tion in the Stock Option Program is automatic.
The Deferred Fee Program allows Participants to defer the
receipt of all or part of their Retainer Fee, Meeting Fees or both in
accordance with Revenue Ruling 71-419, 1971-2 C.B. 220. Participation in the
Deferred Fee Program is voluntary.
The Stock Purchase Program allows Participants to receive all
or part of their Retainer Fee, Meeting Fees or both (to the extent such
amounts are not deferred under the Deferred Fee Program), in the form of
Common Stock. Participation in the Stock Purchase Program is voluntary.
The Plan is intended to assist the Company in promoting a
greater identity of interest between Participants and the Company and its
shareholders. The Plan is also intended to assist the Company in attracting
and retaining non-employee Directors by affording them an opportunity to
share in the future success of the Company.
<PAGE>
Table of Contents
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Account . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03. Allocation Date . . . . . . . . . . . . . . . . . . . . . 1
1.04. Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 1
1.05. Board . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.06. Code. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.07. Committee . . . . . . . . . . . . . . . . . . . . . . . . 1
1.08. Common Stock. . . . . . . . . . . . . . . . . . . . . . . 2
1.09. Common Stock Account. . . . . . . . . . . . . . . . . . . 2
1.11. Compensation. . . . . . . . . . . . . . . . . . . . . . . 2
1.12. Deferred Amount . . . . . . . . . . . . . . . . . . . . . 2
1.13. Deferred Fee Program. . . . . . . . . . . . . . . . . . . 2
1.14. Disability. . . . . . . . . . . . . . . . . . . . . . . . 2
1.15. Distribution Date . . . . . . . . . . . . . . . . . . . . 2
1.16. Election Date . . . . . . . . . . . . . . . . . . . . . . 2
1.17. Election Form . . . . . . . . . . . . . . . . . . . . . . 2
1.18. Extraordinary Distribution Request Date . . . . . . . . . 3
1.19. Extraordinary Distribution Request Form . . . . . . . . . 3
1.20. Fair Market Value . . . . . . . . . . . . . . . . . . . . 3
1.21. Meeting Fees. . . . . . . . . . . . . . . . . . . . . . . 3
1.22. Option. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23. Participant . . . . . . . . . . . . . . . . . . . . . . . 3
1.24. Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25. Retainer Fee. . . . . . . . . . . . . . . . . . . . . . . 4
1.26. Stock Option Program. . . . . . . . . . . . . . . . . . . 4
1.27. Stock Purchase Program. . . . . . . . . . . . . . . . . . 4
1.28. Stock Purchase Election . . . . . . . . . . . . . . . . . 4
1.29. Stock Purchase Election Form. . . . . . . . . . . . . . . 4
ARTICLE II - ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III - STOCK OPTION PROGRAM. . . . . . . . . . . . . . . . . . . 5
3.01. Option Grants . . . . . . . . . . . . . . . . . . . . . . 5
3.02. Option Price. . . . . . . . . . . . . . . . . . . . . . . 5
3.03. Maximum Option Period . . . . . . . . . . . . . . . . . . 5
3.04. Exercise. . . . . . . . . . . . . . . . . . . . . . . . . 6
3.05. Payment of Option Price . . . . . . . . . . . . . . . . . 6
3.06. Shareholder Rights. . . . . . . . . . . . . . . . . . . . 6
3.07. Stock Subject to Options. . . . . . . . . . . . . . . . . 6
ARTICLE IV - DEFERRED FEE PROGRAM . . . . . . . . . . . . . . . . . . . 7
4.01. Deferral Elections. . . . . . . . . . . . . . . . . . . . 7
4.02. Deferral Election Modifications . . . . . . . . . . . . . 8
4.03. Cessation of Deferrals. . . . . . . . . . . . . . . . . . 9
4.04. Beneficiary Election Modification . . . . . . . . . . . . 9
4.05. Investments . . . . . . . . . . . . . . . . . . . . . . . 9
4.06. Investment Directions . . . . . . . . . . . . . . . . . . 10
4.07. New Investment Directions . . . . . . . . . . . . . . . . 11
4.08. Investment Transfers. . . . . . . . . . . . . . . . . . . 11
4.09. Pre-October 1, 1993 Restrictions. . . . . . . . . . . . . 12
4.10. Distribution Elections. . . . . . . . . . . . . . . . . . 12
4.11. Modified Distribution Elections . . . . . . . . . . . . . 13
4.12. Extraordinary Distributions . . . . . . . . . . . . . . . 13
ARTICLE V - STOCK PURCHASE PROGRAM. . . . . . . . . . . . . . . . . . . 15
5.01. Common Stock Purchase . . . . . . . . . . . . . . . . . . 15
5.02. Stock Purchase Election Modification. . . . . . . . . . . 16
5.03. Issuance of Common Stock. . . . . . . . . . . . . . . . . 16
ARTICLE VI - SHAREHOLDER RIGHTS . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VII - ADJUSTMENT UPON CHANGE IN COMMON STOCK. . . . . . . . . . 17
ARTICLE VIII - COMPLIANCE WITH LAW, ETC.. . . . . . . . . . . . . . . . 18
ARTICLE IX - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . 18
9.01. Unfunded Plan . . . . . . . . . . . . . . . . . . . . . . 18
9.02. Rules of Construction . . . . . . . . . . . . . . . . . . 19
9.03. Nontransferability. . . . . . . . . . . . . . . . . . . . 19
ARTICLE X - AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . 19
ARTICLE XI - DURATION OF PLAN . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XII - EFFECTIVE DATE OF PLAN. . . . . . . . . . . . . . . . . . 20
<PAGE>
OWENS & MINOR , INC.
1993 DIRECTOR'S COMPENSATION PLAN
ARTICLE I
DEFINITIONS
1.01. Account means an unfunded deferred compensation account
established by the Company pursuant to the Deferred Fee Program, consisting
of one or more Subaccounts established in accordance with Section 4.05.
1.02. Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the
terms and conditions of an Option granted to such Participant.
1.03. Allocation Date means any date on which an amount representing
all or a part of a Participant's Compensation is to be credited to his or her
Account pursuant to an effective deferral election. The Allocation Date for
the Retainer Fee shall be the first day of each calendar quarter and for
Meeting Fees shall be the first day of the month following the meeting.
1.04. Beneficiary means any person or entity designated as such in a
current Election Form. If there is no valid designation or if no designated
Beneficiary survives the Participant, the Beneficiary is the Participant's
estate.
1.05. Board means the Board of Directors of the Company.
1.06. Code means the Internal Revenue Code of 1986, and any
amendments thereto.
1.07. Committee means the Compensation Committee of the Board.
1.08. Common Stock means the Common Stock of the Company.
1.09. Common Stock Account means the Subaccount whose value shall be
based on the value of units representing shares of Common Stock and dividend
equivalents.
1.10. Company means Owens & Minor, Inc.
1.11. Compensation means the sum of the Retainer Fee and the Meeting
Fees payable by the Company to each Participant, including any additional
amount paid to a chairman of a committee for additional services.
1.12. Deferred Amount means the amount (determined as a percentage of
the Retainer Fee and the Meeting Fees) subject to a current deferral election.
1.13. Deferred Fee Program means the provisions of the Plan that
permit Participants to defer all or part of their Compensation.
1.14. Disability means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
1.15. Distribution Date means the date designated by a Participant or
Retired Participant in accordance with Sections 4.10 and 4.11 for the
commencement of payment of amounts credited to his or her Account.
1.16. Election Date means the date an Election Form is received by
the Secretary of the Company.
1.17. Election Form means a valid Deferred Fee Program initial
Election Form or modified Election Form (in the forms approved by the
Committee) properly completed and signed.
1.18. Extraordinary Distribution Request Date means the date an
Extraordinary Distribution Request Form is received by the Secretary of the
Company.
1.19. Extraordinary Distribution Request Form means the Deferred Fee
Program Extraordinary Distribution Request Form (in the form approved by the
Committee) properly completed and executed by a Participant or Beneficiary
who wishes to request an extraordinary distribution of amounts credited to
his or her Account in accordance with Section 4.12.
1.20. Fair Market Value means, on any given date, the closing price
of a share of Common Stock as reported on the New York Stock Exchange
composite tape on such date, or if the Common Stock was not traded on the New
York Stock Exchange on such day, then on the next preceding day that the
Common Stock was traded on such exchange, all as reported by in the Wall
Street Journal.
1.21. Meeting Fees means the portion of a Participant's Compensation
that is based upon his or her attendance at Board meetings and meetings of
committees of the Board.
1.22. Option means a stock option that entitles the holder to
purchase from the Company a stated number of shares of Common Stock at the
price set forth in an Agreement.
1.23. Participant means a member of the Board who is not then an
employee or officer of the Company. For purposes of the Deferred Fee Program
only, a Participant shall also include a person who ceases to be a member of
the Board as long as an Account is being maintained for his or her benefit.
1.24. Plan means the Owens & Minor, Inc. 1993 Director's Compensation
Plan.
1.25. Retainer Fee means the portion of a Participant's Compensation
that is fixed and paid without regard to his or her attendance at meetings.
1.26. Stock Option Program means the provisions of the Plan relating
to Options.
1.27. Stock Purchase Program means the provisions of the Plan that
permit Participants to purchase Common Stock with all or part of their
Compensation.
1.28. Stock Purchase Election means a Participant's election to
receive all or part of his or her Compensation in the form of Common Stock in
accordance with the Stock Purchase Program.
1.29. Stock Purchase Election Form means a valid initial Stock
Purchase Program election form or a modified Stock Purchase Program election
form (in the forms approved by the Committee) properly completed and signed.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall
grant Options in accordance with the Plan and upon such terms (not
inconsistent with the provisions of this Plan) as the Committee may consider
appropriate. In addition, the Committee shall have complete authority to
interpret all provisions of this Plan; to prescribe the form of Agreements
and to approve the other forms that are appropriate for use in conjunction
with the Plan; to adopt, amend, and rescind rules and regulations pertaining
to the administration of the Plan; and to make all other determinations
necessary or advisable for the administration of this Plan. The express
grant in the Plan of any specific power to the Committee shall not be
construed as limiting any power or authority of the Committee. Any decision
made, or action taken, by the Committee or in connection with the
administration of this Plan shall be final and conclusive. No member of the
Committee shall be liable for any act done in good faith with respect to this
Plan. All expenses of administering this Plan shall be borne by the Company.
ARTICLE III
STOCK OPTION PROGRAM
3.01. Option Grants. During the term of the Plan and subject to the
limitation set forth in Section 3.07, each Participant will be granted an
Option for 1,688 shares of Common Stock at the first meeting of the Board
following each annual meeting of the Company's shareholders during the term
of this Plan. All Options granted under this Plan will be evidenced by
Agreements which shall be subject to the applicable provisions of the Plan.
3.02. Option Price. The price per share for Common Stock purchased
on the exercise of an Option shall be the Fair Market Value of the Common
Stock on the date the Option is granted.
3.03. Maximum Option Period. The maximum period in which an Option
may be exercised shall be five years from the date of grant; provided,
however, that if the Participant ceases to be a member of the Board, the
Option may be exercised for one year following the date he or she ceases to
be a member of the Board, or until the expiration of the Option period,
whichever is shorter. In the event of the Participant's death while he or
she is a member of the Board, the Option may be exercised by the
Participant's estate or by such person or persons who succeed to Partici-
pant's rights by will or the laws of descent and distribution for one year
following the Participant's date of death or until the expiration of the
Option period, whichever is shorter.
3.04. Exercise. Subject to the provisions of Section 3.03 and
Article VIII, an Option may be exercised in whole at any time or in part from
time to time on and after the date of grant. An Option may be exercised with
respect to any number of whole shares less than the full number for which the
Option could be exercised. A partial exercise of an Option shall not affect
the right to exercise the Option from time to time in accordance with this
Plan and the applicable Agreement with respect to the remaining shares
subject to the Option.
3.05. Payment of Option Price. Payment of the Option price shall be
made in cash or a cash equivalent acceptable to the Committee or by
surrendering shares of Common Stock to the Company. The total amount of cash
or cash equivalent paid and the Fair Market Value (determined as of the day
preceding the date of exercise) of any Common Stock surrendered shall not be
less than the aggregate option price for the number of shares for which the
option is being exercised.
3.06. Shareholder Rights. No Participant shall have any rights as a
shareholder with respect to shares subject to his or her Option until the
date of exercise of such Option.
3.07. Stock Subject to Options. Upon the exercise of any Option, the
Company may deliver to the Participant (or the Participant's broker if the
Participant so directs), shares from its authorized but unissued Common
Stock. The maximum aggregate number of shares of Common Stock that may be
issued pursuant to the exercise of Options under this Plan is 150,000. The
maximum aggregate number of shares of Common Stock that may be issued under
this Plan shall be subject to adjustment as provided in Article VII. If an
Option is terminated, in whole or in part, for any reason other than its
exercise, the number of shares of Common Stock allocated to the Option or
portion thereof may be reallocated to other Options to be granted under this
Plan.
ARTICLE IV
DEFERRED FEE PROGRAM
4.01. Deferral Elections. (a) A Participant may make a Deferral
Election with respect to all or a part of his or her Compensation to be
earned and payable thereafter by completing and executing an Election Form
and submitting it to the Secretary of the Company. A deferral election
relating to a Retainer Fee shall be in integral multiples of twenty-five
percent (25%) of the Retainer Fee. A deferral election relating to Meeting
Fees shall be in integral multiples of twenty-five percent (25%) of each
Meeting Fee.
(b) In accordance with the terms of the Plan, the
Participant shall indicate on the Election Form: (i) the percentage of the
Retainer Fee and the percentage of the Meeting Fee that he or she wishes to
defer; (ii) the Distribution Date; (iii) whether distributions are to be in
a lump sum, in installments or a combination thereof; (iv) the Participant's
Beneficiary or Beneficiaries; and (v) the subaccounts to which the Deferred
Amount is to be allocated.
(c) A deferral election shall become effective with respect
to a Participant's Retainer Fee accruing on and after the first day of the
calendar quarter following the Election Date. A deferral election shall
become effective with respect to a Participant's Meeting Fees accruing on and
after the first day of the calendar month following the Election Date. A
deferral election shall remain in effect with respect to all future Compen-
sation until a new deferral election made by the Participant in accordance
with Section 4.02 or Section 4.03 becomes effective.
4.02. Deferral Election Modifications. A Participant may modify his
or her deferral election with respect to Compensation to be earned and
payable thereafter by completing and executing a new Election Form and
submitting it to the Secretary of the Company. An election to increase the
amount of future Compensation to be deferred shall become effective with
respect to a Participant's Retainer Fee accruing on and after the first day
of the calendar quarter following the Election Date. An election to increase
the amount of future Compensation deferred shall become effective with
respect to a Participant's Meeting Fees accruing on and after the first day
of the calendar month following the Election Date. Subject to Section 4.03,
an election to decrease the amount of future Compensation to be deferred
shall become effective with respect to Compensation accruing on and after the
later of (i) January 1 of the year following the Election Date or (ii) the
first day of the second calendar quarter following the Election Date.
Notwithstanding the foregoing, to the extent any such modification of a
deferral election affects the Common Stock Account, it shall not become
effective until the first day of the calendar month that is at least six
months after the Election Date. Any amount credited to a Participant's
Account prior to such effective date will continue to be subject to the
provisions of the Participant's last valid Election Form.
4.03. Cessation of Deferrals. A Participant may cease to defer
future Compensation by completing and executing a new Election Form, and
submitting it to the Secretary of the Company. An election by a Participant
to cease deferrals in the Deferred Fee Program shall become effective with
respect to Compensation accruing on or after the later of (i) January 1 of
the year following the Election Date or (ii) the first day of the second
calendar quarter following the Election Date. Notwithstanding the foregoing,
to the extent such election affects the Common Stock Account, it shall not
become effective until the first day of the calendar month that is at least
six months after the Election Date. Any amounts credited to a Participant's
Account prior to such effective date will continue to be subject to the
provisions of the Participant's last valid Election Form.
4.04. Beneficiary Election Modification. A Participant shall be
permitted at any time to modify his or her Beneficiary designation, effective
as of the Election Date, by completing and executing a new Election Form and
submitting it to the Secretary of the Company.
4.05. Investments. (a) The Company shall establish an Account (for
bookkeeping purposes only), for each Participant and for each Beneficiary to
whom installment distributions are being made. On each Allocation Date, the
Company shall allocate to each Participant's Account an amount equal to his
Deferred Amount.
(b) The Company shall establish within each Account one or
more Subaccounts, which shall be credited with earnings and charged with
losses, if any. One Subaccount shall be the Common Stock Account. The other
Subaccounts, if any, shall be designated by the Committee from time to time.
(c) Subject to the provisions of Sections 4.06 and 4.07, on
each Allocation Date, each Participant's Subaccount shall be credited with an
amount equal to the Deferred Amount designated by the Participant for alloca-
tion to such Subaccounts. Each Subaccount shall be credited with earnings
and charged with losses as if the amounts allocated thereto actually had been
invested in the investment designated as that subaccount.
4.06. Investment Directions. In connection with his or her initial
deferral election, each Participant shall make an investment direction on his
or her Election Form with respect to the portion of such Participant's
Deferred Amount that is to be allocated to each Subaccount of the
Participant's Account. Any apportionment of Deferred Amounts (and of
increases or decreases in Deferred Amounts) among the Subaccounts shall be in
integral multiples of ten percent (10%). An investment direction shall
become effective with respect to a Subaccount other than the Common Stock
Account on the first day of the calendar month following the Election Date.
An investment direction shall become effective with respect to the Common
Stock Account on the later to occur of (i) the first day of the calendar
month that occurs six months after the relevant Election Date and (ii)
October 1, 1993. All investment directions shall be irrevocable and shall
remain in effect with respect to all future Deferred Amounts until a new
irrevocable investment direction made by the Participant in accordance with
Section 4.07 becomes effective.
4.07. New Investment Directions. A Participant may make a new
investment direction with respect to his or her Deferred Amount only by
completing and executing a new Election Form and submitting it to the
Secretary of the Company. A new investment direction shall become effective
with respect to a Subaccount other than the Common Stock Account on the first
day of the calendar month following the Election Date. A new investment
direction shall become effective with respect to the Common Stock Account on
the later to occur of (i) the first day of the calendar month that is at
least six months after the relevant Election Date and (ii) October 1, 1993.
4.08. Investment Transfers. A Participant or a Beneficiary (after
the death of the Participant) may transfer to one or more different
Subaccounts all or a part (in integral multiples of ten percent (10%)) of the
amounts credited to a Subaccount by completing and executing a Transfer Form
and submitting it to the Secretary of the Company. Any transfer of amounts
among the Subaccounts and, unless the person requesting the transfer is then
subject to Section 16 of the Exchange Act, the Common Stock Account, shall
become effective on the first day of the calendar month following the
Transfer Election Date. Any transfer to or from the Common Stock Account
requested by a person who is then subject to Section 16 of the Exchange Act
shall become effective on the first day of the calendar month that is at
least six months after the Transfer Election Date, but in no event, prior to
October 1, 1993.
4.09. Pre-October 1, 1993 Restrictions. Notwithstanding the
foregoing, prior to October 1, 1993, each Participant will be permitted to
make no more than one investment direction involving the Common Stock
Account.
4.10. Distribution Elections. (a) Each Participant shall designate
on his or her Election Form one of the following dates as a Distribution Date
with respect to amounts credited to his or her Account thereafter: (i) the
first day of the calendar month following the date of the Participant's
death; (ii) the first day of the calendar month following the date of the
Participant's Disability; (iii) the first day of the calendar month following
the date of termination of the Participant's service as a member of the
Board; (iv) the first day of a calendar month specified by the Participant
which is at least six months after the Election Date; or (v) the earliest to
occur of (i), (ii), (iii) or (iv). A Distribution Date election shall become
effective on the Election Date.
(b) A Participant may request on his or her Election Form
that distributions from his or her Account be made in (i) a lump sum, (ii) no
more than one-hundred eighty (180) monthly, sixty (60) quarterly or fifteen
(15) annual installments or (iii) a combination of (i) and (ii). Each
installment shall be determined by dividing the Account balance by the number
of remaining installments. If a Participant receives a distribution from a
Subaccount on an installment basis, amounts remaining in such Subaccount
before payment shall continue to accrue earnings and incur losses in
accordance with the terms of Section 4.05. Except as stated in Section
4.10(c), all distributions shall be made to the Participant.
(c) If the Distribution Date is the first day of the month
following the Participant's death or a fixed date which in fact occurs after
the Participant's death or if at the time of death the Participant was
receiving distributions in installments, the balance remaining in the
Participant's Account shall be payable to his or her Beneficiaries as set
forth on the Participant's current Election Form or Forms. Upon the death of
a Beneficiary who is receiving distributions in installments, the balance
remaining in the Account of the Beneficiary shall be payable to his or her
estate in a lump sum.
(d) All distributions shall be paid in cash and, except as
provided in Section 4.12, shall be deemed to have been made from each
Subaccount pro rata.
4.11. Modified Distribution Elections. A Participant may modify his or her
election as to the Distribution Date and form of distribution with respect to
Compensation to be earned and payable thereafter by completing and executing a
new Election Form and submitting it to the Secretary of the Company. Any new
Distribution Date or form of distribution election shall become effective on
the Election Date.
4.12. Extraordinary Distributions. (a) Notwithstanding the
foregoing, a Participant or Beneficiary (after the death of the Participant)
may request an extraordinary distribution of all or part of the amount
credited to his or her Account on account of hardship. A distribution shall
be deemed to be "on account of hardship" if such distribution is necessary to
alleviate or satisfy an immediate and heavy financial need of the Participant
or Beneficiary (after the death of the Participant).
(b) A request for an extraordinary distribution shall be
made by completing and executing an Extraordinary Distribution Request Form
and submitting it to the Secretary of the Company. All extraordinary
distributions shall be subject to approval by the Committee. The
Extraordinary Distribution Request Form shall indicate: (i) the amount to be
distributed from the Account; (ii) the Subaccount(s) from which the
distribution is to be made; and (iii) the "hardship" requiring the distribu-
tion. The amount of any extraordinary distribution shall not exceed the
lesser of the amount determined by the Committee to be required to meet the
immediate financial need of the applicant or the amount credited to the
Participant's Account.
(c) An extraordinary distribution shall be made with respect
to amounts credited to any of the Subaccounts, if the recipient is not then
subject to Section 16 of the Exchange Act, on the first day of the calendar
month next following approval of the extraordinary distribution request by
the Committee. An extraordinary distribution requested by a Participant who
is then subject to Section 16 of the Exchange Act shall commence with respect
to amounts credited to the Common Stock Account on the first day of the
calendar month that is at least six months following the Extraordinary
Distribution Request Date or, if later, the first day of the calendar month
following approval of the extraordinary distribution request by the
Committee.
