<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1994
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 1-9810
OWENS & MINOR, INC.
(Exact name of Registrant as specified in its charter)
Virginia 54-1701843
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4800 Cox Road, Glen Allen, Virginia 23060
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including Area Code (804) 747-9794
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $2 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
(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 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 $377,909,196 as of March 7, 1995. 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 assumption shall not be deemed
conclusive for any other purpose.
The number of shares of the Company's Common Stock
outstanding as of March 7, 1995 was 30,805,845 shares.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Owens & Minor, Inc. Annual Report to
Shareholders for the year ended December 31, 1994 (the "1994 Annual
Report") are incorporated by reference into Part II of this Form
10-K and portions of the Owens & Minor, Inc. definitive Proxy
Statement for the 1995 Annual Meeting of Shareholders (the "1995
Proxy Statement") are incorporated by reference into Part III of
this Form 10-K. With the exception of the specific information
referred to in Items 5, 6, 7, 8 and 14 hereof, the 1994 Annual
Report and 1995 Proxy Statement are 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
<S> <C> <C> <C> <C>
PART I
Item 1 Business 2-4
Item 2 Properties 5
Item 3 Legal Proceedings 5
Item 4 Submission of Matters to a
Vote of Security Holders 5
PART II
* Item 5 Market for Registrant's Common
Equity and Related Stockholder
Matters 9 43
* Item 6 Selected Financial Data 9 22-23
* Item 7 Management's Discussion and
Analysis of Financial
Condition and Results
of Operation 9 24-25
* Item 8 Financial Statements and
Supplementary Data 9 26-40
Item 9 Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure 9
PART III
** Item 10 Directors and Executive Officers Proposal 1: Election of
of the Registrant 10 Directors
** Item 11 Executive Compensation 10 Proposal 1: Election of Directors - Executive
Compensation
** Item 12 Security Ownership of Certain Proposal 1: Election
Beneficial Owners and of Directors - Capital
Management 10 Stock Owned by Principal Shareholders
and Management
** Item 13 Certain Relationships and
Related Transactions 10 None
PART IV
Item 14 Exhibits, Financial Statement
Schedules, and Reports on
Form 8-K 11-13
</TABLE>
* Information related to this item is hereby incorporated by
reference to the 1994 Annual Report.
** Information related to this item is hereby incorporated by
reference to the 1995 Proxy Statement.
<PAGE>
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 the largest
branded wholesale distributor of medical/surgical supplies and
carries over 163,000 products and operates 53 distribution centers
serving hospitals, nursing homes, integrated healthcare systems,
alternate medical care facilities, physicians' offices and other
institutions nationwide. The Company also distributes
pharmaceuticals and related products to hospitals. The Company's
common stock is traded on the New York Stock Exchange under the
symbol OMI.
On May 10, 1994, the Company acquired Stuart Medical,
Inc. (Stuart), a distributor of medical/surgical supplies. The
consideration paid to the shareholders of Stuart was $40.2 million
in cash and $115 million par value of convertible preferred stock.
In 1994, 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 1994 nor is it subject to
any material seasonality. At February 28, 1995, the Company
had approximately 3,000 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 3,000 different manufacturers that provide an
adequate availability of inventory. In 1994, products purchased
from Johnson & Johnson, Inc. accounted for approximately 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.
Hospital customers (including members of hospital
buying groups/alliances) represent the majority of the Company's
sales. The remaining sales are to alternative care providers
including Integrated Healthcare System (IHS), nursing homes,
surgical centers, physician offices and other purchasers. The
historic focus on sales to hospitals reflects the Company's
principal strategy of focusing on hospital customers in the
belief that the buying decisions regarding distribution of supplies
to the new IHS will be lead by the hospital community. Important
elements of this strategy have been to maintain the Company's status
as a low cost distributor of high volume commodity products and to
operate in a decentralized manner to provide customers with a high
level of service on a local basis.
In 1994, the majority of the Company's sales were related to
eight product groups including 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 and the opening
of new 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. On
May 10, 1994, the Company acquired Stuart. The acquisition of
Stuart provided the Company with distribution centers located
primarily in the West, Midwest and Northeast. In October 1994, the
Company acquired substantially all of the assets of Emery Medical
Supply, Inc., located in Denver, Colorado. In August 1994, the
Company opened a distribution center in San Diego, California, and
in December 1994, in St. Louis, Missouri. The Company intends
to continue to acquire or establish distribution centers in new
locations depending on the attractiveness of new markets, the
availability of suitable acquisition candidates and the potential
for additional sales and/or cost savings from new locations.
Since 1985, the Company has been a distributor for VHA
Inc. (formerly named Voluntary Hospitals of America, Inc.) ("VHA").
VHA is the nations's largest group purchasing organization for the
non-profit hospital system, representing over 1,000 health care
organizations all of which are in markets serviced by the Company.
The Company entered into a new supply agreement with VHA in 1993.
Under the provisions of the new VHA agreement, commencing on April
1, 1994, the Company sells 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. In
November 1994, another change was made to the VHA agreement adding
Baxter Healthcare Corporation as the fourth authorized VHA
distributor effective in the first quarter of 1995.
Simultaneously, with this change, VHA enabled the other
three authorized VHA distributors, including the Company, to
distribute Baxter-manufactured products, which was not previously
possible. During 1994, no single customer accounted for 10% or
more of the Company's net sales, except for sales under the VHA
agreement to member hospitals, which amounted to approximately $960
million or 40% of the Company's total net sales.
In February 1994, the Company was selected by
Columbia/HCA Healthcare Corp. ("Columbia/HCA") as its principal
distributor for medical/surgical products. Under the new
partnership, the Company provides distribution services to
Columbia/HCA hospitals and their other healthcare facilities
nationwide to improve the cost effectiveness and efficiency of
their inventory management process. Columbia/HCA owns
approximately 200 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 seven distribution centers.
As a result of the Company's sale of its Wholesale Drug
Division and Specialty Packaging Division in 1992, the Company
has only one reporting segment.
MARKETING DEVELOPMENTS
In 1994, the Company introduced a series of decision analysis
for personal computer applications called Interactive Value Models
(IVM(Registered Trademark)). With the IVM(Registered Trademark),
customers are guided through a series of questions accessing
their data to arrive at a cost savings figure achievable through
the use of the Company's distribution services. If the customer
cannot provide the data, the application automatically provides
industry standard values. Because IVM(Registered Trademark) is
computerized, customers receive answers quickly.
The field automation program was implemented in October 1994,
with field management receiving IBM Thinkpad(Registered Trademark)
laptops. The sales force trainers received their laptop computers
in December 1994 in preparation for the roll-out to the entire sales
force in 1995. These laptops will be used to access business data
on a real time basis, to communicate electronically both with the
Company's customers and teammates, and to provide multi-media
presentations.
Stock Point(Registered Trademark) was introduced in November
1994 as the name for the Company's stockless distribution program.
This program provides for low-unit-of-measure delivery of product
directly to the hospital department or care site on a daily
basis. The Company successfully implemented in 1994 a newly
developed Stock Point(Registered Trademark) point-of-use application
at two hospital locations. This application automates the
replenishment process through the use of portable computers
outfitted with bar code readers.
A new Integrated Healthcare System (IHS) marketing strategy
was introduced in the Fall of 1994 to five major IHS customers.
This program is designed to provide a seamless distribution
program to address the special needs of the large IHS in
reducing their non-clinical operating expenses and working
towards a risk/gain sharing agreement.
"The Source", Owens & Minor's first product catalog, was
released in December 1994 to customers and teammates. This is a
comprehensive medical/surgical product catalog illustrating many of
the products that are available through the Company's distribution
centers.
COMPETITION
The medical/surgical supply business in the United States
consists of three nationwide distributors, Owens & Minor, Baxter
Healthcare Corp. and General Medical, and a number of regional and
local distributors. The Company believes that, based upon sales, it
is the largest branded distributor of medical/surgical products to
hospitals in the United States. Competition within the
medical/surgical supply business exists with respect to breadth of
product line, product availability, delivery time, services
provided, the ability to meet special requirements of customers
and price. Further consolidation of medical/surgical supply
distributors continues through the purchase of smaller distributors
by larger companies due to competitive pressures in the market place.
<PAGE>
Item 2. Properties
The corporate headquarters of the Company is 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. In addition, the Company owns its warehouse
facilities in Youngstown, Ohio, La Mirada, California and
Greensburg, Pennsylvania and an office facility in Sanford,
Florida.
The Company also leases offices and warehouses for its
distribution centers in 45 cities. Overall there are 53
distribution centers. In 1994, the Company relocated five
distribution centers and expanded six others. Much of this
activity can be attributed to new business growth with Columbia/HCA
hospitals and the consolidation of Owens & Minor and Stuart
facilities. In 1995 new facilities are planned for seven
locations including Atlanta, Chicago, Detroit, Ft. Lauderdale,
Houston, Jackson and Richmond. All 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 1994.
<PAGE>
EXECUTIVE AND OTHER OFFICERS OF THE REGISTRANT
The Company's Executive Officers are:
Name Age Office
G. Gilmer Minor, III 54 Chairman, President and Chief
Executive Officer
Craig R. Smith 43 Executive Vice President and
Chief Operating Officer
Robert E. Anderson, III 60 Executive Vice President,
Planning and Development
Henry A. Berling 52 Executive Vice President,
Sales and Customer
Development
Drew St. J. Carneal 56 Senior Vice President,
Corporate Counsel and
Secretary
Glenn J. Dozier 44 Senior Vice President,
Finance, Chief Financial
Officer
The Company's other Officers are:
Richard F. Bozard 48 Vice President, Treasurer
Charles C. Colpo 37 Vice President, Inventory
Management
Hugh F. Gouldthorpe, Jr. 56 Vice President, Quality and
Communications
Michael L. Roane 40 Vice President, Human
Resources
Thomas J. Sherry 46 Vice President, Sales and
Marketing
F. Thomas Smiley 39 Vice President, Operations
and Cost Management,
Controller
Hue Thomas, III 56 Vice President, Corporate
Relations
At the meeting of the Board of Directors held February 27,
1995, Mr. Colpo was elected Officer and all of the other Officers
were elected at the annual meeting of the Board of Directors held May
10, 1994. All Officers are elected to serve until the 1995
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. in history from the Virginia
Military Institute in 1963. In 1966, he was awarded an MBA from
the Colgate Darden School of Business Administration at the
University of Virginia. He has spent his entire business career with
the Company and was elected President and Chief Operating Officer
in 1981 and Chief Executive Officer in 1984. In May 1994 he was
also elected Chairman of the Board.
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. Later in 1993, Mr. Smith assumed the new role of
Senior Vice President, Distribution and Information Systems and
in 1994, he was elected Executive Vice President, Distribution and
Information Systems. In February 1995, Mr. Smith was promoted to
Chief Operating Officer. Mr. Smith is a graduate of the University
of Southern California.