ARTICLE V
STOCK PURCHASE PROGRAM
5.01. Common Stock Purchase. (a) A Participant may make a Stock
Purchase Election with respect to all or part of his or her Compensation to
be earned and payable thereafter (other than Compensation that is deferred
under Article IV), by completing and executing a Stock Purchase Election Form
and submitting it to the Secretary of the Company. The preceding sentence to
the contrary notwithstanding, the Stock Purchase Election shall be effective
only with respect to Compensation that is payable on and after the first day
of a calendar month that is at least six months after the Election Date, but
in no event before October 1, 1993.
(b) A Stock Purchase Election relating to the Retainer Fee
shall be in integral multiples of twenty-five percent (25%) of the Retainer
Fee. A Stock Purchase Election relating to Meeting Fees shall be in integral
multiples of twenty-five percent (25%) of each Meeting Fee. The Participant
shall indicate on the Stock Purchase Election Form whether the Common Stock
issued under this Article V shall be registered in the name of the Partici-
pant or in the joint names of the Participant and his or her spouse. A Stock
Purchase Election Form shall remain in effect with respect to all future
Compensation until a new Stock Purchase Election made by the participant in
accordance with Section 5.02 becomes effective.
5.02. Stock Purchase Election Modification. A Participant may modify
his or her Stock Purchase Election to increase or decrease the amount of
Compensation that will be applied to the purchase of Common Stock under this
Article V or to cease purchases of Common Stock under this Article V. The
new Stock Purchase Election shall be effective with respect to Compensation
payable on and after the first day of the month specified by the Participant;
provided, however, that such date is at least six months after the Election
Date and on or after October 1, 1993.
5.03. Issuance of Common Stock. Common Stock purchased under this
Article V shall be issued as of the date that the Retainer Fee or Meeting Fee
or both, as applicable, would have been payable but for the Participant's
Stock Purchase Election. The number of shares issuable shall be determined
by dividing the amount of Retainer Fee or Meeting Fee otherwise payable on
that date by the Fair Market Value of the Common Stock on the day preceding
the date described in the preceding sentence. A fractional share of Common
Stock shall not be issued but instead the Participant shall receive a cash
payment of the Compensation that cannot be applied to purchase a whole share.
ARTICLE VI
SHAREHOLDER RIGHTS
No Participant shall have any rights as a shareholder with
respect to shares subject to his or her Option until the date that he or she
exercises such Option. No Participant shall have any rights as a shareholder
with respect to his or her participation in the Deferred Fee Program. No
Participant shall have any rights as a shareholder with respect to his or her
participation in the Stock Purchase Program until the date for the issuance
of shares as provided in Section 5.03.
ARTICLE VII
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options may be granted
under this Plan shall be proportionately adjusted, and the terms of
outstanding Options and the records of the Company Stock Account shall be
adjusted, as the Committee shall determine to be equitably required in the
event that (a) the Company (i) effects one or more stock dividends, stock
split-ups, subdivisions or consolidations of shares or (ii) engages in a
transaction to which Section 424 of the Code applies or (b) there occurs any
other event which, in the judgment of the Committee necessitates such action.
Any determination made under this Article VII by the Committee shall be final
and conclusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to, outstanding awards of Options or the records of the
Company Stock Account.
ARTICLE VIII
COMPLIANCE WITH LAW, ETC.
No Option shall be exercisable, no Common Stock shall be
issued, no certificates for shares of Common Stock shall be delivered, and no
payment shall be made under this Plan except in compliance with all appli-
cable federal and state laws and regulations, any listing agreement to which
the Company is a party, and the rules of all domestic stock exchanges on
which the Company's shares may be listed. The Company shall have the right
to rely on an opinion of its counsel as to such compliance. Any share
certificate issued to evidence Common Stock purchased under Article V or for
which an Option is exercised may bear such legends and statements as the
Committee may deem advisable to assure compliance with federal and state laws
and regulations. No Option shall be exercisable, no Common Stock shall be
issued, no certificate for shares shall be delivered, and no payment shall be
made under this Plan until the Company has obtained such consent or approval
as the Committee may deem advisable from regulatory bodies having jurisdic-
tion over such matters.
ARTICLE IX
GENERAL PROVISIONS
9.01. Unfunded Plan. The Plan shall be unfunded, and the Company
shall not be required to segregate any assets that may at any time be
represented by grants under, or participation in, this Plan. Any liability
of the Company to any person with respect to any grant under, or
participation in, this Plan shall be based solely upon any contractual obli-
gations that may be created pursuant to this Plan. No such obligation of the
Company shall be deemed to be secured by any pledge of, or other encumbrance
on, any property of the Company.
9.02. Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
use of the singular includes the plural and the reference to one gender
includes the other. The reference to any statute, regulation, or other
provision of law shall be construed to refer to any amendment to or successor
of such provision of law.
9.03. Nontransferability. A Participant may not transfer or assign
any rights that he or she has under this Plan other than by will or the laws
of descent and distribution. During the lifetime of the Participant, his or
her Option may be exercised only by the Participant. No right or interest of
any Participant or Beneficiary under the Plan shall be liable for, or subject
to, any lien, obligation or liability of such Participant or Beneficiary.
ARTICLE X
AMENDMENT AND TERMINATION
The Board may amend or terminate this Plan from time to time;
provided, however, that no amendment may become effective until shareholder
approval is obtained if (i) the amendment increases the aggregate number of
shares of Common Stock that may be issued under the Plan or (ii) the
amendment changes the class of individuals eligible to become Participants.
No amendment shall, without a Participant's consent, adversely affect any
rights of such Participant under any outstanding Option, the Deferred Fee
Program or the Stock Purchase Program as in effect at the time such amendment
is made. Notwithstanding the foregoing the Stock Option Program shall not be
amended more than once in any six month period unless such amendment comports
with changes in the Code or the rules thereunder.
ARTICLE XI
DURATION OF PLAN
No Option may be granted under this Plan more than five years after the
date that the Plan is approved by shareholders as provided in Article XII.
Options granted before that date shall remain valid in accordance with their
terms. The Deferred Fee Program shall remain in effect until all
Participants' Accounts have been distributed in full, unless sooner
terminated by the Board. No Stock Purchase Election shall be made with
respect to Compensation payable more than five years after the date the Plan
is approved by shareholders as provided in Article XII; provided, however,
that the Board may sooner terminate the Stock Purchase Program.
ARTICLE XII
EFFECTIVE DATE OF PLAN
This Plan will be effective on the date that this Plan is
approved by a majority of the votes entitled to be cast by the Company's
shareholders, voting either in person or by proxy, at a duly held
shareholders' meeting.
Exhibit 10 (m)
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
This agreement ("Agreement") is made and entered into this ___
day of _____________, 1993, by and between Voluntary Hospitals of
America, Inc. ("VHA"), a Delaware corporation, and ________________
_____________________, a ___________________ corporation, an
authorized distribution agent of VHA ("ADA").
This Agreement is entered into based on the following
facts:
A. VHA is a nonexclusive limited Agent for Designated VHA
Members and Affiliates;
B. VHA is, among other things, in the business of providing
(a) products and other property, purchasing and other
opportunities, procurement, distribution and other services,
directly and indirectly, to, for, on behalf of and as an Agent for
certain health providers, and (b) marketing and other assistance to
certain Vendors and certain wholesalers and distributors, including
without limitation, ADA, in order to make the property,
opportunities, procurement, distribution and related services more
conveniently, efficiently and effectively available to Designated
VHA Members and Affiliates;
C. ADA has a reputation for offering to sell and selling high
quality products and for providing prompt, efficient and effective
distribution services, including, but not limited to, the services
of selling, marketing, ordering, paying, order receiving,
billing/invoicing, product handling, product storing, product
receiving, inventorying, managing inventory, product transporting,
product delivery, collecting funds, cash application, cash
management, receivables management, payables management, handling
customer and other inquiries, providing customer service, handling
product recalls and market withdrawals, providing for product
returns permitted by law, handling allowances and providing other
distribution services;
D. ADA has computer-based systems which are useful in
connection with managing and conducting its business, which are
flexible and able to produce a wide variety of computer-based
reports and which are capable of establishing computer-to-computer
communications between VHA, on the one hand, and Designated VHA
Members and Affiliates, on the other;
E. VHA desires to engage ADA to assist in providing
distribution services as a distribution agent of VHA to the
Designated VHA Members and Affiliates with respect to Contract
Products, including, without limitation, Contract Products which
display the "VHA+PLUS(R)" trademark, and ADA desires to perform such
services;
F. ADA desires to sell Noncontract Products to the Designated
VHA Members and Affiliates and, in connection therewith, to provide
distribution services, and VHA desires that the Designated VHA
Members and Affiliates have the opportunity to purchase such
Noncontract Products and distribution services;
THEREFORE, in consideration of the premises, the
representations and warranties of the parties, the mutual covenants
contained herein, and other good and valuable consideration, the
adequacy, receipt and sufficiency of which are hereby acknowledged,
the parties agree, subject to the conditions, terms and provisions
hereof, as follows:
Section 1. Definitions.
(A) As used in this Agreement, each of the following
capitalized terms shall have the following meaning:
(1) "Agent" means any entity authorized to act on behalf
of another entity by the other within the limited scope of the
grant of authority set forth in the document or documents granting
such authority.
(2) "Alternate Distribution Center" refers to any ADA
distribution center other than a Primary Ordering Location.
(3) "Automatic Product Substitution" has the meaning set
forth in Section 4(E).
(4) "Backorder Relay" has the meaning set forth in
Section 4(B).
(5) "Capital Equipment" means equipment having an order
in a single or multiple unit value of over $1,000.
(6) "Contract Products" refers to those products with
respect to which VHA has executed a contract ("Purchasing
Agreement"), other than this Agreement, with a Vendor thereof, such
contract providing for, among other things, the sale by such Vendor
of the products to certain Designated VHA Members and Affiliates
through ADA.
(7) "Cost" refers to [this confidential information has
been omitted and filed separately with the Commission].
(8) "Delivery Schedules" has the meaning set forth in
Section 6(C).
(9) "Delivery Times" has the meaning set forth in
Section 6(C).
(10) "Designated VHA Members and Affiliates" refers to
those VHA Members and Affiliates identified as such on Schedule 1.
Schedule 1 may be amended by VHA to add new Designated VHA Members
and Affiliates or to delete Designated VHA Members or Affiliates at
its sole discretion, at any time during the term of this Agreement,
upon thirty (30) days notice to ADA.
(11) "Noncontract Products" refers to all products that
are not Contract Products or VHA+PLUS(R) Products.
(12) "Price" has the meaning set forth in Section 6.
(13) "Primary Ordering Location" refers to the ADA
distribution center which has service responsibility for a
particular Designated VHA Member or Affiliate. ADA's POLs, as of
the date of this Agreement, are listed in Schedule 2.
(14) "Purchasing Agreement" has the meaning set forth in
Section 1(A)(6).
(15) "Revised Delivery Time" has the meaning set forth in
Section 6(C).
(16) "RHCS" refers to Regional Health Care Systems, which
are listed on Schedule 3. Schedule 3 may be amended by VHA at its
sole discretion at any time during the life of this Agreement upon
thirty (30) days written notice to ADA.
(17) "Service Level Report" has the meaning set forth in
Section 10.
(18) "Vendors" means the sellers, including without
limitation, manufacturers, of products.
(19) "VHA+PLUS(R) Products" means products bearing the
VHA+PLUS(R) trademark.
(20) "VHA Fee" has the meaning set forth in Section 8(G).
(21) "Non-traditional Products" are defined as products
that are normally not available through distribution or whose
distribution is limited to a specific hospital and require the
agreement between the Designated VHA Member and Affiliate and ADA
for distribution and inclusion on the Pricing Matrix. VHA and ADA
recognize that products may start as Non-traditional Products and
then become Contract or Noncontract Products at a later date.
(B) Capitalized terms used in this Agreement but not
specifically defined herein shall have the meanings customarily
ascribed to such terms in the products distribution industry.
Section 2. Appointment as Agent.
VHA appoints ADA as a distribution Agent, subject to the
provisions of Section 11(B). ADA shall provide Designated VHA
Members and Affiliates with products, services and value added
distribution functions. ADA shall work to build a mutually
successful relationship with each Designated VHA Member and
Affiliate and work in a proactive manner to provide the lowest
total delivered cost of products, develop and implement
standardization and utilization processes and provide logistics,
operational and analytical services.
ADA agrees to actively support and supplement the strategic
initiatives of VHA through its role as an ADA under this Agreement.
Section 3. Product Capacity and Handling. ADA shall provide
warehouse facilities at each of its Primary Ordering Locations to
secure and store sufficient product to meet the service levels to
Designated VHA Members and Affiliates specified in this Agreement.
(A) Contract Products.
(1) ADA's Duties. As VHA's Agent, ADA's duties shall
include the provision of distribution services with respect to
Contract Products to each and every Designated VHA Member and
Affiliate, and ADA shall act at all times in accordance with the
conditions, terms and provisions of the Purchasing Agreements.
(2) Purchasing Agreements. VHA shall notify ADA of the
existence of all Purchasing Agreements and all provisions of such
Purchasing Agreements which have or may have any effect on ADA's
activities hereunder. VHA shall provide such notification within
15 days of the date of this Agreement for Purchasing Agreements
executed by VHA on or before the date of this Agreement and within
30 calendar days of execution for Purchasing Agreements executed by
VHA hereafter.
(3) ADA Loading of Contract Products. ADA agrees that
all changes in Purchasing Agreements will be loaded into ADA's
computer system not less than 30 days prior to the effective date
of such changes. ADA will supply each Designated VHA Member and
Affiliate with a printout (or such other format as reasonably
requested) setting forth ADA order numbers for all Products covered
by the Purchasing Agreement at least 30 days prior to the
effective start date of each Purchasing Agreement.
ADA will load into ADA's computer system all Contract
Products. Those items not presently stocked by ADA shall be
identified on the printout.
VHA will supply ADA with the Purchasing Agreement data not
less than forty-five (45) days prior to the effective date of each
Purchasing Agreement. VHA will instruct Vendors holding Purchasing
Agreements to provide to ADA contract verification based on the
foregoing guidelines. ADA shall advise VHA, at least thirty (30)
days prior to the effective start date of each Purchasing
Agreement, of those Vendors who have not provided contract
verification.
Upon request of a Designated VHA Member or Affiliate of VHA,
ADA will provide annually at no charge a Purchasing Agreement
printout listing all Contract Products with ADA order entry numbers
and Prices.
ADA shall load into its mainframe computer, within ten (10)
days after receipt from VHA, all additions, corrections, price
changes, and other modifications to Purchasing Agreements. VHA
will notify ADA of the occurrence of any of the foregoing
modifications to the Purchase Agreement on a bi-weekly basis.
(B) Noncontract Products. ADA agrees to offer to sell and,
if any such offer is accepted, to sell Noncontract Products to the
Designated VHA Members and Affiliates. Designated VHA Members and
Affiliates may offer to buy and, if such offer is accepted, may buy
Noncontract Products from ADA. In the event such offers, sales or
purchases are made, such offers, sales or purchases shall be
processed by ADA and the Designated VHA Members and Affiliates in
conformity with the provisions of this Agreement.
(C) Price Increases. VHA and ADA shall work together to
manage increases in the Cost of Noncontract items. The parties
desire to control aggregate Noncontract price increases for any
year to not exceed VHA's average price increase for Contract
Products for the previous twelve month period, which for 1993 is
1.4%. VHA will provide the average price increase for Contract
Products by October 1 of each year. VHA and ADA shall jointly
develop a process, the objective of which is to provide notice to
Designated VHA Members and Affiliates by November 1 of each year of
any price changes for the next calendar year. VHA Contract
Products, VHA+PLUS(R) Products, and hospital negotiated contracts
with Vendors are not subject to this paragraph.
(D) Price Lists. At such point in time that ADA and VHA have
achieved annual price increases for a substantial portion of
Noncontract Products, ADA shall provide each Designated VHA Member
and Affiliate no later than November 15 of each year a price list
containing the Prices for Noncontract Products for the next
calendar year in whatever form the Designated VHA Member or
Affiliate reasonably requests (e.g., diskette, microfiche, tape,
etc.).
(E) VHA+PLUS(R) Products. ADA agrees to stock such amount of
VHA+PLUS(R) Products as ADA reasonably determines is necessary to
satisfy the anticipated requirements of the Designated VHA Members
and Affiliates. Any individual Designated VHA Member or Affiliate
price change on a product shall follow the Pricing
Protocol described in Schedule 4. All Products will be
identified in ADA's inventory as "A items" and, as such, will be
subject to appropriate inventory review by ADA. ADA will use its
best efforts to market and promote Products when such
products meet the needs of a Designated VHA Member or Affiliate.
(F) Stocking Responsibility. ADA shall have the following
stocking responsibilities with respect to both Contract Products
and Noncontract Products:
(1) ADA will maintain sufficient stock of Contract
Products and Noncontract Products to support Designated VHA Members
and Affiliates at the service level set forth in this Agreement.
(2) Upon request of a Designated VHA Member or Affiliate
to add items to stock, ADA will add the items to stock. Within
thirty (30) days, or industry standard lead time, of receipt of
usage data, ADA will have the items in stock and advise the
requesting Designated VHA Member or Affiliate that the items are
available at the Primary Ordering Location.
(3) ADA will not remove from stock at the Primary
Ordering Location any product being purchased by a Designated VHA
Member or Affiliate unless ADA no longer distributes the product.
ADA will review its stock on an appropriate basis to identify those
products which have generated sales of less than $100 during a
period of not less than ninety (90) calendar days. ADA may then
contact any Designated VHA Member or Affiliate who was purchasing
these products within the last 180 calendar days to ascertain
continuing need. If no need is expressed, ADA may give written
notice to all Designated VHA Members and Affiliates of ADA's intent
to remove the items from stock. If a Designated VHA Member or
Affiliate provides ADA within ten (10) business days after such
notice of the Designated VHA Member or Affiliate usage estimates on
these items, ADA will maintain the items in stock. If ADA does not
receive usage data, ADA may discontinue the items and shall so
advise the Designated VHA Members and Affiliates.
(4) From time-to-time, VHA may advise ADA that specified
Contract Products are to be stocked by ADA exclusively for
Designated VHA Members and Affiliates. ADA shall use its best
efforts to restrict delivery of such specified Contract Products to
Designated VHA Members and Affiliates, provided ADA shall be free
to enter into agreements with any Vendor for distribution of any
products, including products which may be Contract Products under
this Agreement.
(5) If a Vendor advises ADA that specific Contract
Products or Noncontract Products will be available in reduced
quantities or will be allocated, and that, therefore, ADA may not
be able to honor all requests for such products, ADA will allocate,
based on past purchasing history of the Designated VHA Members and
Affiliates, a portion of such products to Designated VHA Members
and Affiliates and shall advise VHA and the Designated VHA Members
and Affiliates of the quantity of products so allocated. (This confidential
information has been omitted and filed separately with the Commission).
(6) ADA shall provide upon request of Designated VHA
Members and Affiliates regular list price catalogues either in hard
copy or electronic media, at the election of Designated VHA Members
and Affiliates.
(G) Notice of Physical Inventory. ADA will give VHA and the
Designated VHA Members and Affiliates not less than forty-five (45)
days prior written notice of ADA's intent to perform a physical
inventory at the Primary Ordering Location. ADA will accept
saleable returns up to ten (10) days prior to such inventory and,
thereafter, ADA will continue to authorize returns, except such
returns will be held at the Designated VHA Member or Affiliate
until the first business day after completion of the physical
inventory.
Section 4. Ordering.
(A) Orders. Orders for Contract Products and Noncontract
Products by Designated VHA Members and Affiliates may be submitted
on purchase orders delivered to ADA through electronic order entry
via computer or any other reasonable means. ADA shall not require
a minimum dollar order amount for Contract Products or Noncontract
Products ordered by Designated VHA Members and Affiliates provided
products are ordered in Vendor's standard packaging units. ADA
will, after having selected from its stock the Contract Products
and Noncontract Products ordered by a Designated VHA Member or
Affiliate, physically check each order to assure that the products
and quantities selected by ADA accurately correspond to the order
received by ADA from the Designated VHA Member or Affiliate. Upon
request, ADA will develop and use a method of setting predetermined
order quantities (standing orders) based on a Designated VHA
Member's or Affiliate's average weekly or bi-weekly usage of
Contract Products and Noncontract Products. These order quantities
may be adjusted by the Designated VHA Member or Affiliate upon 72
hours notice to ADA.
(B) Backorder Relay. If ADA fails to have a Contract Product
or Noncontract Product on hand at a Primary Ordering Location when
the Contract Product or Noncontract Product is available at an
Alternate Distribution Center, ADA shall, at its own expense, be
able to deliver the Contract Product or Noncontract Product
directly to the ordering Designated VHA Member or Affiliate or by
way of the Primary Ordering Location, whichever is fastest, from
the Alternate Distribution Center ("Backorder Relay"). Backorder
Relay is required only for "A" items (see Section 6(E)). ADA
shall use Backorder Relay upon customer request whenever a Contract
Product or Noncontract Product is unavailable at a Primary Ordering
Location, regardless of the cause of such unavailability (for
example, even if such unavailability is caused by Vendor's
backorder). ADA shall use Backorder Relay whenever one or more
line-items is unavailable at the Primary Ordering Location. ADA
will notify Designated VHA Members and Affiliates by automatic
order entry print back, customer service, sales representative or
other reasonable means of a true backorder at the Primary Ordering
Location. Designated VHA Members and Affiliates, at their option,
will select a desired means of resolution that may include:
product substitution, maintaining backorder or order item
cancellation. Each Designated VHA Member or Affiliate will also
have the option to select a reasonable method of delivery to meet
the individual institution's service requirements. Designated VHA
Members and Affiliates shall not be responsible for any delivery
charges where such Backorder was the responsibility of ADA.
(C) Electronic Order Entry. All Designated VHA Members and
Affiliates will use Electronic Order Entry for placement for not
less than 90% of all lines ordered unless otherwise agreed by ADA.
ADA shall maintain an 800 number for electronic order entry and
direct contact with the Primary Ordering Location personnel by
Designated VHA Members and Affiliates and the RHCS.
(D) Confirmation. ADA shall provide to each Designated VHA
Member and Affiliate confirmation of each order placed by such
Designated VHA Member or Affiliate. The confirmation shall include
the following information: (1) a description of the products,
price, quantity to be shipped and whether Backorder Relay or
Automatic Product Substitution will be used for each item ordered;
and (2) the dollar amount of the total order.