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 by the Company 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 and in 1994, he was elected
Executive Vice President, Planning. Mr. Anderson received a B.S.
in Commerce from the University of Virginia.
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 and in 1994, he was elected Executive Vice President, Sales
and Customer Development. Mr. Berling received a B.S. in
Economics from Villanova University.
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. 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. 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. 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. Colpo was employed by the Company in 1981 as Manager,
Internal Audit. In April 1984, Mr. Colpo was promoted to Division
Vice President (DVP) and served as DVP for the Harlingen, Texas,
Division, in 1987, for the Orlando, Florida, Division and in 1993
for the Atlanta, Georgia, Division. In 1994, he became Director,
Business Process Redesign. In 1995, Mr. Colpo was promoted to Vice
President, Inventory Management. Mr. Colpo received a BS in
Accounting from Virginia Polytechnic Institute and State
University.
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. 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. from 1980 to 1992
where his last position was Manager, Employee Relations Operations.
Prior to that he was employed by Gulf Western Industries in a
variety of human resources positions. Mr. Roane received his B.S.
Degree in Business Management from Canisius College.
Mr. Sherry joined Owens & Minor as Vice President of Sales
and Marketing with the Company's acquisition of Stuart in May 1994.
During his 18 year employment at Stuart he held various
positions which included sales representative, Sales Manager,
Division Vice President, Regional Vice President, Vice President
of Sales and Executive Vice President. Mr. Sherry has a B.S.
in Business Administration from Central Michigan University and
while in the Air Force completed the M.B.A. program at the
University of Northern Colorado.
Mr. Smiley was employed by the Company in September 1979 as
Manager of Internal Audit. In January 1981, he became Assistant
Controller. In June 1985, he became Controller. In April 1986 he
was elected Assistant Vice President, Controller. In April
1989, he was elected Vice President, Controller and in
February 1995, was promoted to Vice President, Operations and
Cost Management. 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.
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
1994 Annual Report under the heading "Market and Dividend
Information" on page 43 and is incorporated by reference herein.
Item 6. Selected Financial Data
The information required under this item is contained in the
1994 Annual Report under the heading "Selected Financial Data" on
pages 22 and 23 and is incorporated by reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
The information required under this item is contained in the
1994 Annual Report under the heading "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages
24 and 25 and is incorporated by reference herein.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes as of December
31, 1994 and 1993 and for each of the years in the three-year
period ended December 31, 1994, together with the independent
auditors' report of KPMG Peat Marwick LLP dated February 3, 1995,
appearing on pages 26 through 40 of the 1994 Annual Report are
incorporated by reference herein.
The information required under Item 302 of Regulation S-K is
set forth in the 1994 Annual Report in Note 13 - "Quarterly
Financial Data (Unaudited)" in the Notes to Consolidated Financial
Statements on page 39 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-year period
ended December 31, 1994.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required for this item is contained in Part I
of this Form 10-K and in the 1995 Proxy Statement under the
heading, "Proposal 1: Election of Directors" and is incorporated
by reference herein.
Item 11. Executive Compensation
The information required under this item is contained in the
1995 Proxy Statement under the heading "Proposal 1: 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
1995 Proxy Statement under the heading "Proposal 1: Election of
Directors - Capital Stock Owned by Principal Shareholders and
Management" and is incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions
None
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K
Page Numbers
1994 Annual Form
Report * 10-K
(a) The following documents are filed
as part of this report:
1. Consolidated Financial Statements:
Independent Auditors' Report of
KPMG Peat Marwick LLP 40
Consolidated Balance Sheets at
December 31, 1994 and 1993 27
Consolidated Statements of Income for
the years ended December 31, 1994,
1993 and 1992 26
Consolidated Statements of Cash Flows
for the years ended December 31, 1994,
1993 and 1992 28
Notes to Consolidated Financial Statements 29-39
2. Financial Statement Schedules:
Independent Auditors' Report of KPMG
Peat Marwick LLP 15
VIII - Valuation and Qualifying Accounts 16
* Incorporated by reference from the indicated
pages of the 1994 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 December 22, 1993, as amended and
restated on March 31, 1994, by and among Stuart Medical, Inc.,
the Company and certain shareholders of Stuart Medical, Inc.
(incorporated herein by reference to the Company's Proxy
Statement/Prospectus dated April 6, 1994, Annex III)**
(3)(a) Amended and Restated Articles of Incorporation of the Company
(b) Amended and Restated Bylaws of the Company
(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) Amendment to Owens & Minor, Inc. 0% Subordinated Note due
May 31, 1997
(c) Owens & Minor, Inc. $3,332,912, 9.10% Convertible
Subordinated Note dated May 10, 1994, due May 31, 1996,
between the Company and Hygeia Ltd.
(d) Credit Agreement dated as of April 29, 1994 among the Company,
as borrower, certain of the Company's subsidiaries, as
guarantors, NationsBank of North Carolina, N.A., as Agent,
Chemical Bank and Crestar Bank, as Co-Agents, and the Banks
identified therein ("Credit Agreement")**
(e) First Amendment to Credit Agreement dated February 28, 1995**
(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 (incorporated
herein by reference to the Company's Annual Report on Form 10-
K, exhibit 10(k), for the year ended December 31, 1993)*
(l) Owens & Minor, Inc. Directors' Compensation Plan (incorporated
herein by reference to the Company's Annual Report on Form 10-
K, exhibit 10(l), for the year ended December 31, 1993) *
(m) Form of Enhanced Authorized Distribution Agency Agreement
("ADA Agreement") dated as of November 16, 1993 by and between
Voluntary Hospitals of America, Inc. and Owens & Minor, Inc.
(incorporated herein by reference to the Company's Annual
Report on Form 10-K, exhibit 10 (m), for the year ended
December 31, 1993)***
(n) Amendments to ADA Agreement dated as of August 9, 1994,
September 15, 1994 and November 15, 1994, respectively
(11) Calculation of Net Income Per Share
(13) Owens & Minor, Inc. 1994 Annual Report to Shareholders
(21) Subsidiaries of Registrant
(23) Consent of KPMG Peat Marwick LLP, independent auditors
(27) Financial Data Schedule
* 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 1994
Note 1. With the exception of the information incorporated in this Form
10-K by reference thereto, the 1994 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, III
G. Gilmer Minor, III
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the date
indicated:
/s/ G. Gilmer Minor, III /s/ R. E. Cabell, Jr.
G. Gilmer Minor, III R. E. Cabell, Jr.
Chairman of the Board, President Director
and Chief Executive Officer
/s/ Philip M. Minor /s/ James B. Farinholt, Jr.
Philip M. Minor James B. Farinholt, Jr.
Vice Chairman of the Board Director
/s/ William F. Fife /s/ Carl G. Grefenstette
William F. Fife Carl G. Grefenstette
Director Director
/s/ Glenn J. Dozier /s/ Vernard W. Henley
Glenn J. Dozier Vernard W. Henley
Senior Vice President, Finance, Director
Chief Financial Officer
/s/ F. Thomas Smiley /s/ E. Morgan Massey
F. Thomas Smiley E. Morgan Massey
Vice President, Principal Director
Accounting Officer and Controller
/s/ James E. Rogers
James E. Rogers
Director
/s/ James E. Ukrop
James E. Ukrop
Director
/s/ Anne Marie Whittemore
Anne Marie Whittemore
Director
Each of the above signatures is affixed as of March 22, 1995.
<PAGE>
INDEPENDENT AUDITORS' REPORT
REPORT ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors
Owens & Minor, Inc.:
Over date of February 3, 1995, we reported on the consolidated balance
sheets of Owens & Minor, Inc. and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of income and cash
flows for each of the years in the three-year period ended December 31,
1994, as contained in the 1994 annual report to shareholders. These
consolidated financial statements and our report thereon are
incorporated by reference in the December 31, 1994 annual report on Form
10-K. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial statement
schedule included on page 16 of this annual report on Form 10-K. This
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set
forth therein.
KPMG Peat Marwick LLP
Richmond, Virginia
February 3, 1995
<PAGE>
Schedule VIII
OWENS & MINOR, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands)
Additions
Balance at Charged to
Beginning Costs Other** Balance
Year-End of and at End
Description Year Expenses Deductions* of Year
Allowance for doubtful
accounts deducted from
accounts and notes
receivable in the
Consolidated
Balance Sheets
1994 $4,678 $1,149 $ 40 $ 527 $5,340
1993 $4,442 $ 497 - $ 261 $4,678
1992 $4,514 $1,351 - $1,423 $4,442
* Uncollectible accounts written off.
** Adjusted for the allowance reserve acquired with the Emery
acquisition.
<PAGE>
Form 10-K
Exhibit Index
Exhibit # Description
(3) (a) Amended and Restated Articles of Incorporation of the Company
(b) Amended and Restated Bylaws of the Company
(4) (b) Amendment to Owens & Minor, Inc. 0% Subordinated Note due May
31, 1997
(c) Owens & Minor, Inc. $3,332,912 9.10% Convertible Subordinated
Note dated May 10, 1994 due May 31, 1996 between the Company
and Hygeia Ltd.
(d) Credit Agreement dated as of April 29, 1994, among the
Company, as borrower, certain of the Company's subsidiaries,
as guarantors, NationsBank of North Carolina, N.A., as Agent,
Chemical Bank and Crestar Bank, as Co-Agents, and the Banks
identified therein
(e) First Amendment to Credit Agreement dated February 28, 1995
(10) (n) Amendments to ADA Agreement dated as of August 9, 1994,
September 15, 1994 and November 15, 1994, respectively
(11) Calculation of Net Income Per Share
(13) Owens & Minor, Inc. 1994 Annual Report to Shareholders
(21) Subsidiaries of Registrant
(23) Consent of KPMG Peat Marwick LLP, independent auditors
(27) Financial Data Schedule
Exhibit 3 (a)
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
OWENS & MINOR, INC..
ARTICLE I.
NAME
The name of the Corporation shall be OWENS & MINOR, INC.
ARTICLE II.
PURPOSES.
The purposes for which the Corporation is formed are:
1. To buy, sell, distribute and trade in medical and
surgical supplies and equipment, pharmaceuticals, drugs and merchandise of
every sort, class and description at wholesale or at retail, as principal
or as agent, alone or in partnership with any other person, firm or
corporation within and without the Commonwealth of Virginia and the United
States of America and to do and perform every act and to carry on every
business which shall be incidental thereto.
2. In addition, the Corporation shall have the power to
transact any and all lawful business not required to be stated specifically
in the articles of incorporation for which corporations may be incorporated
under Chapter I of Title 13.1 of the Code of Virginia of 1950 as in effect
on the effective date of these Articles or as amended subsequently thereto.
ARTICLE III.
CAPITAL STOCK.
The maximum number of authorized shares of the capital
stock of the Corporation shall be Two Hundred Million (200,000,000) shares
of Common Stock of the par value of Two Dollars ($2.00) per share, and Ten
Million (10,000,000) shares of Cumulative Preferred Stock of the par value
of One Hundred Dollars ($100.00) per share, issuable in series as is
hereinafter provided.