The confirmation shall also include identification codes such
as purchase order numbers and cost center designations, if the
Designated VHA Member or Affiliate by written notification to ADA
elects to be supplied such information. For electronic orders, the
confirmation shall be received by the Designated VHA Member or
Affiliate within two (2) hours after receipt of the order by ADA.
The confirmation will be provided through print back or computer if
the appropriate technology is available to ADA and the Designated
VHA Member or Affiliate.
(E) Automation. ADA shall, at its own expense, make
available a software system (compatible with VHA-NET) capable of
computer-to-computer on-line transmission with each Designated VHA
Member and Affiliate (the "System"). ADA shall establish computer-
to-computer interface (compatible with VHA-NET) with VHA. Without
limiting the generality of the foregoing, ADA shall be responsible
for establishing and providing the necessary software interface
with each Designated VHA Member and Affiliate. ADA represents that
Schedule 5 hereof sets forth an accurate description of ADA's
current capabilities and types of installations with respect to
communications with the Designated VHA Members and Affiliates. ADA
shall use the System, or equivalent system such as EDI, for the
term of this Agreement. ADA represents that it has a computerized
Automatic Product Substitution system and that these systems are
accurately described on Schedule 5 hereof. The use of Automatic
Product Substitution will be done for individual line item products
upon the request of a Designated VHA Member or Affiliate.
Section 5. Uniform Purchase.
The ADA will, in conjunction with the RHCS and with those
Designated VHA Members and Affiliates not part of a RHCS, identify
products and categories of products that are not under contract
through VHA or competing with a Contract Product which the
Designated VHA Members and Affiliates can uniformly purchase. ADA
will use its best efforts to obtain for Designated VHA Members and
Affiliates a reduced cost of said product for an extended period of
time, based on the anticipated usage and participation of RHCS
members or the combined usage for Designated VHA Members and
Affiliates not part of an RHCS.
Section 6. Base ADA Services.
All services listed in this Section shall be provided to
Designated VHA Members and Affiliates for the cost plus fee
applicable from the Price Matrix in Schedule 6.
(A) Price Matrix. Schedule 6 provides a Price Matrix which
determines a Designated VHA Member or Affiliate's percentage mark-
up on Cost to determine the "Price" of each product delivered under
this Agreement, except for Capital Equipment (distribution service
fees for Capital Equipment shall be negotiated between ADA and the
Designated VHA Member or Affiliate). "Price" equals the Cost, plus
an amount equal to Cost times the percentage from the applicable
slot of the Price Matrix based on monthly volume and "Utilization",
adjusted to reflect all credits, discounts, rebates, returns,
allowances and other adjustments granted by ADA. "Utilization" is
defined as [this confidential provision has been omitted and filed
separately with the Commission]. VHA and/or ADA may request
reasonable substantiation of purchase figures provided by any
Designated VHA Member or Affiliate. Any Designated VHA Member or
Affiliate which fails or refuses to provide accurate information in
a timely manner as to its total distributed purchases shall be
charged Cost plus [this confidential information has been omitted
and filed separately with the Commission].
(1) Initial Implementation. Each Designated VHA Member
and Affiliate will be charged Cost plus [this confidential
information has been omitted and filed separately with the
Commission] for the first calendar quarter of 1994. During the
first calendar quarter of 1994, the Utilization for each Designated
VHA Member and Affiliate will be jointly determined by the
Designated VHA Member or Affiliate, ADA and VHA using as many
months of actual 1993 purchase data as is available (the "1993
Utilization"). Commencing on April 1, 1994, and for the balance of
1994, each Designated VHA Member and Affiliate will be slotted in
the Price Matrix based upon the 1993 Utilization and 1993 average
monthly volume through ADA. Any Designated VHA Member or Affiliate
commencing participation under this Agreement after January 1,
1994, shall be slotted at Cost plus [this confidential information
has been omitted and filed separately with the Commission] for the
first full calendar quarter under this Agreement and thereafter
will be eligible for Annual Slotting and Quarterly Performance
Bonuses.
(2) Annual Price Matrix Slotting. On or before January
1 of each year after 1994 during the term of this Agreement, VHA
and each Designated VHA Member or Affiliate shall recalculate the
Utilization and average monthly volume through the ADA based upon
actual purchases from the preceding twelve months. The Designated
VHA Member or Affiliate's applicable Cost plus slot on the Price
Matrix will be adjusted, if necessary, based upon such actual
purchase performance ("Annual Slotting"). Each Designated VHA
Member and Affiliate shall acknowledge annually on the form
provided in Schedule 7 its Annual Slotting, payment term election
and services desired.
(3) Quarterly Performance Bonus. Commencing with the
calendar quarter ending on June 30, 1994, and for each calendar
quarter thereafter, each Designated VHA Member or Affiliate whose
performance qualifies for a lower Cost plus in the Price Matrix
than its current Annual Slotting will receive a Quarterly
Performance Bonus from ADA within thirty (30) days after final
sales figures are available from the prior quarter in the form of
either a check or a credit to the account, at the Designated VHA
Member or Affiliate's election. The amount of the Quarterly
Performance Bonus shall be calculated by taking the difference
between the Cost plus percentage of the Designated VHA Member or
Affiliate's current Annual Slotting and the Cost plus percentage
applicable to the Designated VHA Member or Affiliate's actual
performance for the quarter multiplied by the total amount of
purchases through ADA for that quarter. A Quarterly Performance
Bonus will not be available for Designated VHA Members and
Affiliates which are on a fixed fee for stockless services. In
these cases, the Pricing Matrix will be used only for the purpose
of determining the VHA Fee.
(4) Failure to Maintain Slotting. Any Designated VHA
Member or Affiliate which fails to maintain actual quarterly
performance at least equal to its current Annual Slotting for any
quarter shall have its Price Matrix location adjusted immediately
to reflect actual performance for the most recently completed
quarter.
(B) Payment Terms. Each Designated VHA Member and Affiliate
shall designate in writing one of the payment options listed in
Schedule 8. A Designated VHA Member or Affiliate may change its
payment option no more frequently than once each calendar quarter
upon thirty (30) days prior written notice to ADA.
(C) Delivery. Each Designated VHA Member and Affiliate shall
be entitled to two deliveries per week. ADA shall deliver Contract
Products and Noncontract Products F.O.B. destination,
transportation out prepaid and absorbed, except for Capital
Equipment. ADA shall deliver Contract Products and Noncontract
Products to each Designated VHA Member or Affiliate in accordance
with delivery schedules mutually agreed upon by ADA and the
Designated VHA Member or Affiliate ("Delivery Schedules"). ADA and
each Designated VHA Member and Affiliate shall agree on facility
specific delivery needs, including but not limited to, backorders,
number of deliveries, time of deliveries, substitutions, etc. If
a conflict arises which cannot be resolved by ADA and the
Designated VHA Member or Affiliate, ADA will contact VHA to work
out an appropriate schedule.
The delivery of backordered items (including items delivered
through Backorder Relay) does not constitute an additional
delivery, however, VHA has no objection to ADA encouraging
hospitals to allow backordered items to be held and delivered with
the next regular delivery.
ADA shall notify the affected Designated VHA Member or
Affiliate at the earliest convenient time after ADA can reasonably
anticipate that a delivery will be made after the scheduled
delivery time ("Delivery Time"). Such notification shall include
the anticipated date and time of delivery of the late shipment
("Revised Delivery Time") and the reason for the delay.
In order to minimize the frequency and length of delays, ADA
shall establish a secondary delivery system which shall be used in
the event that the primary delivery method is unavailable.
(D) Returned Goods. ADA shall service returned goods,
including, without limitation, arranging for credits due any
Designated VHA Member or Affiliate in accordance with the Returned
Goods Policy specified in Schedule 9.
(E) Fill Rate. ADA shall maintain for each Designated VHA
Member and Affiliate an unadjusted Fill Rate of 98% for all "A"
items. "A" items are defined as those items that are stock items
and are purchased on a regular basis by that Designated VHA Member
or Affiliate. Unadjusted Fill Rate shall be calculated by total
number of lines fully delivered, divided by total number of lines
ordered.
(F) Hospital Reports. ADA shall provide each Designated VHA
Member and Affiliate with the monthly reports listed in Schedule
10 by the tenth day of the following month. VHA may modify or
change Schedule 10 upon sixty (60) days written notice to ADA.
(G) Customized Packing Slips and Invoices. ADA shall provide
customized packing slips and invoices consistent with Designated
VHA Member and Affiliate requirements.
(H) Customized Pallet Design. ADA shall assist in pallet
design and arrangement and shall deliver goods in accordance with
such pallet design upon request of Designated VHA Members and
Affiliates.
(I) Member Quarterly Business Review. Once each calendar
quarter, ADA shall meet with each Designated VHA Member and
Affiliate to discuss, at a minimum, the issues listed in Schedule
11, Member Business Review Agenda.
(J) Delivery of Non-traditional Products. ADA shall discuss
with each Designated VHA Member and Affiliate the appropriateness
of delivering Non-traditional products through ADA to the
Designated VHA Member or Affiliate. Such Non-traditional products
may include by way of example: IV solutions, x-ray film, forms,
textiles, office supplies, etc. The inclusion of Non-traditional
Products in a Designated VHA Member or Affiliate's volume for
Annual Slotting shall occur only upon the mutual agreement of ADA
and the Designated VHA Member or Affiliate; otherwise, charges, if
any, for the delivery of such Non-traditional products shall be
negotiated between ADA and the Designated VHA Member or Affiliate.
In the case of IV solutions, ADA and the Designated VHA Member or
Affiliate shall follow the process specified in Schedule 12 before
any decision to deliver IV solutions through the ADA is made.
(K) ADA Representative. Schedule 13 lists the
responsibilities of ADA's representatives for every Designated VHA
Member and Affiliate.
(L) ADA shall staff the Primary Ordering Location each
business day continuously from at least 8:00 a.m. through 6:00
p.m., local time. In case of an emergency, Designated VHA Members
and Affiliates can call the Primary Ordering Location. ADA will
provide a list of emergency telephone numbers at the Primary
Ordering Location for after hours contact.
Section 7. Other Services Available from ADA.
The services listed in this Section shall be available from
ADA at an additional charge to the Designated VHA Member or
Affiliate as negotiated between the ADA and the Designated VHA
Member or Affiliate.
(A) Logistics Services. ADA shall have available the
logistic services listed in Schedule 14.
(B) Patient Charge-Item Labelling. ADA shall provide patient
charge-item labels to Designated VHA Members and Affiliates for a
charge of not more than [this confidential information has been
omitted and filed separately with the Commission] label if labels
are supplied by customer or not more than [this confidential
information has been omitted and filed separately with the
Commission] label if ADA supplies labels.
(C) JIT Program. ADA shall offer Just-in-Time ("JIT")
delivery services upon request. JIT services shall include
frequent deliveries in cases or boxes, whatever is Vendor's
standard unit of packaging. Charges for packing orders by
department shall not exceed [this confidential information has been
omitted and filed separately with the Commission] of sales.
(D) Stockless/LUM (Lowest Unit of Measure). ADA shall offer
stockless/LUM services upon request. At a minimum, such services
shall include the ability to provide: at least 5 day-a-week
deliveries, delivery in lowest unit of measure, pick and pack by
area of use, and delivery to area of use and put stock away.
Stockless/LUM services shall be provided with an unadjusted Fill
Rate of 100% (as calculated in Section 6(E)) with an approved
substitution list as provided by the Designated VHA Member or
Affiliate. Charges for deliveries to department shall not exceed
[this confidential information has been omitted and filed
separately with the Commission] of affected sales and charges for
putting stock away for the customer shall not exceed [this
confidential information has been omitted and filed separately with
the Commission] of affected sales. Additional stockless services
shall be subject to local negotiation.
(E) Emergency Deliveries. ADA shall have available emergency
delivery services available 24 hours a day, seven days a week.
(F) Barcoding. ADA shall provide barcoding labels to
Designated VHA Members and Affiliates upon request.
(G) Other Services. Schedule 15 details certain listed ADA
services available and the charge structure, if any, associated
with those services. ADA and each Designated VHA Member and
Affiliate may negotiate additional services as requested by the
Designated VHA Member or Affiliate.
Section 8. ADA Responsibilities.
ADA shall be responsible to perform the following:
(A) Disaster Plan. ADA will assist each Designated VHA
Member and Affiliate and RHCS in developing a plan of action for
delivery of products in the event of a natural disaster in the
geographical area of a Designated VHA Member or Affiliate.
Schedule 16 details ADA's disaster plan. ADA shall provide VHA,
and each RHCS, Designated VHA Member and Affiliate, upon request a
written action plan describing procedures in the event their
Primary Ordering Location should become unable to provide products
under this Agreement. These action plans will be reviewed yearly
by ADA and VHA and updated as required.
(B) Computer Systems. ADA attests that, in the event its
computer system should fail, it has access to another computer
system which, under normal conditions, will be in operation in no
more than 48 hours. Schedule 17 details ADA's computer
capabilities. ADA will utilize manual ordering systems during
periods in which its computer systems are not operative in order to
provide an uninterrupted flow of Contract Products and Noncontract
Products to the Designated VHA Members or Affiliates.
(C) EDI Capabilities. Schedule 18 lists the EDI
capabilities required of ADA.
(D) VHA Quarterly Business Review. ADA corporate staff shall
meet no less frequently than once each calendar quarter with VHA to
discuss ADA's performance under this Agreement. This quarterly
business review shall also be used to establish performance targets
and goals and to review progress toward such targets and goals.
(E) Reports to VHA. ADA shall provide to VHA reports as
specified in Schedule 19. VHA may amend Schedule 19 at any time
upon sixty (60) days written notice to the ADA. Failure to provide
the required tapes, diskettes, or information by the deadline
shall result in the following payments by ADA to VHA per calendar
year:
1st Failure: Written Warning
2nd Failure: $500 Late Fee
3rd Failure: $2,500 Late Fee
4th Failure and
each succeeding
failure per
calendar year: $5,000 Late Fee
(F) TQM/CQI Process. ADAs will support with VHA an
initiative of Quality Improvement that will better serve the
Designated VHA Member and Affiliate. Based on customer input, the
ADAs shall provide a proactive team that services the Designated
VHA Member and Affiliate based on lowering total delivered cost.
(G) VHA Fee. With the delivery of every monthly sales report
listing the sales to each Designated VHA Member and Affiliate, ADA
shall pay to VHA on the 10th of each month a "VHA Fee" calculated
on total net sales of all Contract and Noncontract Products as
follows: [this confidential information has been omitted and filed
separately with the Commission].
Provided however, no VHA Fee shall be due on the sales of any
products except those listed in Schedule 20.
In the event any Designated VHA Member or Affiliate earning a
Quarterly Performance Bonus results in an overpayment of the
monthly VHA Fee, ADA shall recalculate the VHA Fee due for each
affected Designated VHA Member or Affiliate and provide VHA with a
detailed calculation and report of each adjustment. ADA may deduct
the net adjustment for the calendar quarter in the next monthly VHA
Fee provided ADA has delivered the adjustment calculation and
report to VHA. In the event ADA fails to pay the VHA Fee when due,
ADA shall pay VHA, in addition to the VHA Fee, a late charge of
0.75% per month, or the maximum allowed by law, whichever is less,
on all amounts past due.
(H) Support of VHA-NET. In addition to the EDI capabilities
required by Schedule 18, ADA shall cooperate and support VHA NET as
new transaction sets data elements are added to the VHA-NET system.
Specifically, purchase order acknowledgements should contain the
same item pricing as invoices; ADA shall support the current
version of HIBCC conventions and the four most recent preceding
versions; ADA shall support HIBCC guidelines for asynchronous
communications; ADA shall support increased modem speeds on VHA-
NET; ADA shall include HIN's in its customer data fields; ADA will
support the use of Common Category Database codes in product
transactions; and ADA will refer questions regarding VHA-NET to the
VHA-NET Customer Support Team.
(I) ADA Representative Compensation System. ADA shall
provide VHA a written summary of ADA representative's compensation
plan no later than November 1 of each year. ADA shall provide VHA
with the opportunity to make comments on such plan or plans.
(J) VHA Access to Facilities and Personnel. ADA shall permit
VHA and its authorized representatives access to ADA's facilities
and personnel at all reasonable times upon reasonable request. ADA
shall provide at no charge VHA with the necessary software to
permit "read only" access to ADA's computer data (pricing,
inventory, accounts receivable, fill rates, etc.) on an on-line
basis.
(K) Fraud and Abuse Disclosure. ADA represents and warrants
that, as a seller, it will provide each Designated VHA Member and
Affiliate with all information necessary to comply with the
Medicare Medicaid fraud and abuse/anti-kickback statute (42 U.S.C.
Section 1320a-7b) and the regulations issued thereunder, including, but
not limited to, the appropriate disclosures with each and every
Quarterly Performance Bonus paid.
(L) Manufacturer Reports. ADA agrees to deliver all
manufacturer tracing and rebate reports to each manufacturer for
Contract Products no later than ten (10) days after the end of the
month in which the sales reported took place.
(M) Problem Resolution Policy. ADA shall follow a problem
resolution policy for resolving issues with a Designated VHA Member
or Affiliate. A copy of this policy is attached as Schedule 21.
Section 9. Drop Shipments.
If a Vendor ships Contract Products or Noncontract Products
directly to a Designated VHA Member or Affiliate (a "drop
shipment") and the Vendor bills through ADA, such transaction will
be subject to the terms of this Agreement.
ADA may pass through to the Designated VHA Member or Affiliate
any service charges levied by Vendor on ADA for drop shipments.
ADA will notify VHA Members and Affiliates of any such service
charges at the time of order.
Section 10. Service Level.
In addition to its other service obligations under this
Agreement, ADA shall provide the minimum level of service specified
in Schedule 22 attached. Schedule 22 may be amended from time-
to-time by the written agreement of the parties.
Section 11. General.
(A) Risk of Loss and Insurance. As between ADA and the
Designated VHA Members and Affiliates, ADA shall bear all risk of
loss while Contract Products or Noncontract Products are in ADA's
possession, custody, or control. ADA shall provide evidence to VHA
that ADA is maintaining all-risk, full replacement cost insurance
coverage for any such Contract Product or Noncontract Product. The
Designated VHA Members and Affiliates shall not bear the risk of
loss prior to their receipt of Contract Products or Noncontract
Products. VHA shall never bear any risk of loss. ADA may satisfy
the foregoing insurance requirements through its self-insurance
program. In addition, ADA shall secure and maintain, at its own
expense, commercial general liability insurance, including blanket
contractual liability and products liability coverages with minimum
limits of $2,000,000 per occurrence and $5,000,000 annual
aggregate. Such insurance shall include VHA and Designated VHA
Members and Affiliates as additional insureds. Within thirty (30)
days from the date hereof, ADA shall submit to VHA a certificate of
insurance attested by a duly authorized representative of the
insurance carrier or carriers, evidencing that the insurance
required by this Section is in force and in effect and that such
insurance will not be canceled or materially changed without giving
VHA at least thirty (30) days prior written notice. ADA's
obligation to obtain and maintain the required insurance and submit
the required certificate of insurance to VHA shall continue during
the term of this Agreement and for five (5) years thereafter.
(B) Exclusivity. In consideration that ADA will have access
to confidential price information of VHA and the assistance of VHA
in gaining access to Designated VHA Members and Affiliates, ADA
shall not offer to sell or sell Contract Products or Noncontract
Products or otherwise do business with any Designated VHA Member or
Affiliate unless contemplated by this Agreement or approved in
writing by VHA. ADA's entire relationship vis-a-vis products with
the Designated VHA Members and Affiliates shall be governed by this
Agreement.
VHA and other persons may sell or distribute Contract
Products, Noncontract Products or both to VHA Members and
Affiliates who are not Designated VHA Members and Affiliates, and
to Designated VHA Members and Affiliates. Nothing in this
Agreement shall prohibit VHA from entering into any distribution
agreement with a manufacturer that distributes its own products.
VHA retains all its rights to manufacture, sell, market, and
otherwise distribute goods and services to Designated VHA Members
and Affiliates and to any other party.
(C) Confidentiality. ADA shall not provide any usage, sales
or purchase data relating to Designated VHA Members and Affiliates
to any third party, except to the extent necessary to obtain
credits, charge backs or meet other Vendor requirements or as
required by applicable law. If ADA currently has in place a
binding contract to supply usage, sales or purchase data to IMS
America, Ltd., Selling Areas Marketing Inc. of Chicago, or any
other data collection entity, ADA may continue to provide the
information required by such contract until the expiration of such
contract if no one or more of the Designated VHA Members and
Affiliates is identified or identifiable therefrom either
separately or as a group. ADA may renew any such contract, but ADA
agrees to notify VHA in writing at least thirty (30) days before
such renewal.
ADA acknowledges that information supplied to it by VHA is the
property of VHA. ADA agrees to hold confidential the terms,
provisions and conditions of this Agreement and information which
is market confidential and is supplied to it by VHA pursuant to or
in connection with this Agreement or the Purchasing Agreements and
to return any such information to VHA promptly upon the termination
of this Agreement. ADA agrees to use such confidential information
only in connection with the performance of its obligations under
this Agreement. ADA shall not disclose such information to any
third party except with the consent of VHA.
VHA acknowledges that, as professional business people, ADA's
sales representatives have access to information necessary to
properly manage their territory. The terms of this Agreement will
be provided to the sales and marketing team to ensure their
thorough understanding of the program and its objectives. VHA
agrees to hold in confidence the terms provisions and consideration
of this Agreement.
Notwithstanding any other provision of this Agreement, the
obligations of ADA to maintain the confidentiality of the
confidential information shall not apply to any portion of the
confidential information that: (i) was in the public domain at the
time of its disclosure to ADA or its affiliates; (ii) enters the
public domain through no fault of ADA or its affiliates; (iii) was
communicated to ADA or its affiliates by a third party free of any
obligation of confidence; (iv) was developed by officers,
employees, or agents of ADA or its affiliates independently of, and
without reference to, the confidential information; (v) is already
known to ADA or its affiliates at the time of receiving the
confidential information.
The obligations of ADA pursuant to this Section 11(C) shall
survive for a period of three (3) years after the termination of
this Agreement.
(D) Warranty. ADA warrants that any product delivered
hereunder shall be new, unopened and in its original packaging as
received from the Vendor, having been stored in accordance with any
Vendor instructions. ADA shall not sell any products without a
reasonable warranty from the Vendor which is assignable to the
Designated VHA Member or Affiliate.
ADA agrees to take any action necessary, and any action
reasonably requested, to effect the assignment of such
manufacturers' warranty to the purchaser of the warranted product.
ADA MAKES NO IMPLIED WARRANTIES OR OTHER EXPRESS WARRANTIES,
INCLUDING ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE.
(E) Relationship. Each party to this Agreement has only the
authority granted by this Agreement. Neither party shall take any
action on behalf of the other party unless consented to in writing
by the other party.
(F) Financial Statements. ADA will supply to VHA upon
request and at least annually copies of ADA's annual audited
financial reports. Such reports shall include, at a minimum, an
income statement, balance sheet, statement of equity, statement of
cash flows, all footnotes and such other information as VHA may
reasonably request.
(G) Federal Access. Until the expiration of four years after
ADA furnishes any service under this Agreement, ADA will maintain
and, upon the request of the Secretary of the U.S. Department of
Health and Human Services, the Comptroller General of the United
States, or a representative of either of them, ADA will make
available to such requesting person, this Agreement and all books,
documents and records that are necessary to certify the nature and
extent of costs claimed to Medicare by any Designated VHA Member or
Affiliate with respect to any services provided by ADA under this
Agreement. Whether or not ADA is permitted hereunder to do so, if
ADA carries out any of the duties of this Agreement through a
subcontract, with a value or cost of $10,000.00 or more over a
twelve-month period, with a related organization or person, then
ADA agrees to cause such related organization or person to, and to
include in any such subcontract clauses and provisions to the
effect that, such related organization or person agrees to
maintain, and upon the request of the Secretary of the U.S.
Department of Health and Human Services, the Comptroller General of
the United States, or a representative of either of them, make
available to such requesting person the subcontract and all books,
documents and records that are necessary to certify the nature and
extent of costs claimed to Medicare by any Designated VHA Member or
Affiliate with respect to any services provided under such
subcontract.
(H) Compliance With All Laws. Each party to this Agreement
represents and warrants to the other party that it does and will
comply with all laws in connection with this Agreement and the
performance of its obligations hereunder; provided, however,
without limiting the generality of the foregoing, ADA shall provide
documentation to VHA upon request to demonstrate compliance with
all applicable OSHA and EEOC requirements.
(I) Indemnification. ADA agrees to indemnify VHA, the
Designated VHA Members and Affiliates and their respective
affiliates, directors, officers, employees, agents, servants, and
representatives, upon demand for and against any claim, loss,
liability, or expense (including attorneys' fees and other expenses
of litigation) incurred by any of them in connection with or as a
result of any act, or failure to act, by ADA, its affiliates,
directors, officers, employees, agents, servants, or
representatives or any breach by ADA of this Agreement, provided,
however, that such indemnity shall not extend to any claim, loss,
liability or expense resulting from the negligence or willful
misconduct of the party to be indemnified.
(J) Assignment. This Agreement is binding on the parties
hereto and shall inure to the benefit of and be binding upon the
successors and assigns of the parties. Neither this Agreement nor
either party's rights and obligations under this Agreement may be
assigned, pledged, or encumbered without the prior written consent
of the other party. For purposes of this paragraph, any transfer,
sale, merger or consolidation of ADA, or a substantial portion of
ADA's assets, whether by contract, agreement or operation of law,
shall be deemed an assignment and require the prior written consent
of VHA.
(K) Entire Agreement, Modification, Amendment, Waiver. This
Agreement constitutes the entire agreement between the parties. No
modification, amendment or waiver of any provision of this
Agreement will be effective unless approved in writing by VHA and
ADA. The failure of VHA, any Designated VHA Member or Affiliate,
or ADA at any time to enforce any provision of this Agreement will
not be construed as a waiver of such provision and will not affect
the right of VHA, the Designated VHA Members and Affiliates or ADA
thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
(L) Choice of Law. In the event of any dispute between VHA
and ADA, this Agreement shall be governed by the internal laws of
the State of Texas. Any dispute between ADA and a Designated VHA
Member or Affiliate shall be construed in accordance with the local
laws of the location of such Designated VHA Member or Affiliate.
(M) Third-Party Beneficiaries. The Designated VHA Members
and Affiliates are intended third-party beneficiaries hereunder and
may enforce any of the terms of this Agreement against ADA.
(N) Severability. If this Agreement, or any one or more of
the provisions hereof, shall be held invalid, illegal, or
unenforceable within any governmental jurisdiction or subdivision
thereof, this Agreement or any such provision or provisions shall
not as a consequence thereof be deemed to be invalid, illegal or
unenforceable in any other governmental jurisdiction or subdivision
thereof. If any provisions in this Agreement shall be held
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Agreement; this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein,
and there shall be deemed substituted such other provision as will
most nearly accomplish the intent of the parties to the extent
permitted by applicable law.
(O) Authority. Each party represents that the execution,
delivery, and performance of this Agreement have been duly
authorized by all required action on such party's part, that such
party has the full power to make and perform this Agreement and
that this Agreement constitutes the legal, valid, and binding
obligation of such party, enforceable in accordance with its terms.
(P) Force Majeure. ADA shall be excused for failure to
perform hereunder if failure is caused by fire, shortages of goods
caused by national crisis, unavoidable casualties, Acts of God, or
any other matters beyond ADA's control.
(Q) Books and Records, Audit. ADA shall keep, maintain and
preserve complete, current and accurate books, records and accounts
of the transactions contemplated hereby and such additional books,
records and accounts as are necessary to establish and verify ADA's
compliance hereunder. All such books, records and accounts shall
be available for inspection and audit by VHA and its authorized
representatives at any time during the term of this Agreement and
for two (2) years thereafter, but no more frequently than twice in
any consecutive twelve month period and only during reasonable
business hours and upon reasonable notice. The exercise by VHA of
the right to inspect and audit is without prejudice to any other or
additional rights or remedies of either party hereto.
(R) Favored Customer Pricing. Notwithstanding anything to
the contrary contained herein, the price for each product and
service under this Agreement to Designated VHA Members and
Affiliates will be no greater than the lowest price charged by ADA
during the term hereof for such product or service to any other
customer of ADA, other than the federal government. As competitive
situations arise during the term of this Agreement, it will be
necessary for VHA and ADA to mutually agree on meeting specific
competitive situations that are strategically important to VHA and
ADA.
Section 12. Term and Termination.
This Agreement will become effective upon execution as to each
Designated VHA Member and Affiliate to which ADA is distributing
products as of the date of this Agreement. This Agreement will
commence on January 1, 1994, and continue in force until December
31, 1996, unless terminated sooner as provided in this Section;
provided that either party may at any time terminate this Agreement
with or without cause, by delivering not less than ninety (90) days
prior written notice thereof to the other party; and provided that
VHA may terminate this Agreement, in whole or in part, upon thirty
(30) days written notice in the event of any breach or non-
performance by ADA, provided ADA has not cured the breach within
said 30 days. This Agreement maybe extended for up to two
additional one year terms unless VHA notifies ADA in writing ninety
(90) days prior to the anniversary date of this Agreement.
Section 13. Notices.
(A) All notices given under any of the provisions of this
Agreement shall be deemed duly given to VHA or the Designated VHA
Members and Affiliates if mailed by registered or certified mail,
return receipt requested, to:
Voluntary Hospitals of America, Inc.
300 Decker Drive
Irving, Texas 75062
or to such other address as VHA may designate in writing by notice
to ADA as provided in this Section 13.
(B) All notices given under any of the provisions of this
Agreement shall be deemed duly given to ADA if mailed by registered
or certified mail to:
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
or to such other address as ADA may designate in writing by notice
to VHA as provided in this Section 13.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
Voluntary Hospitals of America, Inc. ("VHA")
By: _______________________________
Dwight Winstead
Executive Vice President
__________________________________
("Authorized Distribution Agent")
By: ________________________________
Title:_______________________________
<PAGE>
SCHEDULE 1
DESIGNATED VHA MEMBERS AND AFFILIATES
[List of Members and Affiliates assigned to ADA]
SCHEDULE 1 - MEMBERS & AFFILIATES ASSIGNED TO ADA
Lic. # Hospital City
State
ADA: OWENS & MINOR
P291 Atmore Community Hospital Atmore AL
P381 Baptist Health Services Corp. Montgomery AL
H018 Baptist Health Services, Inc. Gadsden AL
P315 Baptist Medical Center-Cherokee Centre AL
P344 Baptist Medical Center-Dekalb Ft. Payne AL
P294 Baptist Medical Center-Montclair Birmingham AL
P295 Baptist Medical Center-Princeton Birmingham AL
P346 Baptist Memorial Hospital Gadsden AL
P309 Boaz-Albertville Medical Center Boaz AL
P409 Citizens Baptist Medical
Center (BMC) Talladega AL
DAJU Coosa Valley Medical Center Sylacauga AL
P320 Cullman Medical Center Cullman AL
P310 D.W. McMillan Memorial Hospital Brewton AL
W431 DCH Healthcare Authority Tuscaloosa AL
P414 DCH Regional Medical Center Tuscaloosa AL
P415 DCH Rehabilitation Pavilion Tuscaloosa AL
P323 Decatur General Hospital Decatur AL
P341 Eliza Coffee Memorial Hospital Florence AL
P337 Fayette County Hospital Fayette AL
P357 Guntersville-ARAB Medical Center Guntersville AL
P363 Huntsville Hospital Huntsville AL
W133 Infirmary Health System, Inc. Mobile AL
W425 Jackson County Health Care Authority Scottsboro AL
P402 Jackson County Hospital Scottsboro AL
VH65 Marshall County Health Care Authority Boaz AL
P391 Mizell Memorial Hospital, Inc. Opp AL
P375 Mobile Infirmary Medical Center Mobile AL
P292 North Baldwin Hospital Bay Ninette AL
P311 North Jackson Hospital Bridgeport AL
P281 Northeast Alabama Regional
Medical Center Anniston AL
P388 Northport Hospital - DCH Northport AL
P394 Phenix Medical Park Hospital Phenix City AL
P136 Regional Health Services, Inc. Anniston AL
W534 Rotary Rehabilitation Hospital Mobile AL
P285 Shelby Medical Center Alabaster AL
P342 South Baldwin Hospital Foley AL
P070 The Baptist Medical Centers Birmingham AL
P336 Thomas Hospital Fairhope AL
P404 Vaughan Regional Medical Center Selma AL
P318 Vaughan-Chilton Medical Center Clanton AL
P317 Washington County Infirmary Chatom AL
VHE1 Medlantic Healthcare Group Washington DC
VHE4 National Rehabilitation Hospital Washington DC
S525 Washington Hospital Center Washington DC
W135 Alachua General Hospital, Inc. Gainesville FL
VH66 Baptist Health Care Corporation Pensacola FL
P016 Baptist Hospital, Inc. Pensacola FL
U900 Bay Medical Center Panama City FL
U862 Bayfront Medical
Center, Inc. St. Petersburg FL
V514 Bethesda Memorial Hospital, Inc. Boynton Beach FL
V516 Boca Raton Community Hospital,
Inc. Boca Raton FL
U854 Bradford Hospital Starke FL
V499 Cape Canaveral Hospital Cocoa Beach FL
V448 Citrus Memorial Hospital Inverness FL
U826 Good Samaritan Medical Center West Palm BeachFL
P033 Gulf Breeze Hospital Gulf Breeze FL
W539 Halifax Health Care Systems, Inc. Daytona Beach FL
V490 Halifax Medical Center Daytona Beach FL
W509 Holmes Regional Healthcare
Systems, Inc. Melbourne FL
V403 Holmes Regional Medical Center Melbourne FL
V433 Jay Hospital Jay FL
V425 Lake Shore Hospital, Inc. Lake City FL
V420 Lakeland Regional Medical Center Lakeland FL
V471 Lee Memorial Hospital Fort Myers FL
W502 Martin Memorial Health Systems Stuart FL
U853 Martin Memorial Medical Center Stuart FL
VMB6 Mease Health Care Dunedin FL
V486 Mease Hospital Dunedin FL
VHDJ Mease Hospital Countryside Safety Harbor FL
V443 Methodist Medical Center Jacksonville FL
U915 Munroe Regional Medical Center Ocala FL
U906 Orlando Regional Healthcare
System Orlando FL
H040 Sand Lake Hospital Orlando FL
V467 Santafe Healthcare, Inc. Gainesville FL
V451 SMK Homestead Hospital Homestead FL
U867 South Miami Health System, Inc. South Miami FL
U864 St. Cloud Hospital St. Cloud FL
V438 St. Luke's Hospital Jacksonville FL
V411 Suwannee Hospital, Inc. Live Oak FL
U851 Tallahassee Memorial Regional
Medical Center Tallahassee FL
U839 University Community Hospital,
Inc. Tampa FL
W532 Upreach Pavilion Gainesville FL
U832 Venice Hospital Venice FL
W537 Vista Pavilion Gainesville FL
V146 Athens Regional Medical Center Athens GA
W581 Brooks County Hospital Quitman GA
W547 Buford Hospital Buford GA
U998 Candler Health System Savannah GA
V113 Cobb Hospital & Medical Center Austell GA
V014 Colquitt Regional Medical Center Moultrie GA
DEIG Columbus Ambulatory Healthcare
Services, Inc. Columbus GA
V088 Columbus Regional Healthcare
System, Inc. Columbus GA
V075 Dekalb Medical Center Decatur GA
V004 Floyd Medical Center Rome GA
V102 Grady General Hospital Cairo GA
V032 Gwinnett Hospital System Lawrenceville GA
V078 Hamilton Medical Center, Inc. Dalton GA
W548 Joan Glancy Memorial Hospital Duluth GA
V390 John D. Archbold Memorial
Hospital Thomasville GA
V024 Kennestone Hospital Marietta GA
P266 Kennestone Hospital at Windy Hill Marietta GA
W521 Kennestone Regional Health Care
System, Inc. Marietta GA
V033 Louis Smith Memorial Hospital Lakeland GA
V103 Marion Memorial Hospital and
Nursing Home Buena Vista GA
V027 Medical Center of Central Georgia Macon GA
V100 Mitchell County Hospital
Authority Camilla GA
V011 Newman Hospital Newman GA
V050 Northeast Georgia Health
Services, Inc. Gainesville GA
DDGR Northridge Hospital Columbus GA
V151 Phoebe Putney Memorial Hospital Albany GA
V126 Piedmont Hospital Atlanta GA
V099 R.T. Jones Regional Hospital Canton GA
V124 Scottish Rite Children's Medical
Center Atlanta GA
V065 South Fulton Medical Center East Point GA
V385 South Georgia Medical Center Valdosta GA
DIYT Summitridge Lawrenceville GA
V149 Sumter Regional Hospital Americus GA
P264 Burlington Medical Center Burlington IA
W423 Covenant Medical Center, Inc. Waterloo IA
U638 Covenant Medical Center-Kimball Waterloo IA
U637 Covenant Medical Center-W, Ninth Waterloo IA
U687 Delaware County Memorial Hospital Manchester IA
U750 Floyd County Memorial Hospital Charles City IA
U712 Grinnell General Hospital Grinnell IA
U677 Henry County Health Center Mt. Pleasant IA
U685 Jackson County Public Hospital Maquoketa IA
U718 Jefferson County Hospital Fairfield IA
U656 Merrill Pioneer Community
Hospital Rock Rapids IA
P024 Ottumwa Regional Health Center Ottumwa IA
U755 Sartori Memorial Hospital Cedar Falls IA
U735 St. Luke's Hospital Davenport IA
U753 St. Luke's Methodist Hospital Cedar Falls IA
U724 The Finley Hospital Dubuque IA
U716 Trinity Regional Hospital of
Ft. Dodge Ft. Dodge IA
H042 Acadia-St. Landry Hospital Church Point LA
W533 Alton Ochsner Medical Foundation New Orleans LA
T809 Beauregard Memorial Hospital Deridder LA
T821 Bunkie General Hospital Bunkie LA
T771 Lake Charles Memorial Hospital Lake Charles LA
T747 Natchitoches Parish Hospital Natchitoches LA
T691 North Caddo Hospital Service
District Vivian LA
T734 Ochsner Foundation Hospital New Orleans LA
T774 Our Lady of Lourdes Regional
Medical Center Lafayette LA
T829 Our Lady of the Lake Regional
Medical Center Baton Rouge LA
T733 Pendleton Memorial Methodist
Hospital New Orleans LA
T840 Rapides Regional Medical Center Alexandria LA
T750 St. Francis Medical Center, Inc. Monroe LA
T700 Willis-Knighton Medical Center Shreveport LA
P020 Willis-Knighton South Shreveport LA
R464 Calvert Memorial Hospital Prince Frederick MD
R483 Fallston General Hospital Fallston MD
R475 Harford Memorial Hospital Havre de Grace MD
R487 The Memorial Hospital at
Easton, Maryland, Inc. Easton MD
W469 Upper Chesapeake Health
System, Inc. Fallston MD
U542 Abbott-Northwestern Hospital,
Inc. Minneapolis MN
U622 Arlington Municipal Hospital Arlington MN
U484 Bethesda Lutheran Hospital St. Paul MN
U604 Canby Community Health Services Canby MN
DHLY Canby Medical Center Canby MN
U492 Divine Redeemer Memorial Hospital South St. Paul MN
DHZO Greater Staples Hospital Staples MN
U567 Harmony Community Hospital, Inc. Harmony MN
W416 Healtheast of Minnesota St. Paul MN
U562 Hutchinson Community Hospital Hutchinson MN
U546 Immanuel-St. Joseph's Hospital Mankato MN
U558 Karlstad Health Facilities Karlstad MN
U579 Lake Region Hospital & Nursing
Home Fergus Falls MN
U556 Lakefield Municipal Hospital&
Colonial NURS. Home Lakefield MN
W500 Lifespan, Inc. Minneapolis MN
U549 Madelia Community Hospital Madelia MN
U605 Memorial Hospital Cambridge MN
U510 Memorial Hospital and Home Perham MN
U536 Methodist Hospital St. Louis Park MN
U485 Midway Hospital St. Louis MN
U534 Minneapolis Children's Medical
Center Minneapolis MN
U494 Murray County Memorial Hospital Slayton MN
U617 North Country Regional Hospital Bemidji MN
U504 Redwood Falls Municipal Hospital Redwood Falls MN
V321 Rice Memorial Hospital Willmar MN
V328 Ridgeview Medical Center Waconia MN
U499 Roseau Area Hospital District Roseau MN
P005 Saint Cloud Hospital St. Cloud MN
U489 Springfield Community Hospital Springfield MN
W455 St. John's Northeast Hospital Maplewood MN
U479 St. Joseph's Hospital St. Paul MN
U590 St. Luke's Hospital of Duluth Duluth MN
P172 St. Peter Community Hospital St. Peter MN
U523 Stevens Community Memorial Hospital,
Inc. Morris MN
U470 Tracy Municipal Hospital Tracy MN
U491 Tweeten/Lutheran Health Care Center,
Inc. Spring Grove MN
V325 Waseca Area Memorial Hospital, Inc. Waseca MN
U486 Watonwan Memorial Hospital St. James MN
U545 Weiner Memorial Medical Center Marshall MN
V319 Windom Area Hospital Windom MN
P017 Baldwyn Hospital Baldwyn MS
P035 Forrest General Hospital Hattiesburg MS
V347 Greenwood Leflore Hospital Greenwood MS
V345 Hardy Wilson Memorial Hospital Hazlehurst MS
U969 Jeff Anderson Regional Medical
Center Meridian MS
V356 Magnolia Hospital Corinth MS
P075 Memorial Hospital at Gulfport Gulfport MS
U976 Moxubee General Hospital Macon MS
W176 Ocean Springs Hospital Ocean Springs MS
U960 Okolona Community Hospital Okolona MS
U951 Oktibbeha County Hospital Starksville MS
P007 Singing River Hospital Pascagoula MS
VHB5 Singing River Hospital System Pascagoula MS
V370 South Panola Community Hospital Batesville MS
W267 Southwest Mississippi Regional
Medical Center McComb MS
V334 St. Dominic-Jackson Memorial
Hospital Jackson MS
W432 Carolina Medicorp, Inc. Winston-Salem NC
W035 Carolinas Medical Center Charlotte NC
VV05 Charlotte Mecklenburg Hospital
Authority Charlotte NC
W034 Charlotte Rehabilitation Hospital Charlotte NC
V922 Community General Hospital of
Thomasville, Inc. Thomasville NC
V968 Davie County Hospital Mocksville NC
P015 Forsyth Memorial Hospital Winston-Salem NC
W393 Hawthorne Surgical Center Winston-Salem NC
V985 Huntersville Oaks Nursing Home Huntersville NC
V907 Medical Park Hospital Winston-Salem NC
V945 Nash General Hospital, Inc. Rocky Mount NC
DSTG Sardis Nursing Home Charlotte NC
W464 University Hospital Charlotte NC
W435 Wake County Hospital System, Inc. Raleigh NC
V950 Wake Medical Center Raleigh NC
V996 Wesley Long Community Hospital, Inc. Greensboro NC
DETC Western Wake Medical Center Cary NC
T409 Cavalier County Memorial Hospital Langdon ND
T412 Hillsboro Community Hospital Hillsboro ND
T411 Jamestown Hospital Jamestown ND
T438 Medcenter One Health Systems Bismarck ND
P006 St. Luke's Association Fargo ND
T417 The United Hospital Grand Forks ND
T402 Trinity Medical Center Minot ND
T419 Unity Hospital Grafton ND
Q104 Eastern New Mexico Medical Center Roswell NM
DDLM Baptist Healthcare of Oklahoma, Inc. Oklahoma City OK
V588 Baptist Medical Center of Oklahoma Oklahoma City OK
V601 Baptist Regional Health Center Miami OK
V631 Bass Memorial Baptist Hospital Enid OK
V655 Blackwell Regional Hospital Blackwell OK
V653 Bristow Memorial Hospital Bristow OK
V586 Deaconess Hospital Oklahoma City OK
V638 Drumright Memorial Hospital Drumright OK
V637 Duncan Regional Hospital, Inc. Duncan OK
V571 Eastern Oklahoma Medical Center Poteau OK
V570 Grand Valley Hospital Pryor OK
V622 Grove General Hospital Grove OK
V544 Hillcrest Medical Center Tulsa OK
V666 Jackson County Memorial Hospital Altus OK
V658 Jane Phillips Episcopal Hospital,
Inc. Bartlesville OK
V621 Logan Hospital & Medical Center Guthrie OK
V602 McAlester Regional Health Center McAlester OK
V660 Memorial Hospital of Southern