The description of the Cumulative Preferred Stock and of
the Common Stock and the designations, preferences and voting powers of
such classes of stock, or restrictions or qualifications thereof and the
terms upon which such stock is to be issued are as follows:
PART A.
CUMULATIVE PREFERRED STOCK.
1. Issuance in Series. The Cumulative Preferred Stock
shall be divided into and issued from time to time in one or more series,
each which series shall be so designated as to distinguish the shares
thereof from all other series and classes. The Board of Directors shall
have the authority to divide the Cumulative Preferred Stock into series by
resolution setting forth the designation and number of shares of each
series and the relative rights and preferences thereof in the following
respects, as to which there may be variation between different series:
(a) The rate of dividend, the time of payment and the
dates from which any dividends shall be cumulative and the
extent of participation rights, if any;
(b) Any right to vote with holders of shares of any
other series or class and any right to vote as a class
either generally or as a condition to specified corporate
action, subject to the limitations of Section 4 of Part A
of this Article III;
(c) The price at which and the terms and conditions
upon which shares may be redeemed;
(d) The amount payable upon shares in the event of
involuntary liquidation;
(e) The amount payable upon shares in the event of
voluntary liquidation;
(f) Sinking fund provisions of the redemption or
purchase of shares, if any;
(g) The terms and conditions upon which shares may be
converted, if the shares of any series are issued with the
privilege of conversion.
The Board of Directors shall have the further authority to
redesignate any shares of any series theretofore established which have not
been issued or which have been issued and retired as shares of some other
series or to change the designation of outstanding shares when desired to
prevent confusion.
All shares of Cumulative Preferred Stock of any one series
shall be identical with each other in all respects except, if so determined
by the Board of Directors, as to the dates from which dividends thereon
shall be cumulative. The shares of Cumulative Preferred Stock shall be
equal in rank with each other regardless of series and shall be identical
with each other in all respects except as hereinabove provided.
2. Preferences over Common Stock. The Cumulative
Preferred Stock as a class shall have preference over the Common Stock as
to the payment of dividends and in the distribution of the assets of the
Corporation in the event of any liquidation and dissolution, whether
voluntary or involuntary. All shares of Cumulative Preferred Stock of
every series shall share ratably in the distribution of assets upon
dissolution if the assets of the Corporation are insufficient to pay the
full liquidation price of all shares of Cumulative Preferred Stock of every
series.
So long as any dividend on any series of Cumulative
Preferred Stock shall be in arrears, no dividend shall be declared and paid
on the Common Stock except dividends payable in shares of Common Stock, nor
shall the Corporation purchase or otherwise acquire for a consideration any
shares of Common Stock.
3. Redemption of Cumulative Preferred Stock. Subject to
any other provision of these Articles of Incorporation to the contrary and
to the right of the Board of Directors to fix in any resolution of serial
designation adopted by it the terms and conditions upon which shares of any
series may be redeemed, in the event of any redemption of shares of
Cumulative Preferred Stock by the Corporation, it may at the option of the
Board of Directors redeem the whole or any part of the Cumulative Preferred
Stock at any time outstanding upon not less than thirty (30) nor more than
sixty (60) days previous notice by mail to the holders of record of the
shares to be redeemed. If less than the whole of a series shall be
redeemed, the shares to be so redeemed shall be determined by lot or in
such other manner as the Board of Directors may determine. If such notice
of redemption shall have been duly given, and if on or before the
redemption date specified in such notice, the funds necessary for such
redemption shall have been deposited in trust with any bank or trust
company in the City of Richmond, Virginia, having capital and unrestricted
surplus aggregating at least TEN MILLION DOLLARS ($10,000,000) named in
such notice, to be applied to the redemption of the Cumulative Preferred
Stock so called for redemption, then from the time of such deposit all
shares of Cumulative Preferred Stock for the redemption of which such
deposit shall have been made shall be deemed no longer to be outstanding
for any purpose and all rights with respect to such shares shall thereupon
terminate, except the right to receive the redemption price on deposit,
without interest thereon. Any interest accrued upon or earned by such
deposit shall be paid to the Corporation. At the end of five (5) years
from the redemption date named in such notice, any funds so deposited which
then remain unclaimed shall be paid to the Corporation free of any trust.
Any holder of Cumulative Preferred Stock so called for redemption as shall
not have received the redemption price prior to such repayment to the
Corporation shall be deemed to be an unsecured creditor of the Corporation
for the amount of the redemption price and shall look only to the
Corporation for the payment thereof, without interest.
4. Voting Rights of Cumulative Preferred Stock. Except
as set forth elsewhere in these Articles of Incorporation and as shall be
provided in any resolution of serial designation adopted by the Board of
Directors, the holders of the Cumulative Preferred Stock shall not be
entitled to any vote except as to matters in respect of which they shall at
the time be indefeasibly vested by statute with such right. The Board of
Directors may grant to holders of any series of Cumulative Preferred Stock
the right to vote as a class for the election of Directors only upon the
following terms and conditions and subject to the following limitations:
(a) Such right to vote as a class for the election of
Directors shall not be exercisable unless and until the
Corporation shall be in arrears for the payment of four (4)
or more dividends on any series of Cumulative Preferred
Stock.
(b) The number of Directors elected by holders of
Cumulative Preferred Stock of all series shall not exceed
two (2) in the aggregate.
(c) Such power to elect Directors, if granted to more
than one series, shall apply to all series as a class, and
not separately.
(d) No Director elected by the Cumulative Preferred
Stock, if such power be conferred upon any series of such
stock, shall be classified with the Directors elected by
the Common Stock, but any such Directors so elected by the
Cumulative Preferred Stock shall serve as a separate class
to be elected annually and shall serve in addition to the
number of classified Directors elected by the Common Stock
as provided in the bylaws of the Corporation. They,
together with the classified Directors as provided in the
bylaws, shall constitute the Board of Directors.
(e) Immediately upon the payment of all dividends in
arrears, any Director or Directors so elected by the
Cumulative Preferred Stock shall cease to act and shall no
longer be Directors of the Corporation.
5. Series A Preferred Stock. The first series of
Cumulative Preferred Stock shall be designated "Series A Participating
Cumulative Preferred Stock" ("Series A Preferred Stock") and the number of
shares constituting such series shall be 300,000. The preferences,
limitations and relative rights of shares of Series A Preferred Stock shall
be as follows:
(a) Dividends and Distributions.
(1) Subject to the prior and superior rights of
the holders of any shares of any series of Preferred
Stock ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends,
the holders of shares of Series A Preferred Stock in
preference to the holders of Common Stock and of any
other junior stock, shall be entitled to receive,
when, as and if declared by the Board of Directors out
of funds legally available therefor, dividends payable
quarterly on the fifteenth day of each February, May,
August and November (each such date being referred to
herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount
per share (rounded to the nearest cent) equal to the
greater of (a) $6.50 or (b) subject to the provision
for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and
100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions
other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a
share of Series A Preferred Stock. In the event the
Corporation shall at any time, (i) declare any
dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the
amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after
such event and the denominator of which is the number
of shares of Common Stock that were outstanding
immediately prior to such event.
(2) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as
provided in paragraph (1) above immediately after it
declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of
Common Stock); provided that, in the event no dividend
or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend at the rate of $6.50
per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(3) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Preferred
Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A
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 A 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 A 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.
The Board of Directors may fix a record date for the
determination of holders of shares of Series A
Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which
record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
(b) Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(1) Subject to the provision for adjustment
hereinafter set forth, each share of Series A
Preferred Stock shall entitle the holder thereof to
one vote on all matters submitted to a vote of the
shareholders of the Corporation.
(2) Except as otherwise provided herein, in the
Articles of Incorporation or under applicable law, the
holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock shall vote together
as one voting group on all matters submitted to a vote
of stockholders of the Corporation.
(3) (i) If at any time dividends on any shares
of Series A Preferred Stock shall be in arrears in an
amount equal to six quarterly dividends thereon, the
occurrence of such contingency shall mark the
beginning of a period (a "default period") that shall
extend until such time when all accrued and unpaid
dividends for all previous quarterly dividend periods
and for the current quarterly dividend period on all
shares of Series A Preferred Stock then outstanding
shall have been declared and paid or set apart for
payment. During each default period, all holders of
the outstanding shares of Series A Preferred Stock
together with any other series of Preferred Stock then
entitled to such a vote under the terms of the
Articles of Incorporation, voting as a separate voting
group, shall be entitled to elect two members of the
Board of Directors of the Corporation.
(ii) During any default period, such voting
right of the holders of Preferred Stock may be
exercised initially at a special meeting called
pursuant to subparagraph (iii) of this Section 5(b)(3)
or at any annual meeting of shareholders, and
thereafter at annual meetings of shareholders,
provided that neither such voting right nor the right
of the holders of any other series of Preferred Stock,
if any, to increase, in certain cases, the authorized
number of Directors shall be exercised unless the
holders of ten percent (10%) in number of shares of
Preferred Stock outstanding shall be present in person
or by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the
holders of Preferred Stock of such voting right. At
any meeting at which the holders of Preferred Stock
shall exercise such voting right initially during an
existing default period, they shall have the right,
voting as a separate voting group, to elect Directors
to fill such vacancies, if any, in the Board of
Directors as may then exist up to two (2) Directors,
or if such right is exercised at an annual meeting, to
elect two (2) Directors. If the number which may be so
elected at any special meeting does not amount to the
required number, the holders of the Preferred Stock
shall have the right to make such increase in the
number of Directors as shall be necessary to permit
the election by them of the required number. After the
holders of the Preferred Stock shall have exercised
their right to elect Directors in any default period
and during the continuance of such period, the number
of Directors shall not be increased or decreased
except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with
the Series A Preferred Stock.
(iii) Unless the holders of Preferred Stock
shall, during an existing default period, have
previously exercised their right to elect Directors,
the Board of Directors may order, or any shareholder
or shareholders owning in the aggregate not less than
ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series,
may request, the calling of a special meeting of the
holders of Preferred Stock, 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 paragraph 5(b)(3)(iii) shall be given
to each holder of record of 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
shareholder or shareholders owning in the aggregate
not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding. Notwithstanding
the provisions of this paragraph 5(b)(3)(iii), 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 shareholders.
(iv) In any default period, the holders of
Common Stock, and other classes of stock of the
Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until
the holders of Preferred Stock shall have exercised
their right to elect two (2) Directors voting as a
separate voting group, after the exercise of which
right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their
successors shall have been elected by such holders or
until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as
provided in paragraph 5(b)(3)(ii)) be filled by vote
of a majority of the remaining Directors theretofore
elected by the voting group which elected the Director
whose office shall have become vacant. References in
this paragraph 5(b)(3)(iv) to Directors elected by a
particular voting group shall include Directors
elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a
default period, (x) the right of the holders of
Preferred Stock, as a separate voting group, to elect
Directors shall cease, (y) the term of any Directors
elected by the holders of Preferred Stock, as a
separate voting group, shall terminate, and (z) the
number of Directors shall be such number as may be
provided for in, or pursuant to, the Articles of
Incorporation or bylaws irrespective of any increase
made pursuant to the provisions of paragraph
5(b)(3)(ii) (such number being subject, however, to
change thereafter in any manner provided by law or in
the Articles of Incorporation or bylaws). Any
vacancies in the Board of Directors affected by the
provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining
Directors, even though less than a quorum.