Oklahoma Ardmore OK
V599 Midwest City Regional Hospital Midwest City OK
V596 Muskogee Regional Medical Center Muskogee OK
V592 Norman Regional Hospital Norman OK
Q038 Oklahoma Healthcare Corp. Oklahoma City OK
V574 Pawnee Municipal Hospital Pawnee OK
DJDL SMC Health Services Corporation Oklahoma City OK
V581 Southwest Medical Center Oklahoma City OK
V598 Southwest Medical Center-Moore Moore OK
V540 St. John Medical Center Tulsa OK
V556 Stillwater Medical Center Stillwater OK
V555 Stroud Municipal Hospital Stroud OK
V668 Valley View Regional Hospital ADA OK
U321 Tuality Community Hospital, Inc. Hillsboro OR
U328 Tuality Forest Grove Hospital Forest Grove OR
U304 Willamette Falls Hospital Oregon City OR
R549 York Hospital York PA
V834 Baker Hospital Charleston SC
V882 Baptist Medical Center at Columbia Columbia SC
V869 Baptist Medical Center Easley Easley SC
V889 Roper Hospital Charleston SC
VWF3 South Carolina Baptist Hospitals,
Inc. Columbia SC
T457 Sioux Valley Hospital Sioux Falls SD
DJIG Baptist Healthcare Group Nashville TN
DJII Baptist Healthcare Group-Miller
Medical Group Nashville TN
DJIH Baptist Healthcare Group-Nashville
MedicalGroup Nashville TN
P012 Baptist Hospital, Inc. Nashville TN
R865 Clarksville Memorial Hospital Clarksville TN
R864 Cookeville General Hospital Cookeville TN
R861 Cumberland Medical Center Crossville TN
R825 East Tennessee Children's Hospital Knoxville TN
VV16 Fort Sanders Alliance Knoxville TN
R808 Fort Sanders Loudon Medical Center Loudon TN
R821 Fort Sanders Parkwest Medical Center Knoxville TN
R824 Fort Sanders Regional Medical Center Knoxville TN
P021 Fort Sanders-Sevier Medical Center Sevierville TN
R859 Goodlark Medical Center, Inc. Dickson TN
R746 Hardin County General Hospital Savannah TN
R846 Harriman City Hospital Harriman TN
R735 Jessee Holman Jones Hospital Springfield TN
R865 Maury Regional Hospital Columbia TN
R757 Methodist Medical Center of
Oak Ridge Oak Ridge TN
R775 Middle Tennessee Medical Center,
Inc. Murfreesboro TN
R851 Williamson Medical Center Franklin TN
S865 All Saints Episcopal Hospital Fort Worth TX
W482 All Saints Hospital * Cityview Fort Worth TX
T049 Angleton-Danbury General Hospital Angleton TX
T044 Arlington Memorial Hospital Arlington TX
T020 Baptist Healthcare System Beaumont TX
DBZG Baptist Hospital, Orange Orange TX
T943 Baptist Medical Center San Antonio TX
W519 Baptist Memorial Hospital System San Antonio TX
P495 Baylor Center for Restorative Care Dallas TX
W515 Baylor Health Care System Dallas TX
S931 Baylor Institute for Rehabilitation Dallas TX
S873 Baylor Medical Center at Ennis Ennis TX
S836 Baylor Medical Center at Garland Garland TX
S817 Baylor Medical Center at Grapevine Grapevine TX
T863 Baylor Medical Center at Waxahachie Waxahachie TX
S942 Baylor University Medical Center Dallas TX
S996 Brownfield Regional Medical Center Brownfield TX
S939 Children's Medical Center of Dallas Dallas TX
S943 CDON Memorial Hospital & Home Dalhart TX
T976 Frio Hospital Pearsall TX
T056 High Plains Baptist Hospital Amarillo TX
T867 Hillcrest Baptist Medical Center Waco TX
U083 Irving Healthcare System Irving TX
T894 King's Daughters Hospital Temple TX
U046 Lamb Healthcare Center Littlefield TX
S815 Limestone Medical Center Groesbeck TX
VV00 Lubbock Methodist Hospital
System, Inc. Lubbock TX
U055 Medical Arts Hospital Lamesa TX
U025 Memorial Hospital Marshall TX
DAJR Memorial Hospital - The Woodlands The Woodlands TX
U013 Memorial Hospital and Medical Center Midland TX
P029 Memorial Hospital Northwest Houston TX
P028 Memorial Hospital Southeast Houston TX
P009 Memorial Hospital Southwest Houston TX
W514 Memorial Hospital System Houston TX
DGMK Methodist Children's Hospital Lubbock TX
U035 Methodist Hospital Lubbock TX
W560 Methodist Hospital Levelland Levelland TX
VV14 Middleton General Hospital Irving TX
T875 Mother Frances Hospital Tyler TX
DAFF Muleshoe Area Medical Center Muleshoe TX
DFGG North Central Baptist Hospital San Antonio TX
T938 Northeast Baptist Hospital San Antonio TX
U087 Northeast Medical Center Hospital Humble TX
S978 Panola General Hospital Carthage TX
T050 Permian General Hospital Andrews TX
S885 Providence Memorial Hospital El Paso TX
T958 Richardson Medical Center Richardson TX
T946 Shannon Medical Center San Angelo TX
T930 Southeast Baptist Hospital San Antonio TX
T030 St. David's Health Care System Austin TX
T926 St. Luke's Lutheran Hospital San Antonio TX
S807 Valley Baptist Medical Center Harlingen TX
T886 Wadley Regional Medical Center Texarkana TX
U008 Ward Memorial Hospital Monahans TX
T850 Wichita General Hospital Wichita Falls TX
S870 Wilson Memorial Hospital Floresville TX
T913 Wilson N. Jones Memorial Hospital Sherman TX
W525 Centra Health, Inc. Lynchburg VA
S614 Children's Health System, Inc. Norfolk VA
S625 Lynchburg General Marshall Lodge Hospitals,
Inc. Lynchburg VA
S662 Martha Jefferson Hospital Charlottesville VA
S646 Mary Washington Hospital Fredericksburg VA
W504 MWH Medicorp Fredericksburg VA
S672 National Hospital for Orthopaedics and
Rehabilitation Arlington VA
S637 Rockingham Memorial Hospital Harrisonburg VA
S554 Sentara Bayside Hospital Virginia Beach VA
S640 Sentara Hampton General Hospital Hampton VA
P004 Sentara Health System, Inc. Norfolk VA
S609 Sentara Leigh Hospital Norfolk VA
S607 Sentara Norfolk General Hospital Norfolk VA
S647 Southampton Memorial Hospital Franklin VA
S677 The Alexandria Hospital Alexandria VA
S673 The Arlington Hospital Arlington VA
S551 The Fauquier Hospital, Inc. Warrenton VA
S624 Virginia Baptist Hospital Lynchburg VA
W620 Allenmore Hospital Tacoma WA
W498 Multicare Medical Center Tacoma WA
V361 Tacoma General Hospital Tacoma WA
<PAGE>
SCHEDULE 2 - ADA BRANCHES
ADA: OWENS & MINOR
BRANCH
- --------------------
ATLANTA
AUGUSTA
BIRMINGHAM
DALLAS
FT.LAUDERDALE
HARLINGEN
HOUSTON
JACKSON
JACKSONVILLE
KNOXVILLE
MEMPHIS
MINNEAPOLIS
NEW ORLEANS
NORFOLK
OKLAHOMA CITY
ORLANDO
PORTLAND
RALEIGH
RICHMOND
SAVAGE
SHREVEPORT
<PAGE>
SCHEDULE 3
REGIONAL HEALTH CARE SYSTEMS
VHA ALABAMA, INC.
Two Perimeter Park S., Ste. 404W
Birmingham, AL 35243
(205) 970-2300
FAX: (205) 970-2333
VHA CAROLINAS-TENNESSEE, INC.
Water Oak Bldg.
8720 Red Oak Blvd., Ste. 505
Charlotte, NC 28217
(704) 522-8056
FAX: (704) 522-7912
VHA CENTRAL,INC.
100 Old Wilson Bridge Rd., Ste. 109
Worthington, OH 43085
(614) 436-1165
FAX: (614) 436-4236
VHA EAST, INC.
200 Berwyn Park, Ste. 202
Berwyn, PA 19312
(215) 296-2558
FAX: (215) 296-8850
VHA OF FLORIDA, INC.
3030 N. Rocky Point Dr. W., Ste. 750
Tampa, FL 33607
(813) 281-1080
FAX: (813) 281-1173
VHA GEORGIA, INC.
900 Circle 75 Pkwy., Ste. 1450
Atlanta, GA 30339
(404) 850-7400
FAX: (404) 850-7430
VHA GREAT RIVERS, INC.
235 S. Fifth St.
Springfield, IL 62701
(217) 753-0395
FAX: (217) 753-2078
VHA GULF STATES, INC.
2431 S. Acadian Thruway, Ste. 540
Baton Rouge, LA 70808
(504) 922-4020
FAX: (504) 922-4023
VHA HEALTHFRONT, INC.
600 W. Cummings Park, Ste. 3900
Woburn, MA 01801-6349
(617) 938-9000
FAX: (617) 938-1090
VHA IOWA, INC.
866 First Ave. N.E.
Cedar Rapids, IA 52402
(319) 366-6652
FAX: (319) 366-3050
VHA METRO NEW YORK, INC.
Cedar Plaza
20 Cedar St., Ste. 301
New Rochelle, NY 10801
(914) 633-0064
FAX: (914) 633-0548
VHA MICHIGAN, INC.
3940 Peninsular Dr., SE, Ste. 280
Grand Rapids, MI 49546
(616) 956-6555
FAX: (616) 956-7884
VHA MID-AMERICA, INC.
4400 College Blvd., Ste. 160
Overland Park, KS 66211
(913) 345-2422
FAX: (913) 345-1868
VHA MID-ATLANTIC STATES, INC.
1033 N. Fairfax St., Ste. 400
Alexandria, VA 22314
(703) 549-3031
FAX: (703) 549-3721
VHA MIDLANDS, INC.
7912 Davenport St.
Omaha, NE 68114
(402) 392-2688
FAX: (402) 392-2887
VHA MIDWEST, INC.
O'Hare Corporate Center
1300 W. Higgins Rd., Ste. 210
Park Ridge, IL 60068
(312) 693-7050
FAX: (312) 693-2894
VHA MOUNTAIN STATES, INC.
2060 Broadway, Ste. 300
Boulder, CO 80302
(303) 545-9300
FAX: (303) 444-3704
VHA NEW ENGLAND, INC.
100 Commercial St., Ste. 406
Portland, ME 04101
(207) 761-2905
FAX: (207) 761-2415
VHA OF NEW JERSEY, INC.
68A S. Main St.
Cranbury, NJ 08512
(609) 395-7776
FAX: (609) 395-9050
VHA NORTH CENTRAL, INC.
3600 W. 80th St., Ste. 550
Minneapolis, MN 55431
(612) 896-3424
FAX: (612) 896-3425
VHA OF OKLAHOMA, INC.
Lakepointe Towers West
4013 NW Expwy., Ste. 675
Oklahoma City, OK 73116
(405) 843-1500
FAX: (405) 848-1813
VHA PACIFIC, INC.
Tishman Office Center
2175 N. California Blvd., Ste. 310
Walnut Creek, CA 94596
(510) 933-2121
FAX: (510) 947-1497
VHA PENNSYLVANIA, INC.
Foster Plaza, Bldg. I, 3rd Fl.
415 Holiday Dr.
Pittsburgh, PA 15220
(412) 922-9124
FAX: (412) 922-9345
VHA SOUTHERN NEW ENGLAND, INC.
Winding River Office Park
74 Scott Swamp Rd.
Farmington, CT 06032
(203) 674-1774
FAX: (203) 674-1953
VHA SOUTHWEST, INC.
14901 Quorum Dr., Ste. 200
Dallas, TX 75240
(214) 490-0433
FAX: (214) 490-0204
VHA TRI-STATE, INC.
8900 Keystone Crossing, Ste. 480
Indianapolis, IN 46240
(317) 574-7170
FAX: (317) 574-7173
VHA UPSTATE NEW YORK, INC.
5000 Campuswood Dr., Ste. 102
East Syracuse, NY 13057
(315) 432-1340
FAX: (315) 433-2320
VHA WEST, INC.
12555 W. Jefferson Blvd., Ste. 325
Los Angeles, CA 90066
(310) 578-7654
FAX: (310) 578-7652
VHA WISCONSIN, INC.
Tenney Plaza
3 S. Pinckney St., Ste. 800
Madison, WI 53703
(608) 255-8225
FAX: (608) 255-4435
<PAGE>
SCHEDULE 4
PRICING POLICY/PROTOCOL
The objective of this policy/protocol is to achieve the following;
o Ensure accurate pricing to VHA hospitals in
a timely manner,
o Provide traceability and accountability of
pricing,
o Centralize pricing decisions, and
o Effectively communicate all price revisions.
TIERED OR HOSPITAL EXCEPTION LEVEL PRICING
In the event that it becomes necessary to deviate from the
published pricing for any medical/surgical product the
following protocol is to be observed.
1) The manufacturer, in conjunction with the
appropriate VHA Account Manager will communicate a
request for tier revision or hospital exception level
pricing to VHA MSBU Product Management on a
HOSPITAL EXCEPTION LEVEL PRICING, (HELP) form. (attached)
2) Product Manager/Analyst will review requests.
3) Product Manager/Analyst will approve/disapprove
requests.
4) MSBU Distribution & Logistics Services Analyst will
telefax approved HELP forms to the Authorized
Distribution Agent (ADA) and revised pricing will be
available to the hospital in 7 working days.
5) The ADA will communicate back to MSBU Distribution &
Logistics Services Analyst in writing confirming the date
entered into the ADA system.
6) All approved HELP requests will be on file with
the Distribution & Logistics Services Analyst for future
reference.
HOSPITAL EXCEPTION LEVEL PRICING
(H.E.L.P. FORM)
VHA Hospital: ______________________________________________
VHA LIC #: _________________________________________________
Address: ___________________________________________________
City/State/Zip: ____________________________________________
Contract #: ________________________________________________
New Price
Current Price Tier: ___________________
Tier: ______________________
Effective Review
Date: ______________________Date: ___________________
(For
Office
U s e
only)
CAT ADA HOSP USAGE USAGE
NO DESCRIPTION PRICE PRICE CS/YR $/YR
- --- ----------- ----- ----- ----- -----
Submitted By: ______________________________________________________________
SIGNATURE DATE
VHA+PLUS(R) Product Management: ____________________________________________
SIGNATURE DATE
ADA Contracts Personnel: ___________________________________________________
SIGNATURE
Return copy to Distribution Analyst-VHA
Fax (214)650-4330
<PAGE>
SCHEDULE 5/ SCHEDULE 17
ADA COMPUTER CAPABILITIES AND BACK-UP SYSTEMS
Owens & Minor's hardware configuration is designed for maximum
availability and flexibility, integrating the technologies of IBM
and DEC to achieve a state-of-the-art physical environment. The
entire Owens & Minor data processing environment is referred to as
OMNI. EDI data may be received into OMNI through one of two
separate systems: the DEC/VAX, once receive, that data is passed
to the mainframe and processed. (The DEC/VAX and the IBM Mainframe
is headquarterd in Owens & Minor's corporate office, Richmond,
Virginia). Regardless of which system actually receives the EDI
data, the processing of that data (orders, etc.) is performed on
the mainframe.
For example, if a VHA Hospital sends several orders electronically
to Owens & Minor via the DEC/VAX; once received, that data is
passed to the mainframe and processed. After order confirmations
are generated, the data is then passed back to the DEC/VAX. A
communications session takes place to electronically transfer the
order confirmations back to the VHA Hospital.
Data may also be sent directly to the IBM mainframe, processed and
sent back to the originating party (mainframe-to-mainframe). This
situation typically occurs between Owens & Minor and its vendors.
Some of the larger VHA Hospitals also communicate directly with the
IBM mainframe. The DEC/VAX system provides a flexible asynchronous
communications environment, and therefore allows Owens & Minor to
accommodate many other communication configurations.
Once this data has been received from the VHA Hospital and
processed, the data is directed to a controller at the local Owens
& Minor Distribution Center. This process takes place within a
matter of seconds from the time it is received from the VHA
Hospital. If back-orders exist, the customer service
representative will manually direct shipment to be made from
another Owens & Minor Distribution Center, depending on the urgency
of the back-order by the VHA Hospital. OMNI does not automatically
spin the back-order to another Distribution center. Due to the
fact that Owens & Minor has a record for high fill-rate percentage
the decision was made to have manual intervention. We find this to
be more efficient and controllable.
Owens & Minor's EDI Systems support both asynchronous and
synchronous (bisync) communications. Asynchronous communications
are exchanged between the DEC/VAX system and the VHA Hospitals.
The IBM mainframe accommodates synchronous communications
(bisync/3780 and 3770 protocol). Communications between Owens &
Minor and the VHA Hospitals may be direct or through a Value Added
Network (VAN).
Currently, Owens & Minor processes EDI data received in the
standard ANSI X12 format, Owens & Minor Proprietary format and
other varied proprietary formats. Although Owens & Minor
encourages the used of ANSI X12 EDI standards, vendor-specific
systems may be developed.
EDI data is received from various Remote Order Entry and Material
Management Systems. Some of the most commonly used software
packages include: QUIKLINK, ESI, and PCtrend (an Owens & Minor
product). A complete list of Owens & Minor EDI interfaces is
listed on the attached pages (See Owens & Minor "Electronic Data
Interchange"). The Owens & Minor Corporate Data Center is backed
by an un-interruptable power supply and an emergency generator
which enables us to continue to operate during local power outages.
Our computer system is state-of-the-art IBM technology which has
been integrated with redundant systems and components to prevent
loss of access to the system. This design will switch to backup
components in the event of a failure and will automatically call
the IBM Support Center supplying the failing component part number
and location in the System to expedited dispatch and repair.
The System also has a multiple component architecture which allows
us to process in a slightly degraded mode for processors which
operate independently. This design permits Owens & Minor to
process customer data without interruption.
Data is routinely backed-up and stored off-site. In the event of
a major disaster which destroys the corporate date center,
arrangements have been made with IBM to establish a HOT SPOT or
Data Center within twenty-four (24) hours. Owens & Minor would be
able to recover to full business processing capacity within three
calendar days of a major disaster to the corporate data center.
In the event of a power outage to a local Owens & Minor
Distribution Center, orders would be pulled manually until power
can be restored. In the event of a disaster to a local Owens &
Minor Distribution Center, EDI and manual orders will be redirected
to another Owens & Minor Distribution Center in the immediate area
until service can be restored.
<PAGE>
SCHEDULE 6
PRICE MATRIX
[This confidential information has been omitted and filed
separately with the
Commission].
<PAGE>
SCHEDULE 7
Designated VHA Member or Affiliate Annual Acknowledgement Form
Price Matrix Slotting for calendar year
Payment Term Selection:
Services Desired:
<PAGE>
SCHEDULE 8
PAYMENT TERMS OPTIONS
[This confidential information has been omitted
and filed separately with the Commission].
<PAGE>
SCHEDULE 9
RETURN GOODS POLICY
I. GENERAL
ADA will accept, for full credit based on original
delivered cost, for Contract and Noncontract Product(s),
originally purchased from ADA and returned to ADA in
original packaging and in saleable condition within sixty
(60) calendar days of the date delivered by ADA. ADA may
assess a 25% restocking charge for returned product(s)
which are damaged or stickered.
ADA will accept for return, saleable and Contract and
Noncontract Product(s) after sixty (60) calendar days,
subject to a 15% restocking charge.
ADA will accept for return, Contract or Noncontract
Product(s) with expired dating or which have been
discontinued by the Vendor, subject to the Vendor's
policy. ADA will issue credit for this product, based on
the amount credited to ADA by the Vendor.
ADA shall levy no other restocking or morgue charges.
ADA shall follow Vendor policy for returns in the event
of a product(s) recall. ADA will provide each Designated
VHA Member and Affiliate a copy of the Vendor's policy
regarding the recall; if requested.
ADA will supply, upon request by Designated VHA Member or
Affiliate, the following:
a) A current list of Vendor addresses for the purpose of
obtaining return goods authorization from the Vendor.
b) The names and telephone numbers of the Vendor
representatives having authority to authorize the return
of product by Designated VHA Member or Affiliate.
c) A list of Vendors who levy a restocking charge on
returned product(s) and the amount of that charge.
II. CREDITS
ADA will process Designated VHA Member and Affiliate
credits on a daily basis. All credits should appear on
the next statement to Designated VHA Members or
Affiliates, except for credits processed near the end of
the statement period, where because of cutoff dates, the
credit will appear on the following statement.
Designated VHA Member or Affiliate will receive a copy of
the credit memo within fifteen (15) days after receipt of
the return by ADA's Primary Ordering Location.
ADA will issue credit, within fifteen (15) days, for
outdated or discontinued product(s) being recalled by the
Vendor. In the case of a Vendor recall(s), the Vendor
must have authorized ADA to issue credit. ADA will advise
Designated VHA Members and Affiliates, by the fifteenth
(15th) calendar day of each month, of any credits issued
by ADA during the previous month, which remain open.
III. FREIGHT CHARGE ON RETURNED GOODS
ADA vehicles or other prepaid carriers will pick up all
product returns authorized by the Primary Ordering
Location to be returned. Any freight charges incurred by
Designated VHA Members or Affiliates for product returns
shipped to the Vendor will be based on the Vendor's
policies.
IV. RETURN OF SHIPPING ERRORS, OVERAGES AND DAMAGED PRODUCT
ADA will authorize, via phone, the return of product(s)
shipped in error. ADA will pick up the product(s) on
ADA's next scheduled delivery to the Designated VHA
Member or Affiliate. If ADA utilizes a common carrier to
serve Designated VHA Members and Affiliates, ADA shall
assume the freight charges for the product(s) to be
returned to ADA.
V. ADA WILL NOT ACCEPT RETURNS ON THE FOLLOWING:
a) Any product(s) purchased on a "special order" basis or
contrary to the Vendor's policy;
b) Any sterile product(s) or refrigerants, unless
properly protected;
c) Product(s), apparatus or equipment which has been used,
or is without original packaging, labeling, or operating
manuals;
d) Product(s) with labeling or packaging which is missing,
damaged, defaced, or other non-saleable product(s), except
as permitted by the Vendor's policy;
e) Seasonal product(s), except according to Vendor's
policy (available on request);
f) Open bottles and partial packages of product(s) will
not be accepted for return, unless the Vendor has authorized
the ADA to accept open bottles and partial packages;
g) Any product(s) purchased direct from the Vendor.
VI. RETURN PROCEDURE
ADA will accept Contract and Noncontract Product(s)
returned from Designated VHA Members and Affiliates based
on the procedure outlined herein.
a) To receive authorization for the return of product,
Designated VHA Members and Affiliates shall contact ADA
Primary Ordering Location.
b) Designated VHA Members and Affiliates provide ADA with
the following information, if appropriate:
1) Designated VHA Member or Affiliate name and account
number as it appears on ADA's invoice.
2) ADA invoice or order number and date.
3) The quantity, product number, price paid form/size,
description. Add lot number, serial number, and
expiration date of the product, as appropriate. NOTE:
A copy of ADA's invoice or packing slip will provide
the required information, as may the price stickers.
4) Purchase order number, if applicable.
5) The reason for return.
c) To assure proper credit and handling, product returns
should be written and packaged for shipment by the type of
product being returned as follows:
1) Refrigerants.
2) Class II through Class V (items must meet DEA
procedures).
3) Saleable product(s).
4) Outdated or discontinued product(s).
5) Damaged product(s).
6) Product(s) recalled by Vendor(s).
VII. NOTIFICATION PROCEDURE
ADA agrees to the following notification procedure.
a) Designated VHA Member and Affiliate claims of product
shortage, damage, overage, product(s) with an expiration
date earlier than six months and products delivered in
error, will be reported to ADA in five (5) business days
from date of delivery, scheduled drugs will be reported in
two (2) business days. No restocking charges apply.
b) In the event of dispute, regarding a delivery damage claim,
or a product return not received by ADA, a receipt may be
required by ADA prior to issuing credit and to enable ADA
to file a claim with the carrier.
<PAGE>
SCHEDULE 10
ADA MONTHLY REPORTS TO DESIGNATED VHA MEMBERS AND AFFILIATES
The following reports shall be delivered to each Designated VHA
Member and Affiliate by the fifteenth day of the month following
the month's activities reflected in such report.
1. Fill Rate report.
2. Sales report listing the dollar amount and unit volume of each
product purchased.
3. Opportunity Work Sheets (attached as Schedule 10A and 10B).
4. Status report on targets and open issues identified at the
Member Quarterly Business Review.
<PAGE>
SCHEDULE 11
MEMBER QUARTERLY BUSINESS REVIEW TOPICS
Include, but not limited to:
o Review prior quarter's action plan accomplishments
o Update volume of purchases
o Update Utilization (% of total possible dist. business)
changes
o Review DSO results and potential savings by improvement
o Review usage of products
o Solicit input on current delivery schedule, customer service,
sales service, and product service support
o Develop and agree on action plan for next 90 days
o Establish next review date
o Discuss future product standardization and utilization
opportunities
<PAGE>
SCHEDULE 12
IV SOLUTION DISTRIBUTION EVALUATION PROCESS
Abbott-ADA-VHA I.V. Solution Distribution
Abbott, ADA and VHA have agreed to the process described below
to determine when IV Solutions should be delivered by ADA:
o Abbott will run a supply channel analysis on all current
ADA distributed business. This will determine the ADA's
current level of compensation by account; Abbott
compensation is activity based by account. Once this
information is available and no later than November 30,
1993, VHA will notify each involved ADA. A joint meeting
between Abbott-ADAs-VHA to review the current compensation
by account, and if there are accounts where the
compensation level is too low based on the activity
required by the ADA, the three parties will reach agreement
on the proper level of compensation on all existing
business.
With respect to new requests for the ADA distribution of IV
Solutions:
o Of the three parties Abbott-ADAs-VHA, whichever is the
initial contact by Designated VHA Members or Affiliates,
needs to contact the other two parties. VHA Distribution
and Logistic Services has offered to be the conduit for
contact.
o If Abbott is the initial contact by Designated VHA
Members and Affiliates; Abbott will contact VHA
Distribution and Logistic Services, then Distribution
and Logistic Services will contact the ADA and the VHA
account manager.
o If ADA is initial contact; ADA will notify VHA
Distribution and Logistic Services, who will in turn
contact Abbott and the VHA account manager.
o If VHA account manager or Distribution and Logistic
Services is the initial contact; VHA will in turn
contact Abbott and the ADA.
Once notified, all parties agree to the following process:
o Abbott will contact the Designated VHA Member or Affiliate
and gather appropriate information and perform a supply
channel analysis. This analysis will detail the costs
involved by all parties involved with the distribution of
solutions as well as hospitals rebates and ADA
compensation. The supply channel analysis will include a
line item for ADA markups. Prior to dissemination of the
supply channel analysis; the ADA and Abbott will agree on
the % of mark up the ADA will charge for distribution of
I.V. solutions to the hospital based upon the Designated
VHA Member or Affiliate's election to include the IV volume
in their slotting on the Price Matrix..
o Once Abbott and the ADA agree on the supply channel
analysis, a completed copy will be faxed to VHA,
Distribution and Logistic Services. Distribution and
Logistic Services will keep a copy on file as well as
provide the VHA account manager with a copy.
o Abbott will provide a completed copy of the supply channel
analysis to the Designated VHA Member or Affiliate. Abbott
and the ADA will jointly present the findings of the supply
channel analysis. By presenting the findings jointly to
the Designated VHA Member or Affiliate, misunderstandings
will be avoided and a stronger partnership provided.
The overall objective is to provide Designated VHA Member or
Affiliate with the correct information as quickly as possible.
Abbott-ADAs-VHA have agreed to an ongoing review of this process to
insure that Designated VHA Member and Affiliate needs are met as
quickly as possible.
<PAGE>
SCHEDULE 13
ADA REPRESENTATIVE RESPONSIBILITIES
Each ADA will provide, at no cost to the RHCS (Schedule 3), a
"Dedicated Representative" to the members of each RHCS in which it
has Designated VHA Members and Affiliates. ADA will make known the
name, title, address and phone number of each Dedicated
Representative to the applicable RHCS no later than December 31,
1993. The Dedicated Representative will be responsible for
providing the following services:
(A) Coordinating all distribution activity to the Designated
VHA Members and Affiliates it services within the RHCS with the VHA
Account Manager for said members.
(B) Actively participate with the RHCS staff:
1. President
2. Vice President
3. Account Manager
4. Other
with initial and ongoing strategic planning to enhance the
ongoing Quality Improvement process of the Dedicated
Representative to Designated VHA Members and Affiliates.
(C) Actively participate with RHCS Materiels Council.
(D) Actively participate with the following programs:
1. Total Delivered Cost
2. SPIP (Service Performance Improvement Program)
3. Taking Stock(SM)
4. QBR (Quarterly Business Reviews)
(E) Provide the following information monthly as is needed by
RHCS staff:
1. Hospital fill rates
2. ADA Representative call reports to Designated VHA
Members and Affiliates
3. Matrix management update
4. Monthly Designated VHA Member and Affiliate complaint
update with resolutions
5. Monthly tracking of invoice errors
6. Monthly tracking of percentage of returned goods
7. Monthly utilization
8. Monthly reports on backorder
9. Monthly manufacturer fill rate reports
10. Monthly NonContract and Contract reports
(F) Total responsibility to the ADA on the ADA Agreement.
1. Verification and collection ongoing of utilization
data.
2. Matrix management
Annual Slotting
Services needed
Payment Terms
EOE Requirements
3. Strategic Planning of initial and ongoing distribution
services at:
RHCS
Designated Member and Affiliate
4. QBR/MUM - ensure rebates and matrix changes are done
quarterly and timely.
5. Communication link between the Designated VHA Member
and Affiliate, RHCS, ADA branch and ADA corporate
headquarters.
(G) Dedicated Representative to each RHCS will also serve in
the same capacity to any non-aligned Designated VHA Member and
Affiliate serviced in the same geographic area as RHCS.
(H) Based on the Designated VHA Member's or Affiliate's
requirements, ADA Representatives will plan their schedule of
visits to Designated VHA Members and Affiliates based upon mutual
agreement on frequency of visits.
(I) ADA shall provide a sales representative to call on each
VHA Member and Affiliate. ADA's sales representatives shall be
thoroughly trained in each Designated VHA Member's and Affiliate's
operations and purchasing characteristics.
(J) If at anytime during the term of this Agreement the
Designated VHA Member or Affiliate feels that ADA's service is
inadequate or that there is a problem with the ADA sales
representation, the Designated VHA Member or Affiliate has the
following alternatives:
1. The Designated VHA Member or Affiliate may contact its ADA
sales representative regarding service issues.
2. The Designated VHA Member or Affiliate will have access to
the ADA National Accounts Representative to register any
concern directly to ADA's corporate office.
3. The Designated VHA Member or Affiliate may contact its VHA
Account Manager or its VHA Distribution and Logistics
Service Manager.
ADA has agreed to respond to any inquiry within one (1) business
day after receipt. A monthly summary of the inquiries received
will be provided to VHA for review and follow-up where needed.
<PAGE>
SCHEDULE 14
ADA LOGISTIC SERVICES
o Operational Analysis
o ADA agrees to position Taking Stock(SM) as the most cost
effective means for a hospital to understand, develop
and implement a plan for improved materials logistic
operations.
o ADA agrees to provide resources to learn and understand
the Taking Stock(SM) program and position the program
within its own organization.
o ADA agrees to provide local training on Taking Stock(SM)
to its Dedicated Resources to VHA, for supporting
Hospital initiatives with VHA.
o VHA agrees to provide the initial marketing and
education to the hospital.
o ADA agrees that it will only position its own logistic
services to hospitals after positioning the value of
Taking Stock(SM) initially.
o Asset Management
SUTURE INVENTORY MANAGEMENT:
The ADA agrees, upon request of the VHA health care
organization and in conjunction with the VHA suture contract
manufacturer, to conduct an initial examination of the
hospital's inventory, including a physical inventory and
purchase and usage history reviews. The ADA will provide
written analysis that will identify overstocking and isolate
unnecessary expenditures with buy back arrangements. The ADA
will recommend usage levels for each hospital department,
reorganize storage areas and systems, provide on-site
inventory services, provide regular reports and reviews and
establish goals and performance measures. The ADA will assist
the hospital in all efforts to lower overall suture inventory
and improve their cash flow to reduce overall annual suture
expense.
CATH LAB MANAGEMENT:
The ADA agrees, upon request of the VHA health care
organization, to work with the Director of Materiels Manager,
the physician, the department head and the VHA contract
manufacturer to reduce the number of purchase orders and over-
night deliveries and consolidate vendors. The ADA will
deliver product to the designated area, manage the inventory,
provide a clean room to store the product, maintain specialty
carts (for delivery) and sit on the hospital's evaluation
committee for new products.
INVENTORY BUY-DOWN:
The ADA agrees, as an integral part of asset management, to
reduce the hospital's un-official and official inventory by
buying-down inventory to a manageable level and removing
obsolete inventory. The ADA will pay the price that the
hospital is currently paying for inventory buy-back.
CONTINUOUS INVENTORY REPLENISHMENT PROGRAM:
The ADA agrees to support the development of a continuous
inventory replenishment program at the manufacturer level by
having in place the ANSI X.12 867, 852, 855 and 861
transaction sets and proactively working with VHA and the
80/20 VHA contract vendors to create a seamless system.
HOSPITAL COST FOR ACCESS TO PROGRAM
Initial consultation and evaluation
- No cost
Utilization of the program
- Fee locally negotiated
<PAGE>
SCHEDULE 15
SERVICE MATRIX
[This confidential information has been omitted
and filed separately with the Commission].
<PAGE>
SCHEDULE 16
ADA DISASTER PLAN
If a major natural disaster or other emergency situation occurs
in a service area affecting a VHA Hospital, the following emergency
procedure will be implemented immediately:
- Within one(1) hour of the occurrence, Owens & Minor will
attempt to establish communication with the VHA
Hospitals in the service area affected via the following means:
- Phone (standard or cellular)
- EDI
- Two-way radio communications with the hospital's
telecommunications center or a pre-designated coordinator.
- On site, direct contact
- Once communications are established, hospital product needs
will be determined based upon current daily order
requirements and projected emergency needs
identified by the hospitals (i.e.,
shipping seven day of supplies versus
one).
- Depending upon the extent of emergency situation,
communications may be established with State Police and
National Guard.
- Emergency back-up supplies can be drawn from other Owens
& Minor divisions as needed.
- Depending upon the extent of emergency situation, the most
expedient form of transporation, (i.e., air or ground) will
be determined and coordianted with the State Police and
National Guard.
- Each Owens & Minor Distribution Center will meet with the
VHA Hospitals by region and develop a detail disaster plan
to meet the requirements of each VHA Hospital within that
region.
- Once established, the Disaster Plan will be tested for its
effectiveness and to ensure that it meets the requirements
of the VHA Hospitals in that region.
<PAGE>
SCHEDULE 17
ADA COMPUTER CAPABILITIES AND BACK-UP SYSTEMS
See Schedule 5
<PAGE>
SCHEDULE 18
ADA EDI CAPABILITIES
ADA shall be fully capable of supporting the following electronic
data interchange (EDI) transaction sets in the ANSI X 12 format:
832 Price sales catalog
850 Purchase order
820 Payment order/remittance advice
810 Invoice
846 Inventory inquiry/advice
812 Credit/debit
867 Product transfer/sales report
<PAGE>
SCHEDULE 19
ADA REPORTS TO VHA
No later than the tenth day of each month, ADA shall deliver
to VHA the two tape reports reflecting the sales activity for the
previous month and a diskette containing the information required
in Attachment 1. Such reports shall be in the format described in
Attachment 1 to this Schedule and shall include: sales of Contract
Products and Noncontract Products by each Designated VHA Member and
Affiliate, fill rate by customer, matrix slotting and net cost plus
by customer, Quarterly Performance Bonuses earned and paid. The
information required in the diskette shall also be provided in hard
copy format by the tenth of the month.
ADA shall also provide VHA with the following reports by the
15th of each month.
o List of additional services provided to Designated VHA
Member and Affiliates pursuant to Section 7 (G).
o Summary of monthly inquiries to ADA's National Account
Representative.
o List of Vendor backorders for the month. For each Vendor
with backorders, ADA shall report lines ordered and lines
delivered.
All reports to VHA shall be directed to VHA's Director of
Distribution.
<PAGE>
SCHEDULE 20
PRODUCTS ON WHICH VHA FEE IS DUE
None as of January 1, 1994
<PAGE>
SCHEDULE 21
PROBLEM RESOLUTION POLICY
Team Problem-Solving Process.
Date Problem was Identified.
Problem.
Identify Problem/Situation.
Evaluate Consequences.
- Does a problem, in fact, exist?
Cause.
Identify Root Causes.
Evaluate Causes.
- Select which ones to work on.
Solution.
Identify Solutions.
Evaluate Solutions.
- Select which ones to put into action.
- Estimate measure of completion.
Communicate to Customer.
Identify Person Responsible.
Implementation.
Identify Implementation Steps.
Evaluate Steps.
- Select Steps.
- Assign Accountabilities.
Evaluation.
Evaluate Overall Success.
- Was the Problem Solved?
- Verity Measure of Completion.
All problems should be resolved within 30 days.
If not resolved, VP of sales informed of problem on 31st day.
If not resolved, president of company is informed of problem
on 46th day.
<PAGE>
SCHEDULE 22
ADA SERVICE LEVELS
(A) Provide reports on Trend Development
(B) Monthly reports for Quality Improvement
1. ADA Representative Visit to Hospitals
Hospitals called on
Dates
Key issues
2. ADA-VHA Meetings
Dates
Attendees
Purpose of meeting
Outcomes
3. ADA-VHA RHCS Meetings
Dates
Attendees
Purpose of meeting
Outcomes
4. ADA-DSVP/DD Meetings
Dates
Attendees
Purpose of meeting
Outcomes
5. Matrix Utilization Meetings (MUM)
Dates
Attendees
Purpose of meeting
Outcomes
6. Monthly Matrix-Rebate Update
Hospital actual matrix performance vs slotting
7. Monthly Complaint Report - ADA
List of complaints
Resolution
8. Monthly Tracking of Invoice Errors by ADA
Number or errors
Resolution
Corrective action to ensure problem will not occur
again
9. Monthly Report of Returned Goods - ADA
Hospital
10. Monthly Service Levels
11. Monthly Tiered Pricing Exception Report
12. Monthly Report on Backorder
13. Monthly Report on VHA Contract Manufacturer Fill Levels
14. Monthly Report on Service Matrix Performance to
Slotting
Exhibit 11
OWENS & MINOR, INC. AND SUBSIDIARIES
Calculation Of Net Income Per Share
(In thousands, except per share amounts)
Year ended December 31,
------------------------------
1993 1992 1991
---- ---- ----
Net income from continuing operations $ 18,517 $15,435 $ 9,669
Discontinued operations:
Income from discontinued operations,
net of taxes - 77 2,358
Gain on disposals, net of other
provisions and taxes 911 5,610 -
Cumulative effect of change in
accounting principles 706 (730) -
------- ------- -------
Net income applicable to common shares $ 20,134 $20,392 $12,027
======= ======= =======
Weighted average common shares
and common share equivalents:
Common shares outstanding 20,285 19,596 19,386
Common share equivalents-dilutive
stock options 390 192 255
------- ------- -------
Weighted average common shares
and common share equivalents 20,675 19,788 19,641
======= ======= =======
Net income per share:
Continuing operations $ .90 $ .78 $ .49
Discontinued operations .04 .29 .12
Cumulative effect of change
in accounting principles .03 (.04) -
------- ------- -------
Net income per share $ .97 $ 1.03 $ .61
======= ======= =======
Financial Information
Contents
Management's Discussion and Analysis of
Results of Operations and Financial Condition 18
Consolidated Financial Statements 22
Notes to Consolidated Financial Statements 26
Independent Auditors' Report 37
Market and
Dividend Information 40
<PAGE>
Management's Discussion and Analysis of Operations and Financial Condition
<TABLE>
Selected Financial Data
Year ended December 31,
(in thousands, except ratios and per share data) 1993 1992 1991
<S> <C> <C>
<C>
Income Statement Data:
Continuing operations:
Net sales $1,396,971 $1,177,298 $1,021,014
Cost of sales 1,249,660 1,052,998 918,304
Gross margin 147,311 124,300 102,710
Selling, general and administrative expenses 106,362 90,027 77,082
Depreciation and amortization 7,593 5,861 4,977
Interest expense, net 2,939 2,472 4,301
Total expenses 116,894 98,360 86,360
Income before income taxes 30,417 25,940 16,350
Provision for income taxes 11,900 10,505 6,681
Net income from continuing operations 18,517 15,435 9,669
Discontinued operations:
Income from discontinued operations,
net of taxes - 77 2,358
Gain on disposals, net of other provisions
and taxes 911 5,610 -
Cumulative effect of change in accounting
principles 706 (730) -
Net income $ 20,134 $ 20,392 $ 12,027
Selected Financial Information:
Net income per share:
Continuing operations $ .90 $ .78 $ .49
Discontinued operations .04 .29 .12
Cumulative effect of change in accounting
principles .03 (.04) -
Net income per share $ .97 $ 1.03 $ .61
Cash dividends per share $ .210 $ .165 $ .132
Weighted average common shares and common
share equivalents 20,675 19,788 19,641
Price Range of Common Stock Per Share:
High $ 23.38 $ 15.17 $ 16.17
Low $ 12.63 $ 11.00 $ 6.25
Selected Ratios:
Gross margin as a percent of net sales* 10.5% 10.6% 10.1%
Selling, general and administrative expenses
as a percent of net sales* 7.6% 7.7% 7.6%
Average receivable days sales outstanding* 34.2 35.7 38.1
Average inventory turnover* 11.5 11.4 11.1
Return on average equity* 14.6% 14.4% 10.6%
Current ratio 2.0 1.8 1.9
Balance Sheet Data:
Working capital $ 139,091 $99,826 $122,675
Total assets 334,322 274,540 311,786
Long-term debt 50,768 24,986 67,675
Capitalization ratio 27.1% 17.6% 41.1%
Stockholders' equity 136,943 116,659 97,091
Stockholders' equity per share outstanding $ 6.75 $ 5.95 $ 5.01
<FN>
*Continuing operations only.
</TABLE>
<TABLE>
Year ended December 31,
1990 1989 1988 1987 1986 1985 1984 1983
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Continuing operations:
Net sales $916,709 $708,089 $500,435 $367,034 $272,222 $199,294 $170,777 $147,640
Cost of sales 827,441 641,011 445,456 326,651 239,170 171,099 145,990 125,040
Gross margin 89,268 67,078 54,979 40,383 33,052 28,195 24,787 22,600
Selling, general and administrative expenses 67,171 57,943 42,668 31,302 26,204 23,196 21,262 20,271
Depreciation and amortization 4,210 2,795 2,416 1,922 1,319 1,050 772 590
Interest expense, net 5,858 5,078 2,230 2,006 1,789 1,303 1,279 1,288
Total expenses 77,239 65,816 47,314 35,230 29,312 25,549 23,313 22,149
Income before income taxes 12,029 1,262 7,665 5,153 3,740 2,646 1,474 451
Provision for income taxes 4,634 628 3,032 2,148 1,806 1,224 652 207
Net income from continuing operations 7,395 634 4,633 3,005 1,934 1,422 822 244
Discontinued operations:
Income from discontinued
operations, net of taxes 1,380 1,855 3,734 3,481 2,968 2,986 2,815 2,766
Gain on disposals, net of other provisions
and taxes - - - - - - - -
Cumulative effect of change in accounting
principles - - - - - - - -
Net Income $ 8,775 $ 2,489 $ 8,367 $ 6,486 $ 4,902 $ 4,408 $ 3,637 $3,010
Selected Financial Information:
Net Income per share:
Continuing operations $ .39 $ .03 $ .24 $ .16 $ .11 $ .09 $ .06 $ .02
Discontinued operations .07 .10 .20 .19 .16 .18 .22 .26
Cumulative effect of change in accounting
principles - - - - - - - -
Net income per share $ .46 $ .13 $ .44 $ .35 $ .27 $ .27 $ .28 $ .28
Cash dividends per share $ .115 $ .115 $ .113 $ .098 $ .089 $ .080 $ .071 $ .058
Weighted average common shares and common
share equivilants 19,170 18,941 18,842 18,791 18,468 16,163 12,839 10,799
Price Range of Common Stock Per Share:
High $ 6.67 $ 7.06 $ 6.78 $ 6.55 $ 6.00 $ 5.41 $ 3.06 $ 3.80
Low $ 4.78 $ 5.06 $ 3.93 $ 3.48 $ 3.93 $ 2.62 $ 2.22 $ 2.52
Selected Ratios:
Gross margin as a percent of net sales* 9.7% 9.5% 11.0% 11.0% 12.1% 14.1% 14.5% 15.3%
Selling, general and administrative expenses
as a percent of net sales* 7.3% 8.2% 8.5% 8.5% 9.6% 11.6% 12.5% 13.7%
Average receivable days sales outstanding* 39.2 41.4 41.0 41.0 40.6 45.9 44.0 44.3
Average inventory turnover* 10.8 8.5 7.6 8.0 8.3 7.9 7.0 5.7
Return on average equity* 9.1% .8% 6.3% 5.4% 5.0% 4.2% 2.7% 1.0%
Current ratio 1.9 2.4 2.7 2.8 2.7 2.6 3.0 2.8
Balance Sheet Data:
Working capital $117,983 $133,309 $106,545 $ 89,056 $71,317 $54,248 $44,840 $35,897
Total assets 290,233 258,683 189,916 154,390 126,779 96,825 74,702 62,130
Long-term debt 71,339 85,324 46,819 33,713 42,562 27,546 20,092 12,658
Capitalization ratio 45.6% 52.4% 37.8% 32.3% 51.0% 43.4% 38.5% 30.2%
Stockholders' equity 85,002 77,560 77,170 70,761 40,878 35,914 32,059 29,320
Stockholders' equity per share outstanding $ 4.49 $ 4.13 $ 4.12 $ 3.78 $ 3.07 $ 2.77 $ 2.53 $ 2.31
<FN>
*Continuing operations only.