(4) Except as set forth herein or as otherwise
provided in the Articles of Incorporation, holders of
Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except
to the extent they are entitled to vote with holders
of Common Stock as set forth herein) for taking any
corporate action.
(c) Certain Restrictions.
(1) Whenever quarterly dividends or other
dividends or distributions payable on the Series A
Preferred Stock as provided in Section 5(a) are in
arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared,
on shares of Series A Preferred Stock outstanding
shall have been paid in full, 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 the Series A Preferred 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 the
Series A Preferred Stock and shall not redeem,
purchase or otherwise acquire, directly or indirectly,
whether voluntarily, for a sinking fund, or otherwise
any shares of any class of stock of the Corporation
ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series
A Preferred Stock, provided that, notwithstanding the
foregoing, the Corporation may at any time redeem,
purchase or otherwise acquire shares of stock of any
such junior class in exchange for, or out of the net
cash proceeds from the concurrent sale of, other
shares of stock of any such junior class;
(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 A Preferred
Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking
on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the
Series A Preferred Stock, provided that the
Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series
A Preferred Stock;
(iv) purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock,
or any shares of stock ranking on a parity with the
Series A Preferred Stock, except 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 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) 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 5(c), purchase or otherwise
acquire such shares at such time and in such manner.
(d) Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
canceled 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 (either as
to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share,
plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to
the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount
of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares
of Series A Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received
an amount per share (the "Common Adjustment") equal to
the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph f(iii) below to
reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common
Stock) (such number in clause (ii) being hereinafter
referred to as the "Adjustment Number"). Following
the payment of the full amount of the Series A
Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A
Preferred Stock and Common Stock, respectively,
holders of Series A Preferred Stock and holders of
shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1
with respect to such Series A Preferred Stock and
Common Stock, on a per share basis, respectively.
(2) In the event, however, that there are not
sufficient assets available to permit payment in full
of the Series A 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. In the event, however, that
there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the
holders of Common Stock.
(3) In the event the Corporation shall at any
time (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of
shares, then in each such case the Adjustment Number
in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a
fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after
such event and the denominator of which is the number
of shares of Common Stock that were outstanding
immediately prior to such event.
(f) Consolidation, Merger, Share Exchange, etc. In
case the Corporation shall enter into any consolidation,
merger, share exchange, combination or other transaction in
which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any
other property, then in any such case the shares of Series
A Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to
100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock
is changed or exchanged. In the event the Corporation shall
at any time (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each
such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series
A Preferred Stock shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately
prior to such event.
(g) Redemption. The outstanding shares of Series A
Preferred Stock may be redeemed at the option of the Board
of Directors as a whole, but not in part, at any time, or
from time to time, at a cash price per share equal to (i)
the par value thereof, plus (ii) all dividends which on the
redemption date have accrued on the shares to be redeemed
and have not been paid or declared and a sum sufficient for
the payment thereof set apart, without interest.
(h) Ranking. The Series A 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.
(i) Amendment. The Articles of Incorporation shall not
be further amended in any manner that would adversely
affect the preferences, rights or powers of the Series A
Preferred Stock without the affirmative vote of the holders
of more than two-thirds of the outstanding shares of the
Series A Preferred Stock, if any, voting separately as one
voting group.
(j) Fractional Shares. Series A Preferred Stock may be
issues of one one-hundredth of a share (and integral
multiples thereof) which shall entitle the holder, in
proportion to such holders' fractional shares, to exercise
voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights
of holders of Series A Preferred Stock.
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 July 31, 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 only 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. (1) 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.
(2) 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.
PART B.
COMMON STOCK.
1. Voting Rights. The holders of Common Stock shall to
the exclusion of the holders of Cumulative Preferred Stock have the sole
and full power to vote for the election of directors and for all other
purposes without limitation except only as otherwise provided under the
applicable sections of these Articles of Incorporation or by any applicable
provision of law.
2. Dividends. Dividends may be declared and paid and
distributions may be made on the Common Stock and shares of Common Stock
may be purchased or otherwise acquired for value out of any funds of the
Corporation legally available therefore without limit in any amount except
as provided in the sections of these Articles of Incorporation applicable
to cumulative preferred stock. The Corporation may hold or dispose of
shares so purchased from time to time for its corporate purposes or may
retire such shares as provided by law.
3. Distribution of Assets. The holders of the Common
Stock in the event of any dissolution, liquidation or winding up of the
affairs of the Corporation shall be entitled to receive all assets of the
Corporation remaining after satisfaction of the full preferential amounts
to which holders of the Cumulative Preferred Stock are entitled under the
provisions of these Articles of Incorporation, including rights conferred
by any articles of serial designation.
PART C.
PROVISIONS APPLICABLE TO ALL CLASSES OF STOCK.
1. Voting Rights. Each shareholder of record of shares
of any class shall be entitled in any meeting of shareholders in which such
shares are entitled to be voted to cast one (1) vote for each share of
stock so held by such shareholder as shown by the stock books of the
Corporation and may cast such vote in person or by proxy.
2. Certain Required Votes. Except as expressly otherwise
required by these Articles of Incorporation or by the Board of Directors
acting pursuant to Subsection C of Section 13.1-707 of the Virginia Stock
Corporation Act, the vote required to approve an amendment or restatement
of these Articles that requires shareholder approval, other than an
amendment or restatement that (i) amends or affects the shareholder vote
required by the Virginia Stock Corporation Act to approve a merger,
statutory share exchange, sale of all or substantially all of the
Corporation's assets or the dissolution of the Corporation or (ii) amends
or affects this Part C or Article IV of these Articles of Incorporation,
shall be a majority of the votes entitled to be cast by each voting group
that is entitled to vote on the matter.
3. Preemptive Rights. No holder of shares of stock of
the Corporation of any class shall have any preemptive right with respect
to shares of that class of stock or of any other class of stock of the
Corporation. Nothing contained herein shall, however, prevent the Board of
Directors in its discretion without any action by the shareholders in
connection with the issuance of any obligations or stock of the Corporation
to grant rights or options for the purchase of shares of the Corporation,
either preferred or common, or to provide for the conversion of shares of
one class of stock of the Corporation into shares of another class having
prior or superior rights and preferences as to dividends or distribution of
assets upon liquidation.
ARTICLE IV.
NUMBER OF DIRECTORS, TERM OF OFFICE AND CLASSIFICATION.
The Board of Directors shall consist of three (3) directors
or such greater number of directors as shall from time to time be fixed by
the bylaws of the Corporation provided that in the event the holders of
Cumulative Preferred Stock shall become entitled to and shall elect not to
exceed two (2) additional directors as provided in Article III, Part A,
Section 4 above, such director or directors shall be in addition to the
number of directors permitted and subsisting under this section and bylaws
adopted pursuant hereto.
Promptly after these restated Articles of Incorporation
shall become effective, the directors shall be divided into three (3)
classes, each class to be as nearly equal in number as possible. At the
first annual meeting after the effective date of these restated Articles of
Incorporation, the first class of directors shall be elected for a term of
one (1) year, the second class for a term of two (2) years and the third
class for a term of three (3) years. At each annual meeting after such
classification, the number of directors equal to the number of the class
whose term expires at the time of such meeting shall be elected to hold
office until the third succeeding annual meeting of the shareholders.
ARTICLE V.
LIMIT ON LIABILIBY AND INDEMNIFICATION
1. Definitions. For purposes of this Article V, the
following terms shall have the meanings indicated:
(a) "APPLICANT" means the person
seeking indemnification pursuant to this
Article V;
(b) "EXPENSES" includes counsel fees;
(c) "LIABILITY" means the obligation
to pay a judgment, settlement, penalty,
fine, including any excise tax assessed with
respect to an employee benefit plan, or
reasonable expenses incurred with respect to
a proceeding;
(d) "PARTY" includes an individual who
was, is, or is threatened to be made a named
defendant or respondent in a proceeding; and
(e) "PROCEEDING" means any threatened,
pending, or completed action, suit, or
proceeding, whether civil, criminal,
administrative or investigative and whether
formal or informal.
2. Limitation of Liability. In any proceeding brought by
a shareholder of the Corporation in the right of the Corporation or brought
by or on behalf of shareholders of the Corporation, no director or officer
of the Corporation shall be liable to the Corporation or its shareholders
for monetary damages with respect to any transaction, occurrence or course
of conduct, whether prior or subsequent to the effective date of this
Article V, except for liability resulting from such person's having engaged
in willful misconduct or a knowing violation of the criminal law or any
federal or state securities law.
3. Indemnification. The Corporation shall indemnify (i)
any person who was or is a party to any proceeding, including a proceeding
brought by a shareholder in the right of the Corporation or brought by or
on behalf of shareholders of the Corporation, by reason of the fact that he
is or was a director or officer of the Corporation, and (ii) any director
or officer who is or was serving at the request of the Corporation as a
director, trustee, partner or officer of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
any liability incurred by him in connection with such proceeding unless he
engaged in willful misconduct or a knowing violation of the criminal law.
A person is considered to be serving an employee benefit plan at the
Corporation's request if his duties to the Corporation also impose duties
on, or otherwise involve services by, him to the plan or to participants in
or beneficiaries of the plan. The Board of Directors is hereby empowered,
by a majority vote of a quorum of disinterested directors, to enter into a
contract to indemnify any director or officer in respect of any proceedings
arising from any act or omission, whether occurring before or after the
execution of such contract.
4. Application; Amendment. The provisions of this
Article shall be applicable to all proceedings commenced after the adoption
hereof by the shareholders of the Corporation, arising from any act or
omission, whether occurring before or after such adoption. No amendment or
repeal of this Article V shall have any effect on the rights provided under
this Article V with respect to any act or omission occurring prior to such
amendment or repeal. The Corporation shall promptly take all such actions,
and make all such determinations, as shall be necessary or appropriate to
comply with its obligation to make any indemnity under this Article V and
shall promptly pay or reimburse all reasonable expenses incurred by any
director or officer in connection with such actions and determinations or
proceedings of any kind arising therefrom.
5. Termination of Proceeding. The termination of any
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not of itself create a presumption
that the applicant did not meet the standard of conduct described in
section 2 or 3 of this Article V.
6. Determination of Availability. Any indemnification
under this Article V (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination
that indemnification of the applicant is proper in the circumstances
because he has met the applicable standard of conduct set forth in section
3 of this Article V.
The determination shall be made:
(a) By the Board of Directors by a majority vote
of a quorum consisting of Directors not at the time parties to the
proceeding;
(b) If a quorum cannot be obtained under
subsection (a) of this section, by a majority vote of a committee duly
designated by the Board of Directors (in which designation Directors who
are parties may participate), consisting solely of two or more directors
not at the time parties to the proceeding;
(c) By special legal counsel:
(i) Selected by the Board of Directors or its
committee in the manner prescribed in subsection (a) or (b) of this
section; or
(ii) If a quorum of the Board of Directors
cannot be obtained under subsection (a) of this section and a committee
cannot be designated under subsection (b) of this section, selected by
majority vote of the full Board of Directors, in which selection directors
who are parties may participate;
(d) By the shareholders, but shares owned by or
voted under the control of Directors who are at the time parties to the
proceeding may not be voted on the determination. Any evaluation as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is appropriate, except that if the
determination is made by special legal counsel, such evaluation as to
reasonableness of expenses shall be made by those entitled under subsection
(c) of this section 6 to select counsel. Notwithstanding the foregoing, in
the event there has been a change in the composition of a majority of the
Board of Directors after the date of the alleged act or omission with
respect to which indemnification is claimed, any determination as to
indemnification and advancement of expenses with respect to any claim for
indemnification made pursuant to this Article V shall be made by special
legal counsel agreed upon by the Board of Directors and the applicant. If
the Board of Directors and the applicant are unable to agree upon such
special legal counsel, the Board of Directors and the applicant each shall
select a nominee, and the nominees shall select such special legal counsel.
7. Advances. (a) The Corporation shall pay for or
reimburse the reasonable expenses incurred by any applicant who is a party
to a proceeding in advance of final disposition of the proceeding or the
making of any determination under section 3 of this Article V if the
applicant furnishes the Corporation:
(i) a written statement of his good faith
belief that he has met the standard of conduct described in section 3; and
(ii) a written undertaking, executed personally
or on his behalf, to repay the advance if it is ultimately determined that
he did not meet such standard of conduct.
(b) The undertaking required by paragraph (ii) of
subsection (a) of this section 7 shall be an unlimited general obligation
of the applicant but need not be secured and may be accepted without
reference to financial ability to make repayment.
(c) Authorizations of payments under this section
shall be made by the persons specified in section 6 of this Article V.
8. Indemnification of Others. The Board of Directors is
hereby empowered, by majority vote of a quorum consisting of disinterested
Directors, to cause the Corporation to indemnify or contract to indemnify
any person not specified in section 2 or 3 of this Article V who was or is
a party to any proceeding, by reason of the fact that he is or was an
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, to the same extent as if such person were specified as
one to whom indemnification is granted in section 3 of this Article V. The
provisions of sections 4 through 7 of this Article V shall be applicable to
any indemnification provided hereafter pursuant to this section 8.
9. Insurance. The Corporation may purchase and maintain
insurance to indemnify it against the whole or any portion of the liability
assumed by it in accordance with this Article V and may also procure
insurance, in such amounts as the Board of Directors may determine, on
behalf of any person who is or was a director, officer, employee or agent
of the Corporation, or is serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
any liability asserted against or incurred by him in any such capacity or
arising from his status as such, whether or not the Corporation would have
power to indemnify him against such liability under the provisions of this
Article V.
10. Further Indemnity. Every reference herein to
directors, officers, employees or agents shall include former directors,
officers, employees and agents and their respective heirs, executors and
administrators. The indemnification hereby provided and provided hereafter
pursuant to the power conferred by this Article V on the Board of Directors
shall not be exclusive of any other rights to which any person may be
entitled, including any right under policies of insurance that may be
purchased and maintained by the Corporation or others, with respect to
claims, issues or matters in relation to which the Corporation would not
have the power to indemnify such person under the provisions of this
Article V. Such rights shall not prevent or restrict the power of the
Corporation to make or provide for any further indemnity, or provisions for
determining entitlement to indemnity, pursuant to one or more
indemnification agreements, bylaws, or other arrangements (including,
without limitation, creation of trust funds or security interests funded by
letters of credit or other means) approved by the Board of Directors
(whether or not any of the directors of the Corporation shall be a party to
or beneficiary of any such agreements, bylaws or arrangements); provided,
however, that any provision of such agreements, bylaws or other
arrangements shall not be effective if and to the extent that it is
determined to be contrary to this Article V or applicable laws of the
Commonwealth of Virginia.
11. Severability. Each provision of this Article V shall
be severable, and an adverse determination as to any such provision shall
in no way affect the validity of any other provision.
Exhibit 3 (b)
AMENDED AND RESTATED
BYLAWS
OF
OWENS & MINOR, INC.
ARTICLE I
Meetings of Shareholders
1.1 Places of Meetings. All meetings of the
shareholders shall be held at such place, either within or without
the Commonwealth of Virginia, as from time to time may be fixed by
the Board of Directors.
1.2 Annual Meetings. The annual meeting of the
shareholders, for the election of Directors and transaction of such
other business as may come before the meeting, shall be held in
each year on the fourth Tuesday in April, at 11:00 a.m., or on
such other business day that is not earlier than the first day
of March and not later than the last day of April, or at such
other time, as shall be fixed by the Board of Directors.
1.3 Special Meetings. A special meeting of the
shareholders for any purpose or purposes may be called at any
time by the Chairman of the Board, the President, or by a majority
of the Board of Directors. At a special meeting no business shall
be transacted and no corporate action shall be taken other than
that stated in the notice of the meeting.
1.4 Notice of Meetings. Written or printed notice stating
the place, day and hour of every meeting of the shareholders
and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be mailed not less than ten nor
more than sixty days before the date of the meeting to each
shareholder of record entitled to vote at such meeting, at his
address which appears in the share transfer books of the
Corporation. Such further notice shall be given as may be required
by law, but meetings may be held without notice if all the
shareholders entitled to vote at the meeting are present in person
or by proxy or if notice is waived in writing by those not
present, either before or after the meeting.
1.5 Quorum. Any number of shareholders together holding
at least a majority of the outstanding shares of capital stock
entitled to vote with respect to the business to be transacted,
who shall be present in person or represented by proxy at
any meeting duly called, shall constitute a quorum for the
transaction of business. If less than a quorum shall be in
attendance at the time for which a meeting shall have been called,
the meeting may be adjourned from time to time by a majority of the
shareholders present or represented by proxy without notice
other than by announcement at the meeting.
1.6 Voting. At any meeting of the shareholders each
shareholder of a class entitled to vote on any matter coming
before the meeting shall, as to such matter, have one vote, in
person or by proxy, for each share of capital stock of such class
standing in his name on the books of the Corporation on the
date, not more than seventy days prior to such meeting, fixed by
the Board of Directors as the record date for the purpose of
determining shareholders entitled to vote. Every proxy shall be in
writing, dated and signed by the shareholder entitled to vote or
his duly authorized attorney-in-fact.
1.7 Inspectors. An appropriate number of
inspectors for any meeting of shareholders may be appointed by the
Chairman of such meeting. Inspectors so appointed will open and
close the polls, will receive and take charge of proxies and
ballots, and will decide all questions as to the qualifications of
voters, validity of proxies and ballots, and the number of votes
properly cast.
ARTICLE II
DIRECTORS
2.1 General Powers. The property, affairs and business
of the Corporation shall be managed under the direction of
the Board of Directors, and, except as otherwise expressly
provided by law, the Articles of Incorporation or these
Bylaws, all of the powers of the Corporation shall be vested in
such Board.
2.2 Number of Directors. The number of Directors
constituting the Board of Directors shall be ten (10). The
Directors shall be divided into three (3) classes, each class
to be as nearly equal in number as possible.
2.3 Election and Removal of Directors; Quorum.
(a) At each annual meeting of shareholders, (i) the
number of Directors equal to the number in the class whose term
expires at the time of such meeting shall be elected to hold
office until the third succeeding annual meeting and until their
successors are elected, and (ii) any other vacancies then existing
shall be filled.
(b) Any Director may be removed from office at a
meeting called expressly for that purpose by the vote of
shareholders holding not less than a majority of the shares
entitled to vote at an election of Directors.
(c) Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of the majority of the
remaining Directors though less than a quorum of the Board, and
the term of office of any Director so elected shall expire at the
next shareholders' meeting at which directors are elected.
(d) A majority of the number of Directors fixed by
these Bylaws shall constitute a quorum for the transaction of
business. The act of a majority of Directors present at a meeting at
which a quorum is present shall be the act of the Board of
Directors. Less than a quorum may adjourn any meeting.
2.4 Meetings of Directors. An annual meeting of the
Board of Directors shall be held as soon as practicable after the
adjournment of the annual meeting of shareholders at such place as
the Board may designate. Other meetings of the Board of Directors
shall be held at places within or without the Commonwealth of
Virginia and at times fixed by resolution of the Board, or upon
call of the Chairman of the Board, the President or a majority of
the Directors. The Secretary or officer performing the Secretary's
duties shall give not less than twenty-four hours' notice by
letter, telegraph or telephone (or in person) of all meetings of the
Board of Directors, provided that notice need not be given of the
annual meeting or of regular meetings held at times and places
fixed by resolution of the Board. Meetings may be held at any time
without notice if all of the Directors are present, or if those
not present waive notice in writing either before or after the
meeting. The notice of meetings of the Board need not state the
purpose of the meeting.
2.5 Compensation. By resolution of the Board, Directors
may be allowed a fee and expenses for attendance at all meetings,
but nothing herein shall preclude Directors from serving the
Corporation in other capacities and receiving compensation for
such other services.
2.6 Eligibility for Service as a Director. No person
shall be elected or reelected as a Director if at the time of such
proposed election or re-election such person shall have attained
the age of 75 years. No person shall serve as a Director after
the annual meeting following his or her seventy-fifth (75th)
birthday; provided that the provisions of this sentence shall
not apply to any person elected as a director for a term beginning
prior to January 1, 1993, during such term. <PAGE>
2.7 Director Emeritus. The Board of Directors may from time
to time elect one or more Directors Emeritus. A Director Emeritus
may be named "Chairman Emeritus" or "Vice Chairman Emeritus" if
such person holds the office of Chairman or Vice Chairman of
the Corporation or any of its subsidiaries at the time of
retirement as a Director thereof. Each Director Emeritus shall
be elected for a term expiring on the date of the next annual
meeting of the Board. Directors Emeritus may attend meetings of
the Board of Directors but shall not be entitled to vote at
such meetings and shall not be considered "directors" for
purposes of these Bylaws or for any other purpose, except that
they shall be entitled to receive notice of all regular and special
meetings of the Board of Directors. Each Director Emeritus
shall be paid the same fees as members of the Board of Directors for
attendance at Board meetings.
ARTICLE III
COMMITTEES.