</TABLE>
<PAGE>
Management's Discussion and Analysis of Operations and Financial Condition
(continued)
Owens & Minor, Inc. and Subsidiaries
Results of Operations
1993 Compared to 1992
Continuing Operations:
Net Sales
Net sales from continuing operations increased 18.7% to $1.4 billion in 1993.
Same store sales
increased 15.0%. The increase is primarily the result of increased account
penetration, the
development of new partnerships with key customers around the country, market
share improvement
due to the continuing consolidation in the industry, the sale of new products
and lines and the
opening or acquisitions of six new distribution centers. Net sales under the VHA
contract
increased by $72.6 million, or 18.8%, to $459.6 million in 1993.
Gross Margin
Gross margin as a percent of net sales decreased
by .1 percentage points to 10.5% in 1993. This decrease is a result of continued
margin pressure
and a greater percentage of business coming from major national accounts. The
margin decrease
was offset through aggressive and strategic buying practices, the development of
revenue-
producing value-added services for our customers and tighter control of price
and contract
adjustments using electronic data interchange (EDI).
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased to 7.6% of net sales in
1993 from 7.7% in
1992. This decrease was primarily the result of the Company's effort to reduce
administrative
expenses to offset the margin decrease. The decrease in administrative expense
was partially
offset with the costs of opening new distribution centers in Birmingham,
Detroit, Boston and
Seattle. The Company also continued its committment to quality through investing
in training and
information system technology development.
Interest Expense, net
Net interest expense increased $.5 million to $2.9 million in 1993. The average
interest rate
decreased from 8.3% in 1992 to 6.5% in 1993. The increase in interest expense
was primarily the
result of increased borrowings to finance the new distribution centers discussed
above, the
acquisitions of Lyons Physician Supply Company in Youngstown, Ohio and A.
Kuhlman & Company in
Detroit, Michigan and increased inventory from product line expansion.
Income Taxes
The effective tax rate decreased by 1.4 percentage points from 40.5% in 1992 to
39.1% in 1993. A
reconciliation of the statutory income tax rate to the Company's effective
income tax rate is
provided in Note 10 of the Notes to Consolidated Financial Statements.
Net Income
Net income increased by $3.1 million to $18.5 million in 1993. Net income per
share increased by
$.12 to $.90 per share in 1993.
Discontinued Operations
The Company's divestitures of the Wholesale Drug and Specialty Packaging
Divisions are discussed
in Note 2 of the Notes to Consolidated Financial Statements.
Change in Accounting Principle
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No.
109, Accounting for Income Taxes. The cumulative effect of this change in
accounting for income
taxes resulted in
a benefit of $.7 million in 1993.
Results of Operations
1992 Compared to 1991
Continuing Operations:
Net Sales
Net sales from continuing operations increased 15.3% to $1.2 billion in 1992.
The increase is
primarily the result of increased account penetration, the development of new
partnerships with
key customers around the country, market share improvement due to the continuing
consolidation
in the industry and the sale of new products and lines. Net sales under the VHA
contract
increased by $31.4 million, or 8.8%, to $387.0 million in 1992.
Gross Margin
Gross margin as a percent of net sales increased by .5 percentage points to
10.6% in 1992. This
increase reflects more aggressive and strategic buying practices, the
development of revenue-
producing value-added services for our customers and tighter control of price
and contract
adjustments using electronic data interchange (EDI).
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to 7.7% of net sales in
1992 from 7.6% in
1991. This increase reflects a continued investment in our quality process,
training, monetary
incentives for the accomplishment of team and Company goals and increased
information systems
costs.
Interest Expense, net
Net interest expense decreased $1.8 million to
$2.5 million in 1992 and the average interest rate increased from 8.0% in 1991
to 8.3% in 1992.
The decrease in interest expense is primarily the result of paying off debt with
cash proceeds
received from the divestitures of the Wholesale Drug Division and Vangard Labs,
Inc. as
discussed in Note 2 of the Notes to Consolidated Financial Statements. The
increase in the
average interest rate is primarily the result of the repayment of the Company's
variable rate
debt versus higher fixed rate debt.
Income Taxes
The effective tax rate decreased by .4 percentage points from 40.9% in 1991 to
40.5% in 1992. A
reconciliation of the statutory income tax rate to the Company's effective
income tax rate is
provided in Note 10 of the Notes to Consolidated Financial Statements.
Net Income
Net income increased by $5.8 million to $15.4 million in 1992. Net income per
share increased by
$.29 to $.78 per share in 1992. A 3 for 2 stock split was distributed on March
22, 1993, to
shareholders of record as of March 8, 1993.
Discontinued Operations
The Company's divestitures of the Wholesale Drug and Specialty Packaging
Divisions are discussed
in Note 2 of the Notes to Consolidated Financial Statements.
Change in Accounting Principle
In 1992, the Company elected early adoption of the provisions of Statement of
Financial
Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits
Other Than
Pensions. In applying this pronouncement, the Company recognized the accumulated
postretirement
benefit obligation as of the beginning of 1992 of $.7 million.
Financial Condition
Liquidity and Capital Resources
The Company uses a number of measurements of liquidity and capital resources for
internal
management purposes and evaluation. These measurements, which relate to asset
management,
working capital and leverage, are summarized below:
Year ended December 31,
1993 1992 1991
Average asset turnover* 4.6 4.5 4.3
Average inventory turnover* 11.5 11.4 11.1
Average receivable days
sales outstanding* 34.2 35.7 38.1
Working capital (000's) $139,091 $99,826 $122,675
Current ratio 2.0 1.8 1.9
Inventory ownership* 15.3% 6.1% 8.6%
Capitalization ratio (long-
term debt to long-term
debt plus equity) 27.1% 17.6% 41.1%
*Continuing operations only.
Asset Management
For continuing operations, average asset turnover increased to 4.6 in 1993 from
4.5 in 1992;
average inventory turnover increased to 11.5 in 1993 from 11.4 in 1992; and
average receivable
days outstanding decreased to 34.2 days in 1993 from 35.7 days in 1992. The
current ratio
improved to 2.0 in 1993 from 1.8 in 1992.
The improvement in average inventory turnover resulted from continued
strengthening of
inventory controls. Average receivable days sales outstanding decreased as a
result of the
continued emphasis placed on accounts receivable controls.
Working Capital
Working capital increased by $39.3 million to $139.1 million in 1993. The
increase in working
capital is primarily due to increased inventory from product line expansion and
increased
accounts receivable from sales volume growth.
Leverage
Long-term debt, including current maturities, increased by $24.4 million in 1993
to $52.3
million.
The capitalization ratio increased from 17.6% in 1992
to 27.1% in 1993. The increase in long-term debt was necessary to finance new
distribution
centers in Birmingham, Detroit, Boston, and Seattle, two acquisitions, Lyons
Physician Supply
Company in Youngstown, Ohio and A. Kuhlman & Company in Detroit and increased
inventory from
product line expansion. In November 1993, the Company repaid the $12.0 million
outstanding
principle balance of the 9.3% Senior Notes. (See Note 6 of the Notes to
Consolidated Financial
Statements.)
Inflation
It is the Company's policy to pass through price increases from suppliers.
However, these
increases are offset where possible with savings in productivity and volume.
The effects of
inflation on inventories are reflected in net income because the Company uses
the LIFO inventory method.
VHA Agreement
The Company entered into a new supply agreement with VHA in November 1993. Under
the provisions
of the new agreement, commencing on April 1, 1994, the Company will sell
products to VHA-member
hospitals and affiliates on a variable cost-plus basis that is generally
dependent upon dollar
volume of purchases and percentage of total products purchased from the Company.
Accordingly, as
the Company's sales to and penetration of VHA-member customers increase, the
cost-plus pricing
charged to such customers decreases. Prior to April 1, 1994, products were sold
on a straight
cost-plus basis. Although the new cost-plus pricing formulation is likely to
reduce the
Company's overall gross margin, any such reduction may be offset in whole or in
part by the
combined effect of increased sales to and penetration of VHA-member customers
resulting from the
new pricing formulation, additional amounts that the Company may charge such
customers for
certain value-added services and operating efficiencies and economies of scale
associated with
increased sales to VHA-member customers.
Stuart Medical Proposal
On December 22, 1993, the Company entered into an agreement with Stuart Medical,
Inc. whereby
the companies will combine their two businesses. See Note 2 of the Notes to
Consolidated
Financial Statements for further discussion of this combination.
<PAGE>
Consolidated Statements of Income
Owens & Minor, Inc. and Subsidiaries
<TABLE>
Year ended December 31,
(in thousands, except per share data) 1993 1992 1991
<S> <C> <C> <C>
Continuing operations:
Net sales $1,396,971 $1,177,298 $1,021,014
Cost of sales 1,249,660 1,052,998 918,304
Gross margin 147,311 124,300 102,710
Selling, general and administrative expenses 106,362 90,027 77,082
Depreciation and amortization 7,593 5,861 4,977
Interest expense, net 2,939 2,472 4,301
Total expenses 116,894 98,360 86,360
Income before income taxes 30,417 25,940 16,350
Provision for income taxes 11,900 10,505 6,681
Net income from continuing operations 18,517 15,435 9,669
Discontinued operations:
Income from discontinued operations,
net of taxes - 77 2,358
Gain on disposals, net of other provisions
and taxes 911 5,610 -
Cumulative effect of change in accounting
principles 706 (730) -
Net income $ 20,134 $ 20,392 $12,027
Net income per share:
Continuing operations $ .90 $ .78 $ .49
Discontinued operations .04 .29 .12
Cumulative effect of change in accounting
principles .03 (.04) -
Net income per share $ .97 $ 1.03 $ .61
Cash dividends per share $ .210 $ .165 $ .132
Weighted average common shares and common
share equivalents 20,675 19,788 19,641
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Consolidated Balance Sheets
Owens & Minor, Inc. and Subsidiaries
December 31,
(in thousands) 1993 1992
Assets
Current assets
Cash and cash equivalents $ 2,048 $ 7,068
Accounts and notes receivable, less
allowances of $4,678 in 1993
and $4,442 in 1992 144,629 116,984
Merchandise inventories 124,848 92,973
Other current assets 10,638 12,050
Total current assets 282,163 229,075
Property and equipment, net 23,863 22,037
Excess of purchase price over net assets
acquired, net 17,316 14,621
Other assets 10,980 8,807
Total Assets $334,322 $274,540
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt $ 1,494 $ 2,882
Accounts payable 120,699 103,235
Accrued payroll and related liabilities 5,768 5,674
Other accrued liabilities 15,111 17,458
Total current liabilities 143,072 129,249
Long-term debt 50,768 24,986
Accrued pension and retirement plan 3,539 3,646
Total liabilities 197,379 157,881
Stockholders' equity
Preferred stock, par value $10.00 per
share; authorized-1,000 shares;
none issued - -
Series A Participating Cumulative
Preferred stock, par value $10.00 per share;
authorized-300 shares; none issued - -
Common stock, par value $2.00 per share;
authorized-30,000 shares;
issued-20,285 shares in 1993 and
19,596 shares in 1992 40,569 39,191
Paid-in capital 9,258 8,007
Retained earnings 87,116 69,461
Total stockholders' equity 136,943 116,659
Commitments and contingencies
Total Liabilities and Stockholders' Equity $334,322 $274,540
See Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Statements of Stockholders' Equity
Owens & Minor, Inc. and Subsidiaries
<TABLE>
Common
Shares Common Paid-in Retained
(in thousands, except per share data) Outstanding Stock Capital Earnings Total
<S> <C> <C> <C> <C> <C>
Balance December 31, 1990 8,422 $16,843 $25,554 $42,605 $ 85,002
Net income - - - 12,027 12,027
Cash dividends ($.132 per share) - - - (2,551) (2,551)
Proceeds from exercised stock options,
including tax benefits realized
of $563 190 380 1,996 - 2,376
Acquisition related payout 26 53 347 - 400
Stock split (three-for-two) 4,286 8,572 (8,578) - (6)
Retirement plan liability adjustment - - - (157) (157)
Balance December 31, 1991 12,924 25,848 19,319 51,924 97,091
Net income - - - 20,392 20,392
Cash dividends ($.165 per share) - - - (3,224) (3,224)
Proceeds from exercised stock options,
including tax benefits realized
of $493 85 170 759 - 929
Common stock issued for incentive plan 15 30 269 - 299
Acquisition related payout 40 79 724 - 803
Stock split (three-for-two) 6,532 13,064 (13,064) - -
Retirement plan liability adjustment - - - 369 369
Balance December 31, 1992 19,596 39,191 8,007 69,461 116,659
Net income - - - 20,134 20,134
Cash dividends ($.210 per share) - - - (4,222) (4,222)
Proceeds from exercised stock options,
including tax benefits realized
of $495 119 239 1,256 - 1,495
Common stock issued for incentive plan 31 62 387 - 449
Pooling of interests with Lyons Physician
Supply Co. 476 951 (1,189) 1,743 1,505
Acquistion related payout 63 126 797 - 923
Balance December 31, 1993 20,285 $40,569 $ 9,258 $ 87,116 $136,943
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Consolidated Statements of Cash Flows
Owens & Minor, Inc. and Subsidiaries
<TABLE>
Year ended December 31,
(in thousands) 1993 1992 1991
<S> <C> <C> <C>
Operating Activities
Net income and noncash charges
Net income $20,134 $20,392 $12,027
Noncash charges to income
Gain on disposals of business segments, net (911) (5,610) -
Cumulative effect of change in
accounting principles (706) 730 -
Depreciation and amortization 7,593 5,861 6,070
Provision for losses on accounts and notes
receivable 497 1,351 1,506
Provision for LIFO reserve 661 1,056 3,816
Other, net 897 1,135 554
Cash provided by net income and noncash charges 28,165 24,915 23,973
Changes in working capital
Accounts and notes receivable (23,424) 5 (11,414)
Merchandise inventories (28,232) 359 (3,798)
Accounts payable 13,307 (8,885) 3,635
Net change in other current assets and
current liabilities (258) (10,591) 3,366
Other, net 431 (2,112) 904
Cash provided by (used for) operating activities (10,011) 3,691 16,666
Investing Activities
Proceeds from disposals of business segments - 50,920 -
Business acquisitions, net of cash acquired (2,416) - (3,052)
Additions to property and equipment (6,288) (4,955) (5,947)
Other, net (3,377) (2,535) (257)
Cash provided by (used for) investing activities (12,081) 43,430 (9,256)
Financing Activities
Cash dividends paid (4,222) (3,224) (2,551)
Additions to long-term debt 37,000 - -
Reductions of long-term debt (17,471) (44,619) (7,542)
Other short-term financing 765 6,599 (1,700)
Stock split fractional shares - - (6)
Exercise of options 1,000 436 1,813
Cash provided by (used for) financing activities 17,072 (40,808) (9,986)
Net increase (decrease) in cash and
cash equivalents (5,020) 6,313 (2,576)
Cash and cash equivalents at beginning of year 7,068 755 3,331
Cash and cash equivalents at end of year $ 2,048 $ 7,068 $ 755
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Owens & Minor, Inc. and Subsidiaries
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly
owned subsidiaries. All significant intercompany accounts and transactions have
been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include cash and marketable securities with an
original maturity
at the date of purchase of three months or less. The carrying amount of
marketable securities
approximates fair value because of the short maturity of these instruments.
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or market with the
cost of all
inventories determined on a last-in, first-out (LIFO) basis.
Property and Equipment
Additions to property and equipment are recorded at cost. At inception,
capital leases are
recorded at the lesser of fair value of the leased property or the discounted
present value of
the minimum lease payments. The cost of assets sold or retired and the related
amounts of
accumulated depreciation and amortization have been eliminated from the accounts
in the year of
sale or retirement and the resulting gain or loss has been reflected in
operations. Normal
maintenance and repairs are expensed as incurred, and renovations and
betterments are
capitalized.
Depreciation is computed on the straight-line method over the estimated
useful lives of
the various assets. Capital leases and leasehold improvements are amortized by
the straight-line
method over the shorter of their estimated useful lives or the term of the
lease. Accelerated
methods and lives are used for income tax reporting purposes. Estimated useful
lives for
financial reporting purposes are:
Estimated
Assets Useful Life
Buildings and improvements 20-50 years
Furniture, fixtures and equipment 3-10 years
Vehicles 3-6 years
Excess of Purchase Price Over Net Assets Acquired
The excess of purchase price over net assets acquired (goodwill) is being
amortized on a
straight-line basis over 40 years from the dates of acquisition.
Computer Software
Computer software, purchased in connection with major system developments, is
capitalized.
Additionally, certain software development costs are capitalized when incurred
and when
technological feasibility has been established. Amortization of all capitalized
software costs
is computed on a product-by-product basis over the estimated economic life of
the product which
ranges from three to five years. Computer software costs are included in other
assets in the
Consolidated Balance Sheets.
Pension and Retirement Plans
Annual costs of the Company's pension and retirement plans are determined
actuarially in
accordance with Statement of Financial Accounting Standards No. 87, Employers'
Accounting for
Pensions.
Postretirement Benefits Other Than Pensions
Annual costs of the Company's postretirement benefits other than pensions are
determined
actuarially in accordance with Statement of Financial Accounting Standards No.
106, Employers'
Accounting for Postretirement Benefits Other Than Pensions.
Income Taxes
The Company uses the asset and liability method in accounting for income
taxes in
accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income
Taxes. Deferred income taxes result primarily from the use of different methods
for financial
reporting and tax purposes.
Net Income per Share
Net income per share is computed using the weighted average number of shares
of common
stock and common stock equivalents outstanding during the year. The assumed
conversion of all
convertible debentures has not been included in the computation because the
resulting dilution
is not material.
Note 2 - Business Acquisitions and Divestitures
On December 22, 1993, the Company entered into an agreement with Stuart
Medical, Inc.
(Stuart), whereby the companies will combine their two businesses. Stuart, a
distributor of
medical/surgical supplies, has distribution
centers located primarily in the West, Midwest and Northeast and had sales for
the year ended
December 31, 1993 of $890.5 million (unaudited). In the proposed transaction,
the Company will
form a holding company that will own all of the currently outstanding capital
stock of the
Company and Stuart.
Under the terms of the agreement, the new holding company would exchange
$40,200,000 in
cash and $115,000,000 par value of convertible preferred stock for all of the
capital stock of
Stuart. Each outstanding share of the Company's common stock would be exchanged
for one share of
common stock of the new holding company. The Company intends to account for this
transaction as
a purchase, if consumated.
The convertible preferred stock will be convertible into approximately
4,650,000 shares of
common stock of the new holding company (or about 17.8 percent of the pro forma
fully diluted
outstanding shares of the new holding company); entitled to an annual cash
dividend of 4.5
percent; and redeemable by the Company under certain circumstances after three
years. The
Company will also refinance Stuart's pro forma debt of $141,000,000 (unaudited).
The Board of Directors of the Company and the requisite shareholders of
Stuart have
unanimously approved this transaction. The Company's shareholders will vote on
the proposed
transaction at the annual shareholders'
meeting with expected closing of the transaction to occur in the second
quarter. Had this acquisition
been completed on January 1, 1993, on a pro forma basis, net sales, net income
and net income
per share for the Company would have been approximately $2,339,000,000,
$24,000,000 and $.93
(all unaudited).
On May 28, 1993, the Company issued 476,190 shares of its common stock for
all the
outstanding common stock of Lyons Physician Supply Company (Lyons) of
Youngstown, Ohio. This
merger has been accounted for as a pooling of interests, and the Company's
fiscal 1993 financial
statements include the activity of Lyons as of January 1, 1993.
On June 25, 1993, the Company acquired all of the outstanding common stock of
A. Kuhlman &
Co. (Kuhlman's) of Detroit, Michigan. The acquisition was accounted for as a
purchase with the
results of Kuhlman's included from the acquisition date. The cost of the
acquisition was
approximately $2,900,000 and exceeded the net book value of the tangible assets
acquired and
liabilities assumed by approximately $1,700,000. Pro forma results of this
acquisition, assuming
it had been made at the beginning of the year, would not be materially different
from the
results reported.
On February 28, 1992, the Company sold substantially all of the net assets of
its
Wholesale Drug Division to Bergen Brunswig Corporation. Accordingly, the
operations of the
Wholesale Drug Division have been classified as discontinued operations for all
years presented
in the accompanying Consolidated Statements of Income. The proceeds from the
sale of
approximately $49,552,000, resulted in a gain of $9,783,000, net of applicable
income tax
expense of $6,408,000 for the year ended December 31, 1992. Net income of this
division was
$2,270,000 in 1991 and is net of applicable income tax expense of $1,439,000.
On May 29, 1992, the Company sold substantially all of the net assets of
Vangard Labs,
Inc., completing the disposition of the Specialty Packaging Segment, to Medical
Technology
Systems, Inc. The proceeds from the sale of approximately $2,000,000, resulted
in a loss of
$2,858,000, net of applicable income tax benefit of $1,257,000, for the year
ended December 31,
1992. On December 31, 1990 the principle operating assets of Harbor Medical,
Inc., a portion of
the Specialty Packaging Segment, were sold to Sterile Concepts, Inc. The
Specialty Packaging
Segment is accounted for as discontinued operations for all years presented in
the accompanying
Consolidated Statements of Income. Net income for this division was $77,000 for
the first four
months of 1992 and $88,000 in 1991 and is net of applicable income tax expense
of $23,000 and
$15,000, respectively.
The Company periodically re-evaluates the adequacy of its accruals associated
with
discontinued operations.
In 1993, the Company decreased its loss provision for discontinued operations by
$911,000 based
on settlement of established liabilities and changes in prior estimates of
expenses. In 1992,
the loss provision was increased by $1,315,000 for such changes in prior
estimates. Changes in
these estimates are included in discontinued operations
in the accompanying Consolidated Statements of Income.
On December 2, 1991, the Company acquired for cash the common stock of
Koley's Medical
Supply, Inc. (Koley's) in a business combination accounted for as a purchase.