3.1 Executive Committee. The Board of Directors, by
resolution adopted by a majority of the number of Directors
fixed by these Bylaws, may elect an Executive Committee which
shall consist of not less than three Directors, including
the President. When the Board of Directors is not in session,
the Executive Committee shall have all power vested in the Board
of Directors by law, by the Articles of Incorporation, or by these
Bylaws, provided that the Executive Committee shall not have
power to (i) approve or recommend to shareholders action
that the Virginia Stock Corporation Act requires to be approved
by shareholders; (ii) fill vacancies on the Board or on any of its
committees; (iii) amend the Articles of Incorporation pursuant
to (Section Mark)13.1-706 of the Virginia Code; (iv) adopt,
amend, or repeat the Bylaws; (v) approve a plan of merger not
requiring shareholder approval; (vi) authorize or approve a
distribution, except according to a general formula or method
prescribed by the Board of Directors; or (vii) authorize or
approve the issuance or sale or contract for sale of shares, or
determine the designation and relative rights, preferences, and
limitations of a class or series of shares, other than within
limits specifically prescribed by the Board of Directors.
The Executive Committee shall report at the next regular or
special meeting of the Board of Directors all action that the
Executive Committee may have taken on behalf of the Board since
the last regular or special meeting of the Board of Directors.
3.2 Other Committees. The Board of Directors, by resolution
adopted by a majority of the number of Directors fixed by these
Bylaws, may establish such other standing or special committees of
the Board as it may deem advisable, consisting of not less than
two Directors; and the members, terms and authority of such
committees shall be as set forth in the resolutions establishing the
same.
3.3 Meetings. Regular and special meetings of any Committee
established pursuant to this Article may be called and held subject
to the same requirements with respect to time, place and notice
as are specified in these Bylaws for regular and special meetings of
the Board of Directors.
3.4 Quorum and Manner of Acting. A majority of the number of
members of any Committee shall constitute a quorum for the
transaction of business at such meeting. The action of a majority
of those members present at a Committee meeting at which a
quorum is present shall constitute the act of the Committee.
3.5 Term of Office. Members of any Committee shall be
elected as above provided and shall hold office until their
successors are elected by the Board of Directors or until such
Committee is dissolved by the Board of Directors.
3.6 Resignation and Removal. Any member of a Committee
may resign at any time by giving written notice of his intention to
do so to the President or the Secretary of the Corporation, or may
be removed, with or without cause, at any time by such vote of the
Board of Directors as would suffice for his election.
3.7 Vacancies. Any vacancy occurring in a Committee
resulting from any cause whatever may be filled by a majority of the
number of Directors fixed by these Bylaws.
ARTICLE IV
OFFICERS
4.1 Election of Officers: Terms. The officers of the
Corporation shall consist of a President, a Secretary and a
Treasurer. Other officers, including a Chairman of the Board,
one or more Vice Presidents (whose seniority and titles, including
Executive Vice Presidents and Senior Vice Presidents, may be
specified by the Board of Directors), and assistant and subordinate
officers, may from time to time be elected by the Board of
Directors. All officers shall hold office until the next annual
meeting of the Board of Directors and until their successors
are elected. The President shall be chosen from among the
Directors. Any two officers may be combined in the same person as
the Board of Directors may determine.
4.2 Removal of Officers: Vacancies. Any officer of the
Corporation may be removed summarily with or without cause, at any
time, by the Board of Directors. Vacancies may be filled by the
Board of Directors.
4.3 Duties. The officers of the Corporation shall have
such duties as generally pertain to their offices,
respectively, as well as such powers and duties as are prescribed
by law or are hereinafter provided or as from time to time shall be
conferred by the Board of Directors. The Board of Directors may
require any officer to give such bond for the faithful performance
of his duties as the Board may see fit.
4.4 Duties of the President. The President shall be the
chief executive officer of the Corporation and shall be primarily
responsible for the implementation of policies of the Board of
Directors. He shall have authority over the general management
and direction of the business and operations of the
Corporation and its divisions, if any, subject only to the
ultimate authority of the Board of Directors. He shall be a
Director and, except as otherwise provided in these Bylaws or in
the resolutions establishing such committees, he shall be ex
officer a member of all Committees of the Board. In the absence of
the Chairman and the Vice-Chairman of the Board, or if there are
no such officers, the President shall preside at all corporate
meetings. He may sign and execute in the name of the
Corporation share certificates, deeds, mortgages, bonds,
contracts or other instruments except in cases where the signing
and the execution thereof shall be expressly delegated by
these Bylaws to some other officer or agent of the Corporation or
shall be required by law otherwise to be signed or executed. In
addition, he shall perform all duties incident to the office of
the President and such other duties as from time to time may be
assigned to him by the Board of Directors.
4.5 Duties of the Vice Presidents. Each Vice President
(which term includes any Senior Executive Vice President,
Executive Vice President and Senior Vice President), if any,
shall have such powers and duties as may from time to time be
assigned to him by the President or the Board of Directors. Any
Vice President may sign and execute in the name of the
Corporation deeds, mortgages, bonds, contracts or other
instruments authorized by the Board of Directors, except where
the signing and execution of such documents shall be expressly
delegated by the Board of Directors or the President to some
other officer or agent of the Corporation or shall be required by
law or otherwise to be signed or executed.
4.6 Duties of the Treasurer. The Treasurer shall have
charge of and be responsible for all funds, securities, receipts
and disbursements of the Corporation, and shall deposit all
monies and securities of the Corporation in such banks and
depositories as shall be designated by the Board of Directors. He
shall be responsible (i) for maintaining adequate financial
accounts and records in accordance with generally accepted
accounting practices; (ii) for the preparation of appropriate
operating budgets and financial statements; (iii) for the
preparation and filing of all tax returns required by law; and (iv)
for the performance of all duties incident to the office of
Treasurer and such other duties as from time to time may be
assigned to him by the Board of Directors or the President. The
Treasurer may sign and execute in the name of the
Corporation share certificates, deeds, mortgages, bonds,
contracts or other instruments, except in cases where the
signing and the execution thereof shall be expressly delegated by
the Board of Directors or by these Bylaws to some other officer
or agent of the Corporation or shall be required by law or
otherwise to be signed or executed.
4.7 Duties of the Secretary. The Secretary shall
act as secretary of all meetings of the Board of Directors
and shareholders of the Corporation. When requested, he
shall also act as secretary of the meetings of the
committees of the Board. He shall keep and preserve the
minutes of all such meetings in permanent books. He shall
see that all notices required to be given by the Corporation
are duly given and served; shall have custody of the seal
of the Corporation and shall affix the seal or cause it to
be affixed by facsimile or otherwise to all share
certificates of the Corporation and to all documents the
execution of which on behalf of the Corporation under its
corporate seal is required in accordance with law or the
provisions of these Bylaws; shall have custody of all deeds,
leases, contracts and other important corporate documents;
shall have charge of the books, records and papers of the
Corporation relating to its organization and management as a
Corporation; shall see that all reports, statements and
other documents required by law (except tax returns) are
properly filed; and shall in general perform all the duties
incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the Board of
Directors or the President.
4.8 Compensation. The Board of Directors shall have
authority to fix the compensation of all officers of the
Corporation.
ARTICLE V
CAPITAL STOCK
5.1 Certificates. The shares of capital stock of the
Corporation shall be evidenced by certificates in forms prescribed
by the Board of Directors and executed in any manner permitted
by law and stating thereon the information required by law.
Transfer agents and/or registrars for one or more classes of
shares of the Corporation may be appointed by the Board of
Directors and may be required to countersign certificates
representing shares of such class or classes. If any officer
whose signature or facsimile thereof shall have been used on a
share certificate shall for any reason cease to be an officer of the
Corporation and such certificate shall not then have been
delivered by the Corporation, the Board of Directors may
nevertheless adopt such certificate and it may then be issued and
delivered as though such person had not ceased to be an officer
of the Corporation.
5.2 Lost, Destroyed and Mutilated Certificates. Holders
of the shares of the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of the
certificate therefor, and the Board of Directors may in its
discretion cause one or more new certificates for the same number
of shares in the aggregate to be issued to such shareholder upon
the surrender of the mutilated certificate or upon satisfactory
proof of such loss or destruction, and the deposit of a bond in
such form and amount and with such surety as the Board of
Directors may require.
5.3 Transfer of Shares. The shares of the
Corporation shall be transferable or assignable only on the books
of the Corporation by the holder in person or by attorney on
surrender of the certificate for such shares duly endorsed and,
if sought to be transferred by attorney, accompanied by a written
power of attorney to have the same transferred on the books of
the Corporation. The Corporation will recognize, however, the
exclusive right of the person registered on its books as the owner
of shares to receive dividends or other distributions and to vote as
such owner. To the extent that any provision of the Amended and
Restated Rights Agreement between the Corporation and
Wachovia Bank of North Carolina, N.A., as Rights Agent, dated
as of May 10, 1994, is deemed to constitute a restriction
on the transfer of any securities of the Corporation,
including, without limitation, the Rights, as defined therein,
such restriction is hereby authorized by these Bylaws.
5.4 Fixing Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled
to receive payment of any dividend or other distribution, or
in order to make a determination of shareholders for any
other proper purpose, the Board of Directors may fix in advance
a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy
days prior to the date on which the particular action, requiring
such determination of shareholders, is to be taken. If no record
date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders, or
shareholders entitled to receive payment of a dividend or
other distribution, the date on which notices of the meeting are
mailed or the date on which the resolution of the Board of
Directors declaring such dividend or other distribution is
adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made
as provided in this section, such determination shall apply
to any adjournment thereof unless the Board of Directors fixes a
new record date, which it shall do if the meeting is adjourned to
a date more than 120 days after the date fixed for the original
meeting.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 Seal. The seal of the Corporation shall consist
of a circular design with the words "Owens & Minor, Inc." around the
top margin thereof, "Richmond, Virginia" around the lower margin
thereof and the word "Seal" in the center thereof.
6.2 Fiscal Year. The fiscal year of the
Corporation shall end on such date and shall consist of such
accounting periods as may be fixed by the Board of
Directors.
6.3 Checks, Notes and Drafts. Checks, notes, drafts
and other orders for the payment of money shall be signed by such
persons as the Board of Directors from time to time may
authorize. When the Board of Directors so authorizes, however,
the signature of any such person may be a facsimile.
6.4 Amendment of Bylaws. Unless proscribed by the Articles
of Incorporation, these Bylaws may be amended or altered at any
meeting of the Board of Directors by affirmative vote of a
majority of the number of Directors fixed by these Bylaws. The
shareholders entitled to vote in respect of the election of
Directors, however, shall have the power to rescind, amend, alter
or repeal any Bylaws and to enact Bylaws which, if expressly so
provided, may not be amended, altered or repealed by the Board of
Directors.
6.5 Voting of Shares Held. Unless otherwise provided
by resolution of the Board of Directors or of the Executive
Committee, if any, the President may cast the vote which the
Corporation may be entitled to cast as a shareholder or
otherwise in any other corporation, any of whose securities may be
held by the Corporation, at meetings of the holders of the shares
or other securities of such other corporation, or to consent in
writing to any action by any such other corporation, or in lieu
thereof, from time to time appoint an attorney or attorneys or
agent or agents of the Corporation, in the name and on behalf
of the Corporation, to cast such votes or give such consents. The
President shall instruct any person or persons so appointed as to
the manner of casting such votes or giving such consent and may
execute or cause to be executed
on behalf of the Corporation, and under its corporate seal or
otherwise, such written proxies, consents, waivers or other
instruments as may be necessary or proper.
ARTICLE VII
EMERGENCY BYLAWS
7.1 The Emergency Bylaws provided in this Article VII shall
be operative during any emergency, notwithstanding any different
provision in the preceding Articles of these Bylaws or in the
Articles of Incorporation of the Corporation or in the
Virginia Stock Corporation Act (other than those provisions
relating to emergency bylaws). An emergency exists if a quorum
of the Corporation's Board of Directors cannot readily be
assembled because of some catastrophic event. To the extent
not inconsistent with these Emergency Bylaws, the Bylaws provided
in the preceding Articles shall remain in effect during such
emergency and upon the termination of such emergency the Emergency
Bylaws shall cease to be operative unless and until another such
emergency shall occur.
7.2 During any such emergency:
(a) Any meeting of the Board of Directors may be
called by any officer of the Corporation or by any Director. The
notice thereof shall specify the time and place of the meeting.
To the extent feasible, notice shall be given in accord with Section
2.4 above, but notice may be given only to such of the Directors as
it may be feasible to reach at the time, by such means as may be
feasible at the time, including publication or radio, and at a
time less than twenty-four hours before the meeting if
deemed necessary by the person giving notice. Notice shall be
similarly given, to the extent feasible, to the other persons
referred to in (b) below.
(b) At any meeting of the Board of
Directors, a quorum shall consist of a majority of the number
of Directors fixed at the time by these Bylaws. If the Directors
present at any particular meeting shall be fewer than the
number required for such quorum, other persons present as
referred to below, to the number necessary to make up such
quorum, shall be deemed Directors for such particular meeting as
determined by the following provisions and in the following order
of priority:
(i) Vice-Presidents not already serving as
Directors, in the order of their seniority of first election
to such offices, or if two or more shall have been first elected to
such offices on the same day, in the order of their seniority in
age;
(ii) All other officers of the
Corporation in the order of their seniority of first
election to such offices, or if two or more shall have been first
elected to such offices on the same day, in the order of their
seniority in age; and
(iii) Any other persons that are
designated on a list that shall have been approved by the Board
of Directors before the emergency, such persons to be taken in
such order of priority and subject to such conditions as may
be provided in the resolution approving the list.
(c) The Board of Directors, during as well as
before any such emergency, may provide, and from time to time
modify, lines of succession in the event that during such an
emergency any or all officers or agents of the Corporation shall
for any reason be rendered incapable of discharging their duties.
(d) The Board of Directors, during as well as
before any such emergency, may, effective in the emergency,
change the principal office, or designate several alternative
offices, or authorize the officers so to do.
7.3 No officer, Director or employee shall be liable
for action taken in good faith in accordance with these Emergency
Bylaws.
7.4 These Emergency Bylaws shall be subject to repeal or
change by further action of the Board of Directors or by action of
the shareholders, except that no such repeal or change shall modify
the provisions of the next preceding paragraph with regard to
action or inaction prior to the time of such repeal or change.
Any such amendment of these Emergency Bylaws may make any further or
different provision that may be practical and necessary for the
circumstances of the emergency.
Exhibit 4(b)
AMENDMENT TO
OWENS & MINOR, INC.
0% SUBORDINATED NOTE
DUE MAY 31, 1997
This Amendment dated as of April 29, 1994 to the 0%
Subordinated Note Due May 31, 1997 in the principal amount
of $11,500,000 issued by Owens & Minor, Inc., a Virginia
Corporation ("O&M"), to Hygeia Limited, a Cayman Islands
corporation ("Hygeia") or registered assigns (the "0%
Subordinated Note") is made by and between O&M and Hygeia.
RECITALS
A. Pursuant to an Agreement of Exchange, dated as of
December 22, 1993, as amended and restated on March 31,
1994, by and among O&M, O&M Holding, Inc. ("O&M Holding"),
Stuart Medical, Inc. ("SMI") and the principal shareholders
of SMI (the "Exchange Agreement"), at the Effective Time (as
such term is defined in the Exchange Agreement), each issued
and outstanding share of common stock of O&M will be
exchanged for one share of common stock of O&M Holding (the
"Exchange") and O&M will become a wholly-owned subsidiary of
O&M Holding.
B. The 0% Subordinated Note provides that it is
subordinate in right of payment to certain indebtedness of
O&M.
C. The parties wish to amend the 0% Subordinated Note to
make it subordinate in right of payment to certain
indebtedness of O&M Holding as well as O&M.
NOW THEREFORE, the parties hereby agree as follows:
1. Amendment. The subheading "Subordination" and the
provisions thereunder shall be deleted and the following
shall be substituted therefore:
Subordination. This Note is subordinated and
subject in right of payment to the payment, in
accordance with the terms of, (1) indebtedness
of O&M Holding provided for in the Credit
Agreement dated as of April 29, 1994 among O&M
Holding, Inc., certain of its subsidiaries as
guarantors, the banks identified therein,
NationsBank of North Carolina, N.A., as Agent,
Chemical Bank, N.A. and Crestar Bank, as Co-
Agents, and NationsBank of North Carolina, N.A.,
as Administrative Agent (the "Credit
Agreement"), (2) any indebtedness incurred or
issued by the Company or O&M Holding to replace
or refinance indebtedness under the Credit
Agreement ("Refinanced Indebtedness") and (3)
indebtedness of the Company or O&M Holding owing
to any commercial bank or other lending
institution that may hereafter extend term,
revolving credit or line of credit financing or
similar financing (a "Bank Loan"); provided,
however, that nothing herein shall be construed
to impair the ability of the Company to pay to
the registered owner hereof any installments of
principal or interest owing hereunder until such
time as there shall have occurred a default with
respect to the Credit Agreement, Refinanced
Indebtedness or a Bank Loan or any evidence of
indebtedness or collateral document relating to
the foregoing. In addition, nothing herein is
intended to or shall impair as between the
Company, its creditors (other than lenders with
respect to the indebtedness owing pursuant to
the Credit Agreement, holders of any Refinanced
Indebtedness or any lending institution with
respect to a Bank Loan), and the registered
owner of this Note, the obligation of the
Company, which shall be absolute and
unconditional, to pay to the registered owner of
this Note, the principal of and interest on this
Note, as and when the same shall become due and
payable in accordance with its terms, or to
affect the relative rights of the registered
owner of this Note, and creditors of the Company
or O&M Holding (other than lenders with respect
to the indebtedness owing pursuant to the Credit
Agreement, holders of any Refinanced
Indebtedness or any lending institution with
respect to a Bank Loan), nor shall anything
herein or therein prevent the registered owner
of this Note from exercising all remedies
otherwise permitted by applicable law upon
default.
2. Effective Date of Amendment. This Amendment shall
become effective at and as of the Effective Time; provided,
however, that if the Exchange is never consummated, this
Amendment shall become void and of no further force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be executed as of the date first written
above.
OWENS & MINOR, INC.
By:/s/
Title:
HYGEIA LIMITED
By:/s/
Title:
Exhibit 4(c)
Owens & Minor, Inc.
9.10% Convertible Subordinated Note
Due May 31, 1996
$3,332,912 May 10, 1994
FOR VALUE RECEIVED, the undersigned, Owens & Minor,
Inc. (formerly, O&M Holding, Inc.), a Virginia corporation
(herein called the "Company"), hereby promises to pay to
Hygeia Limited, a Cayman Islands corporation or registered
assigns (hereinafter called the "Payee"), the principal sum
of Three Million Three Hundred Thirty-two Thousand Nine
Hundred Twelve Dollars ($3,332,912), together with interest
from the date hereof (computed on the basis of the actual
number of days elapsed and a 365-day year) at the rate of
nine and one-tenth per centum (9 1/10%) per annum,
compounded semiannually, on the principal amount from time
to time remaining unpaid hereof at the Company's offices in
Richmond, Virginia or at such other place as the Payee may
from time to time in writing designate. Interest and
principal shall be payable in lawful money of the United
States of America, as follows:
(a) The entire principal amount of this Note
together with interest accrued and unpaid thereon shall be
paid on May 31, 1996.
(b) Interest ("Total Interest") shall accrue daily
from the date hereof at the rate of 9.10% per annum,
compounded semiannually, on the principal amount outstanding
from time to time. Interest ("Current Interest") at the
rate of 6.82586% per annum shall be payable in arrears semi-
annually on November 30 and May 31 of each year commencing
May 31, 1994 and continuing thereafter until the principal
amount hereof shall have been repaid as provided herein or
this Note shall have been redeemed or converted in its
entirety as hereinafter provided, with the difference
between the Total Interest and the Current Interest being
payable at maturity on May 31, 1996.
This Note was issued on May 10, 1994 with original
issue discount ("OID") for federal income tax purposes. The
amount of OID is approximately $167,088, and equals the
difference between the Total Interest and the Current
Interest to the maturity date of May 31, 1996.
This Note contains provisions entitling the registered
owner hereof to convert all or any part of the principal
balance of the Note into an aggregate of 577,986.95 shares
(subject to adjustment as set forth herein) of the Company's
Common Stock (as hereinafter defined).
Subordination
This Note is subordinated and subject in right of
payment to the payment, in accordance with the terms of, (1)
indebtedness of the Company provided for in the Credit
Agreement dated as of April 29, 1994 among O&M Holding,
Inc., certain of its subsidiaries as guarantors, the banks
identified therein, NationsBank of North Carolina, N.A., as
Agent, Chemical Bank, N.A. and Crestar Bank, as Co-Agents
and NationsBank of North Carolina, N.A., as Administrative
Agent (the "Credit Agreement"), (2) any indebtedness
incurred or issued by the Company to replace or refinance
indebtedness under the Credit Agreement ("Refinanced Debt")
and (3) indebtedness of the Company owing to any commercial
bank or other lending institution that may hereafter extend
term, revolving credit or line of credit financing or
similar financing (a "Bank Loan"); provided, however, that
nothing herein shall be construed to impair the ability of
the Company to pay to the registered owner hereof any
installments of principal or interest owing hereunder until
such time as there shall have occurred a default with
respect to the Credit Agreement, Refinanced Debt, a Bank
Loan or any evidence of indebtedness or collateral document
relating to the foregoing. In addition, nothing herein is
intended to or shall impair as between the Company, its
creditors (other than lenders with respect to the
indebtedness owing pursuant to the Credit Agreement, holders
of any Refinanced Debt or any lending institution with
respect to a Bank Loan), and the registered owner of this
Note, the obligation of the Company, which shall be absolute
and unconditional, to pay to the registered owner of this
Note, the principal of and interest on this Note, as and
when the same shall become due and payable in accordance
with its terms, or to affect the relative rights of the
registered owner of this note, and creditors of the Company
(other than lenders with respect to the indebtedness owing
pursuant to the Credit Agreement, holders of any Refinanced
Debt or any lending institution with respect to a Bank
Loan), nor shall anything herein or therein prevent the
registered owner of this Note from exercising all remedies
otherwise permitted by applicable law upon default.