The acquisition of
Koley's, a distributor of medical/surgical supplies, provided the Company with
three
distribution centers located in Iowa and Nebraska. The cost of the acquisition
was approximately
$3,593,000 and exceeded the net book value of the tangible assets acquired and
liabilities
assumed by approximately $1,637,000. The purchase price was funded through
normal working
capital.
The purchase agreement for Koley's specified that the purchase price may be
increased in
future years if certain criteria are met. Pursuant to the terms of this
agreement, an additional
$1,177,000 was paid in 1993.
Note 3 - Merchandise Inventories
All inventories are valued using the last-in, first-out (LIFO) method of
inventory
valuation. If LIFO inventories had been valued at current costs (FIFO), they
would have been
greater by the following amounts:
(in thousands)
December 31, 1993 $17,620
December 31, 1992 $16,959
December 31, 1991 $29,196
Note 4 - Property and Equipment
The Company's investment in property and equipment consists of the following:
December 31,
(in thousands) 1993 1992
Land and buildings $ 4,617 $ 2,720
Furniture, fixtures and equipment 27,042 23,615
Transportation equipment 1,093 788
Capitalized leases 7,776 8,150
Leasehold improvements 5,898 4,866
46,426 40,139
Less: Accumulated depreciation 17,304 14,262
Less: Accumulated amortization of
capitalized leases 5,259 3,840
Property and equipment, net $23,863 $22,037
For continuing operations, depreciation expense for property and equipment
for 1993, 1992,
and 1991 was $6,368,000, $5,129,000 and $4,115,000, respectively.
Note 5 - Accounts Payable
The Company's accounts payable consists of the following:
December 31,
(in thousands) 1993 1992
Trade accounts payable $ 99,096 $ 82,397
Drafts payable 21,603 20,838
Total accounts payable $ 120,699 $103,235
Note 6 - Long-Term Debt
Long-term debt consists of the following:
December 31,
(in thousands) 1993 1992
Revolving credit notes $ 37,000 $ -
9.3% Senior Notes - 12,000
0% Subordinated Note 8,214 7,440
6 1/2% Convertible Subordinated Debenture 3,500 3,500
Obligations under capitalized leases 3,548 4,928
52,262 27,868
Current maturities (1,494) (2,882)
Long-term debt $50,768 $24,986
The Company has a revolving credit agreement that provides for a maximum
borrowing of
$40,000,000. The interest rates on the revolving credit notes vary with, but do
not exceed, the
prime rate (6.0% as of December 31, 1993). The agreement expires on May 31, 1996
and any
outstanding balances are payable in full on that date.
On May 31, 1989, the Company issued an $11.5 million 0% Subordinated Note and
a $3.5
million 6 1/2% Convertible Subordinated Debenture to partially finance the
National Healthcare
acquisition. The 0% Subordinated Note due May 31, 1997 was discounted for
financial reporting
purposes at an effective rate of 10.4% to $5,215,000 on the date of issuance.
The 6 1/2%
Convertible Subordinated Debenture due May 31, 1996 is convertible into
approximately 578,250
common shares. Interest is payable semi-annually on May 31 and November 30. The
Company can
redeem all or any portion of the debentures without penalty.
The Company leases certain data processing equipment under capitalized lease
agreements.
These leases require monthly payments and expire at various dates through 1996.
Interest is
imputed on these leases at rates ranging from 6.5% to 10.5%.
The Company entered into capital leases for additional computer equipment in
the amounts
of $1,734,000 and $1,744,000 during 1992 and 1991, respectively. These represent
non-cash
investing and financing activities for purposes of the Consolidated Statements
of Cash Flows.
There were no new capital leases during 1993.
Under certain of the loan agreements, the Company is required to maintain
tangible net
worth at specified levels. Other financial covenants relate to levels of
indebtedness, liquidity
and cash flow.
The Company has four bank lines of credit aggregating $62,000,000. At
December 31, 1993,
there were no borrowings under these lines.
Based on the borrowing rates currently available to the Company for bank
loans with
similar terms and average maturities, except for the convertible debenture which
is valued at
book value because the conversion price was substantially below the current
market price, the
fair value of long-term debt, including current maturities, is approximately
$53,238,000, as of
December 31, 1993.
Cash payments for interest during 1993, 1992 and 1991 were $2,341,000,
$2,126,000 and
$5,106,000, respectively.
Maturities of long-term debt for the five years subsequent to 1993 are: 1994-
$1,494,000;
1995-$1,504,000; 1996-$41,050,000; 1997-$8,214,000; 1998-$0.
Note 7 - Employee Benefit Plans
The Company has a noncontributory pension plan covering substantially all
employees.
Employees become participants in the plan after one year of service and
attainment of age 21.
Pension benefits are based on years of
service and average compensation. The amount funded for this plan is not less
than the minimum
required under federal law nor more than the amount deductible for federal
income tax purposes.
Plan assets consist primarily of equity securities, including 22,963 shares as
of December 31,
1993 of the Company's common stock, and U.S. Government securities.
The Company also has a noncontributory, unfunded retirement plan for certain
officers and
other key
employees. Benefits are based on a percentage of the employees' compensation.
The Company
maintains life
insurance policies on plan participants to act as a financing source for the
plan.
The following table sets forth the plans' financial status and the amounts
recognized in
the Company's Consolidated Balance Sheets at December 31, 1993 and 1992:
<TABLE>
Pension Plan Retirement Plan
(in thousands) 1993 1992 1993 1992
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations
Vested $10,984 $8,970 $1,225 $1,279
Non-vested 528 1,041 780 499
Total benefits 11,512 10,011 2,005 1,778
Additional amounts related to projected salary increases 2,110 1,116 1,226 854
Projected benefit obligations for service rendered
to date 13,622 11,127 3,231 2,632
Plan assets at fair market value 13,603 11,445 - -
Plan assets over (under) projected benefit obligations (19) 318 (3,231) (2,632)
Unrecognized net (gain) loss from past experience (42) (1,032) 1,080 828
Unrecognized prior service cost (benefit) 479 715 (23) (109)
Unrecognized net (asset) obligation being recognized
over 11 and 17 years, respectively (321) (428) 369 410
Adjustment required to recognize minimum liability
under SFAS 87 - - (200) (275)
Accrued pension asset (liability) $ 97 $ (427) $(2,005) $(1,778)
</TABLE>
The components of net pension cost for both plans are as follows:
<TABLE>
Year ended December 31,
(in thousands) 1993 1992 1991
<S> <C> <C> <C>
Service cost-benefits earned during the year $1,146 $ 944 $ 864
Interest cost on projected benefit obligations 1,056 994 865
Actual return on plan assets (1,450) (748) (1,829)
Net amortization and deferral 453 (145) 1,103
Net periodic pension cost $1,205 $1,045 $1,003
</TABLE>
The weighted average discount rate and rate of increase in future
compensation levels used
in determining the actuarial present value of the projected benefit obligations
are assumed to
be 7.5% and 5.5% for 1993, respectively and 8% and 6% for 1992, respectively.
The expected long-
term rate of return on plan assets is 9%.
In 1992, a curtailment gain of $123,000 which resulted from the dispositions
of the
business units classified as
discontinued operations, was not reflected in net pension cost in the preceding
table, but was
included in gain on disposals in the Consolidated Statements of Income.
Substantially all employees of the Company may become eligible for certain
medical
benefits if they remain employed until retirement age and fulfill other
eligibility requirements
specified by the plan. The plan is contributory with retiree contributions
adjusted annually.
The Company elected early adoption of the accounting provisions of the
Statement of
Financial Accounting Standards No. 106, Employers' Accounting for Postretirement
Benefits Other
Than Pensions. This new standard requires that the expected cost of retiree
health benefits be
charged to expense during the years that the employees render service rather
than the Company's
past practice of recognizing these costs on a pay-as-you-go basis. As part of
adopting the new
standard, the Company recorded in the first quarter of 1992, a one-time, non-
cash charge against
earnings of $1,200,000 before taxes and $730,000 after taxes, or $.04 per share.
This cumulative
catchup adjustment as of January 1, 1992 represents the discounted present value
of expected
future retiree health benefits attributed to employees' service rendered prior
to that date.
The following table sets forth the plan's financial status and the amount
recognized in
the Company's Consolidated Balance Sheets at December 31, 1993 and 1992:
(in thousands) 1993 1992
Accumulated postretirement benefit obligation:
Retirees $ (251) $ (208)
Fully eligible active plan participants (464) (384)
Other active plan participants (980) (849)
Accumulated postretirement benefit obligation (1,695) (1,441)
Unrecognized loss from past experience 64 -
Accrued postretirement benefit liability $(1,631) $(1,441)
The components of net postretirement benefit cost are as follows:
Year Ended December 31,
(in thousands) 1993 1992
Service cost $142 $137
Interest 122 105
Net periodic postretirement benefit cost $264 $242
For measurement purposes, a 13% annual rate of increase in the per capita
cost of covered
health care benefits was assumed for 1994; the rate was assumed to decrease
gradually to 6.5%
for the year 2001 and remain at that level thereafter. The health care cost
trend rate
assumption has a significant effect on the amounts reported. To illustrate,
increasing the
assumed health care cost trend rates by 1 percentage point in each year would
increase the
accumulated postretirement benefit obligation as of December 31, 1993 by
$104,000 and the
aggregate of the service and interest cost components of net periodic
postretirement benefit
cost for the year then ended by $52,000. The weighted average discount rate used
in determining
the accumulated postretirement benefit obligation was 7.5% for 1993 and 8% for
1992.
Note 8 - Stockholders' Rights Plan
On June 22, 1988, the Company adopted a stockholders' rights plan and
distributed a
dividend of one right
for each outstanding share of common stock. Each right entitles the holder to
buy one unit of a
newly authorized series of preferred stock at an exercise price of $33.33 per
right. The rights
are exercisable only if a person or group acquires 20% or more of the Company's
common stock or
announces a tender offer for 30% or more of such stock.
If a person or group purchases 30% or more of the common stock, each right will
entitle the
holder (except the acquiring person) to acquire preferred stock or, at the
Company's option,
common stock having a value equal to twice the right's exercise price.
If the Company were acquired in a merger or other business combination, or if
50% of its
earning power
(as defined) or assets were sold in one transaction or a series of transactions,
each right
would entitle the holder (except the acquiring person) to purchase securities of
the surviving
company having a market value equal to twice the exercise price of the right.
If a person or group acquires 20% or more of the Company's common stock, the
Company may
issue a share of common stock in exchange for each outstanding preferred share
purchase right
(except for rights held by the acquiring person). The rights, which expire on
June 22, 1998, may
be redeemed at any time up to 10 days after the announcement that a 20% position
has been
acquired, unless such period has been extended by the Board of Directors.
Note 9 - Stock Option Plans
Under the terms of the Company's stock option plans, 2,383,505 shares of
common stock have
been reserved for future issuance. Options may be designated as either Incentive
Stock Options
(ISO) or non-qualified stock options. Options granted under the Plans have an
exercise price
equal to the fair market value of the stock on the date of grant and can be
exercised up to ten
years from date of grant. As of December 31, 1993, there were 687,038 non-
qualified and no ISO
stock options issued and outstanding under the Plans.
The changes in shares under outstanding options for the three years ended
December 31,
1993 are as follows:
Shares Grant Price
Year ended December 31, 1993
Outstanding at beginning of year 569,748 $5.30 - 14.00
Granted 282,880 12.88 - 14.75
Exercised (120,490) 5.30 - 14.00
Expired/cancelled (45,100) 5.33 - 14.00
Outstanding at end of year 687,038 $5.33 - 14.75
Exercisable 295,586
Shares available for additional grants 1,696,467
Year ended December 31, 1992
Outstanding at beginning of year 570,852 $ 3.55 - 14.00
Granted 156,573 12.00 - 13.08
Exercised (137,990) 3.55 - 8.39
Expired/cancelled (19,687) 5.61 - 14.00
Outstanding at end of year 569,748 $ 5.30 - 14.00
Exercisable 332,950
Shares available for additional grants 284,247
Year ended December 31, 1991
Outstanding at beginning of year 755,933 $ 3.55 - 6.22
Granted 296,625 8.39 - 14.00
Exercised (474,281) 3.55 - 8.39
Expired/cancelled (7,425) 3.55 - 5.61
Outstanding at end of year 570,852 $ 3.55 - 14.00
Exercisable 227,312
Shares available for additional grants 441,374
Stock Appreciation Rights (SARs) may be granted in conjunction with any
option granted
under the Plans, and to the extent either is exercised, the other is cancelled.
SARs are payable
in cash, common stock or a combination of both, equal to the appreciation of the
underlying
shares from the date of grant to date of exercise, and may be exercised from one
up to ten years
from date of grant. As of December 31, 1993, there were no SARs issued and
outstanding.
Note 10 - Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109,
Accounting for
Income Taxes, as
of January 1, 1993. The cumulative effect of this change in accounting for
income taxes is a
favorable adjustment of $706,000 and is reported separately in the Consolidated
Statements of
Income for the year ended December 31, 1993. Prior years' financial statements
have not been
restated to apply the provisions of Statement 109.
The provision for income taxes for continuing operations consists of the
following:
Year ended December 31,
(in thousands) 1993 1992 1991
Current tax provision
Federal $10,405 $9,386 $6,387
State 2,123 2,262 1,435
Total current provision 12,528 11,648 7,822
Deferred tax benefit
Federal (555) (916) (928)
State (73) (227) (213)
Total deferred benefit (628) (1,143) (1,141)
Provision for income taxes $11,900 $10,505 $6,681
A reconciliation of the Federal statutory rate to the Company's effective
income tax rate
for continuing
operations follows:
Year ended December 31,
1993 1992 1991
Federal statutory rate 35.0% 34.0% 34.0%
Increases (reductions) in the rate
resulting from:
State income taxes, net of Federal
income tax benefit 4.4 5.1 5.7
Other, net (.3) 1.4 1.2
Effective rate 39.1% 40.5% 40.9%
The significant components of deferred income tax benefit attributable to
income from
continuing operations for the year ended December 31, 1993 are as follows:
(in thousands)
Deferred tax benefit $(432)
Adjustments to deferred tax assets and
liabilities for enacted changes in tax rates (196)
Total deferred benefit $(628)
The components of deferred income tax expense (benefit) for continuing
operations for the
years ended December 31, 1992 and 1991 are as follows:
Year Ended December 31,
(in thousands) 1992 1991
Inventories $ (135) $ 175
Depreciation 225 (77)
Employee benefit plans (611) (239)
Allowance for doubtful accounts (303) (372)
Real estate sale/leaseback 88 (178)
Reserve for fixed assets 126 (274)
Other, net (533) (176)
Total deferred benefit $(1,143) $(1,141)
The tax effects of temporary differences that give rise to significant
portions of the
deferred tax assets and deferred tax liabilities at December 31, 1993 are
presented below:
(in thousands)
Deferred tax assets:
Allowance for doubtful accounts $ 2,702
Accrued liabilities not deductible until paid 1,998
Employee benefits plans 3,038
Leased assets 3,512
Other 1,641
Total deferred tax assets 12,891
Deferred tax liabilities:
Property and equipment 4,484
Merchandise inventories 920
Other 1,352
Total deferred tax liabilities 6,756
Net deferred tax asset (included in
other current assets and other assets) $ 6,135
Management has determined, based on the Company's carryback availability,
history of
earnings and its
expectation of earnings in future years, that it is more likely than not that
all of the
deferred tax asset will be
realized. Therefore, the Company has not recognized a valuation allowance for
the gross deferred
tax asset recorded
in the accompanying 1993 Consolidated Balance Sheet.
Cash payments for income taxes, including taxes on discontinued operations,
for 1993, 1992
and 1991 were $12,153,000, $21,672,000 and $6,756,000, respectively.
For income tax purposes, the Company has unused operating loss carryforwards
expiring in
2004 of approximately $640,000 which are available to offset future federal
taxable income.
The tax benefit relating to discontinued operations for the year ended
December 31, 1993,
was $333,000.
Note 11 - Commitments and Contingencies
The Company has entered into noncancellable lease agreements for certain
office and
warehouse facilities and data processing and delivery equipment with remaining
lease terms
ranging from one to twelve years. Certain leases include renewal options,
generally for five
year increments. At December 31, 1993, future minimum annual payments under
noncancellable
leases with original terms in excess of one year are as follows:
Capital Operating
(in thousands) Leases Leases
1994 $1,760 $10,305
1995 1,629 9,647
1996 561 7,214
1997 - 5,403
1998 - 4,738
Later years - 9,039
Total minimum lease payments 3,950 $46,346
Less imputed interest 402
Present value of minimum lease payments $3,548
Minimum lease payments have not been reduced by minimum sublease rentals
aggregating
$3,160,000 due in the future under noncancellable subleases.
Rent expense for continuing operations for the years ended December 31, 1993,
1992 and
1991 was $12,857,000, $11,329,000 and $10,468,000, respectively.
The Company has limited concentrations of credit risk with respect to
financial
instruments. Temporary cash investments are placed with high credit quality
institutions and
concentrations within accounts and notes receivable are limited due to their
geographic
dispersion. Additionally, no single customer accounted for 10% or more of the
Company's sales
during 1993, except for sales under contract to member hospitals of the VHA,
which amounted to
$459.6 million or 32.9% of the Company's total net sales from continuing
operations.
Note 12 - Quarterly Financial Data (Unaudited)
The following table presents the summarized quarterly financial data for
1993, 1992 and
1991:
<TABLE>
(in thousands, except per share data)
Year 1993
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales from continuing operations $317,812 $341,221 $361,959 $375,979
Gross margin 33,634 35,654 38,151 39,872
Net income from continuing operations 3,826 4,265 4,790 5,636
Gain on disposals, net of other provisions and taxes - - - 911
Cumulative effect of change in accounting principle 706 - - -
Net income $ 4,532 $ 4,265 $ 4,790 $ 6,547
Net income per share:
Continuing operations $ .19 $ .21 $ .23 $ .27
Discontinued operations - - - .04
Cumulative effect of change in accounting principle .03 - - -
Net income per share $ .22 $ .21 $ .23 $ .31
Year 1992
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales from continuing operations $282,481 $289,705 $300,018 $305,094
Gross margin 28,514 29,778 31,450 34,558
Net income from continuing operations 3,085 3,613 3,952 4,785
Discontinued operations:
Income (loss) from discontinued operations,
net of taxes 123 (46) - -
Gain (loss) on disposals, net of other provisions
and taxes 9,933 (3,080) - (1,243)
Cumulative effect of change in accounting principle (730) - - -
Net income $ 12,411 $ 487 $ 3,952 $ 3,542
Net income (loss) per share:
Continuing operations $ .16 $ .18 $ .20 $ .24
Discontinued operations .51 (.16) - (.06)
Cumulative effect of change in accounting principle (.04) - - -
Net income per share $ .63 $ .02 $ .20 $ .18
Year 1991
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales from continuing operations $239,378 $247,441 $260,382 $273,813
Gross margin 23,384 24,493 25,962 28,871
Net income from continuing operations 1,800 2,227 2,699 2,943
Income from discontinued operations, net of taxes 533 510 757 558
Net income $2,333 $ 2,737 $ 3,456 $ 3,501
Net income per share:
Continuing operations $ .09 $ .11 $ .14 $ .15
Discontinued operations .03 .03 .03 .03
Net income per share $ .12 $ .14 $ .17 $ .18
</TABLE>
<PAGE>
KPMG Peat Marwick
Certified Public Accountants
Suite 1900
1021 East Cary Street
Richmond, Virginia 23219-4023
Independent Auditors' Report
To the Board of Directors and Stockholders
Owens & Minor, Inc.:
We have audited the accompanying consolidated balance sheets of Owens &
Minor, Inc. and
subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of
income, stockholders' equity and cash flows for each of the years in the three-
year period ended
December 31, 1993. These consolidated financial statements are the
responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those
standards require that we plan and perform the audits to obtain reasonable
assurance about
whether the financial statements are free of material misstatement. An audit
includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in
all material respects, the financial position of Owens & Minor, Inc. and
subsidiaries as of
December 31, 1993 and 1992 and the results of their operations and their cash
flows for each of
the years in the three-year period ended December 31, 1993 in conformity with
generally accepted
accounting principles.
As discussed in Note 10 to the Consolidated Financial Statements, as of
January 1, 1993,
the Company changed its method of accounting for income taxes.
KPMG Peat Marwick
February 4, 1994
<PAGE>
Market and Dividend Information
On January 29, 1988, Owens & Minor, Inc.'s
common stock began trading on the New York Stock Exchange under the symbol OMI.
The following
table indicates the range of high and low sales prices per share of the
Company's common shares
as reported on the New York Stock Exchange and the quarterly cash dividends paid
by the Company:
Year 1993
Quarter 1st 2nd 3rd 4th
Market Price
High $17.38 $21.00 $23.25 $23.38
Low $12.63 $12.63 $18.25 $18.00
Dividends per share $.0525 $.0525 $.0525 $.0525
Year 1992
Quarter 1st 2nd 3rd 4th
Market Price
High $14.50 $12.50 $13.33 $15.17
Low $11.25 $ 11.00 $11.33 $11.83
Dividends per share $.0350 $.0433 $.0433 $.0433
Year 1991
Quarter 1st 2nd 3rd 4th
Market Price
High $ 9.25 $10.67 $12.50 $16.17
Low $ 6.25 $ 8.09 $10.33 $12.33
Dividends per share $.0289 $.0333 $.0350 $.0350
At December 31, 1993, there were approximately 11,600 shareholders.
Exhibit 22
OWENS & MINOR, INC. AND SUBSIDIARIES
SUBSIDIARIES OF REGISTRANT
Subsidiary State of Incorporation
---------- ----------------------
Owens & Minor West, Inc. California
(formerly known as National Healthcare and
Hospital Supply Corporation)
National Medical Supply Corporation Delaware
Koley's Medical Supply, Inc. Nebraska
Harbor Medical, Inc. Florida
Lyons Physician Supply Company Ohio
A. Kuhlman & Co. Michigan
Exhibit 24
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Owens & Minor, Inc.:
We consent to incorporation by reference in the Registration Statements (Nos.
33-65606, 33-63248, 33-4536, 33-32497, 33-41402 and 33-41403) on Form S-8 of
Owens & Minor, Inc. of our report dated February 4, 1994, relating to the
consolidated balance sheets of Owens & Minor, Inc. and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1993, which report is incorporated by
reference in the December 31, 1993 annual report on Form 10-K of Owens &
Minor, Inc. We also consent to the incorporation by reference in the
aforementioned Registration Statements of our report dated February 4, 1994,
relating to the financial statement schedules of the Company, which report
appears on page 16 of this Form 10-K.
Our reports refer to a change in accounting for income taxes.
KPMG Peat Marwick
Richmond, Virginia
March 7, 1994