Redemption
Subject to the right of conversion into the Company's
Common Stock as herein provided, this Note is subject to
full or partial redemption from time to time at any time at
the option of the Company as follows:
(1) The Company shall redeem the Note, by payment,
in the case of full redemption, of 105% of the principal
amount outstanding, together with all Current Interest
accrued and unpaid until the date of redemption, and in the
case of partial redemption hereof, payment shall be in the
minimum amount of Ten Thousand Dollars ($10,000), and shall
be applied first to payment of any accrued Current Interest
owing hereunder, and of the remainder of any payment in
partial redemption, (i) 95.226% shall be applied to payment
of principal hereof and (ii) 4.774% shall be applied to
payment of the difference between Total Interest and Current
Interest.
(2) The Company shall give the Payee thirty (30)
days prior written notice of its intent to redeem all or any
portion of this Note.
Conversion
The registered owner of this Note is hereby given the
right at any time before May 15, 1996, to convert all or a
portion of the unpaid principal amount of this Note (and the
right to the difference between Total Interest and Current
Interest on the converted principal amount) as such
registered owner desires to convert, from time to time, into
fully paid and nonassessable shares of the Common Stock,
$2.00 par value per share, of the Company (the "Common
Stock") as follows:
(1) Conversion Price. The registered owner of this
Note shall receive one share of Common Stock for each
$5.7664139 (the "Conversion Price") in principal amount of
this Note so converted, subject to adjustment as set forth
in (3) below.
(2) Procedure for Conversion. In order to exercise
the conversion privilege, the registered owner shall
surrender this Note to the Company at its main office in
Richmond, Virginia, accompanied by written notice to the
Company that such owner elects to convert the entire or some
designated portion of this Note. Such notice shall also
state the name or names (with addresses) in which the
certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. As promptly
as practicable after the receipt of such notice and
surrender of this Note as aforesaid, the Company shall issue
and deliver to the registered owner, or as otherwise
specified on his written order, a certificate or
certificates for the number of full shares of Common Stock
issuable upon the conversion of this Note (or specified
portion hereof), together with payment of Current Interest
at the aforesaid Current Interest rate on the principal
amount of this Note so converted, accrued and unpaid through
the effective date of the conversion. Such conversion shall
be deemed to have been effected at the close of business on
the date on which such notice shall have been received by
the Company and this Note shall have been surrendered as
aforesaid. A proportionate number of the shares of Common
Stock issued by the Company upon conversion shall be
attributable to, and constitute full payment of, the
difference between Total Interest and Current Interest on
the principal amount converted. If this Note is converted
in part only, upon such conversion the Company shall execute
and deliver to the registered holder, at the expense of the
Company, a new Note or Notes in principal amount equal to
the unconverted principal amount of this Note. No
fractional shares shall be issued upon conversion of any
Note and any portion of the principal hereof that would
otherwise be convertible into a fractional share shall be
paid in cash at the rate of $5.7664139 per full share.
(3) Adjustment. The Conversion Price set forth in
(1) above shall be subject to appropriate adjustment to
reflect any stock split, reverse stock split, stock dividend
or similar event affecting the aggregate number of shares of
Common Stock outstanding.
(4) Priority of Conversion Privilege. The right of
the Company to make payments on the principal amount of this
Note shall be subject at all times to the right of the
Payee, at any time before the date on which payments of
principal are actually made, whether pursuant to the
exercise by the Company of its right of redemption or
otherwise, to convert this Note or any portion hereof into
Common Stock as set forth herein.
The Company shall at all times reserve and keep
available a number of its authorized but unissued shares of
Common Stock sufficient to permit the exercise in full by
the registered owners of all of the Notes of their
respective conversion rights thereunder.
Sale of Note
This Note has not been registered under the 1933 Act
or under the securities laws of any state. This Note, when
issued, may not be sold, transferred, pledged or
hypothecated in the absence of (1) an effective registration
statement for the Note under the 1933 Act, and such
registration or qualification as may be necessary under the
securities laws of any state, or (2) an opinion of counsel
in form and substance reasonably satisfactory to the Company
that such registration or qualification is not required.
This Note shall be registered on books of the Company
that shall be kept at its principal office for that purpose,
and shall be transferable only on such books by the
registered owner hereof in person or by duly authorized
attorney upon surrender of this Note properly endorsed, and
only in compliance with the next preceding paragraph hereof.
Events of Default; Remedies
(a) If any one or more of the following events shall
occur for any reason whatsoever (whether such occurrence
shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or
order of any court or any order, rule or regulation of any
administrative or other governmental body), it shall be
deemed an Event of Default hereunder:
(1) default by the Company in the due and punctual
payment of the principal, interest, or both on this Note
when and as the same shall become due and payable, whether
at maturity or at a date fixed for prepayment or by
acceleration or otherwise (a "Payment Default");
(2) the Company's becoming insolvent or unable to
meet its obligations as they mature, making a general
assignment for the benefit of creditors, or consenting to
the appointment of a trustee or a receiver, or admitting in
writing its inability to pay its debts as they mature;
(3) the appointment of a trustee or receiver for the
Company or for a substantial part of the properties of the
Company without the consent of the Company and such trustee
or receiver not being discharged within sixty (60) days; and
(4) the institution of bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings by or
against the Company and, if instituted against it, the same
being consented to by the Company or remaining undismissed
for a period of sixty (60) days; and
(5) (i) an event of default, as defined in any
indenture, instrument or agreement evidencing the
indebtedness under the Credit Agreement, or any Bank Loan or
the 0% Subordinated Note issued by Owens & Minor, Inc. (now
named Owens & Minor Medical, Inc.), due May 31, 1997 in the
principal amount of $11,500,000, shall happen and be
continuing and such indebtedness shall have been accelerated
so that the same shall be or become due and payable prior to
the date on which the same would otherwise have become due
and payable, or
(ii) a default in the payment when due of any
amount due under any instrument or agreement under which the
Company shall hereafter have outstanding at least $1,000,000
aggregate principal amount of indebtedness for borrowed
money shall happen and be continuing, provided that if any
such event of default under any such indenture, instrument
or agreement shall be remedied or cured by the Company, such
acceleration shall be rescinded or annulled or such event
of default shall be waived by the holders of such indebtedness,
then the Event of Default hereunder by reason thereof shall be
deemed likewise to have been thereupon remedied, cured or
waived and any acceleration hereunder rescinded and annulled
without further action upon the part of either the Company
or the holder hereof.
(b) In case an Event of Default shall occur, and in
the case of a Payment Default, shall be continuing for more
than ten days, this Note may be declared due and payable,
whereupon the maturity of the then unpaid principal balance
of the Note shall be accelerated and the same and all
Current Interest accrued and unpaid thereon, together with
the difference between the Total Interest and Current
Interest on such principal balance through the maturity
date, shall forewith become due and payable without
presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, anything contained herein
to the contrary notwithstanding, and the holder may exercise
and shall have any and all remedies accorded by law.
Miscellaneous
Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this
Note, and (in case of loss, theft or destruction) of
indemnity satisfactory to it, and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Note, if mutilated,
the Company will make and deliver a new Note of like tenor
in the principal amount of this Note then outstanding in
lieu of such Note. Any Note so made and delivered shall be
dated as of the date to which interest shall have been paid
on this Note when lost, stolen, destroyed or mutilated.
The terms of this Note shall be governed by and
construed in accordance with the laws of the Commonwealth of
Virginia.
This Note shall not be valid or obligatory for any
purpose until authenticated by the execution hereof by the
President or a Senior Vice President of the Company and
registered upon the books of the Company as hereinabove
provided.
IN WITNESS WHEREOF, Owens & Minor, Inc., a Virginia
corporation, has caused this note to be signed in its
corporate name by its President or a Senior Vice President,
by authority duly given, all as of the day and year first
above written.
OWENS & MINOR, INC.
By /s/
President
CREDIT AGREEMENT
Dated as of April 29, 1994
among
O&M HOLDING, INC.
(to be renamed Owens & Minor, Inc. after the Initial Funding Date),
as Borrower,
AND
CERTAIN OF ITS SUBSIDIARIES IDENTIFIED HEREIN
as Guarantors
THE BANKS IDENTIFIED HEREIN,
NATIONSBANK OF NORTH CAROLINA, N.A.,
as Agent,
CHEMICAL BANK
and
CRESTAR BANK,
as Co-Agents,
AND
NATIONSBANK OF NORTH CAROLINA, N.A.,
as Administrative Agent
TABLE OF CONTENTS
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS . . . . . . . - 1 -
1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . - 1 -
1.02 Computation of Time Periods . . . . . . . . . . . . . . - 15 -
1.03 Accounting Terms . . . . . . . . . . . . . . . . . . . . - 15 -
SECTION 2
CREDIT FACILITIES . . . . . . . . . . - 15 -
2.01 Revolving Loan Commitment . . . . . . . . . . . . . . . - 15 -
2.02 Committed Revolving Loan Advances . . . . . . . . . . . - 16 -
2.03 Conversion . . . . . . . . . . . . . . . . . . . . . . . - 17 -
2.04 Repayment of the Committed Revolving Loans . . . . . . . - 18 -
2.05 Interest on Committed Revolving Loans . . . . . . . . . - 18 -
2.06 Committed Revolving Notes . . . . . . . . . . . . . . . - 19 -
2.07 Swingline Loan Subfacility. . . . . . . . . . . . . . - 19 -
2.08 Competitive Loan Subfacility . . . . . . . . . . . . . . - 21 -
2.09 Conditions of Lending . . . . . . . . . . . . . . . . . - 23 -
2.10 Termination of Commitments . . . . . . . . . . . . . . . - 24 -
2.11 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . - 24 -
2.12 Prepayments . . . . . . . . . . . . . . . . . . . . . . - 25 -
2.13 Increased Costs, Illegality, etc . . . . . . . . . . . . - 26 -
2.14 Capital Adequacy . . . . . . . . . . . . . . . . . . . . - 27 -
2.15 Compensation . . . . . . . . . . . . . . . . . . . . . . - 27 -
2.16 Net Payments . . . . . . . . . . . . . . . . . . . . . . - 28 -
2.17 Change of Lending Office; Right to Substitute Lender . . - 28 -
2.18 Payments and Computations . . . . . . . . . . . . . . . - 29 -
2.19 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . - 29 -
2.20 Sharing of Payments . . . . . . . . . . . . . . . . . . - 29 -
2.21 Foreign Lenders . . . . . . . . . . . . . . . . . . . . - 30 -
SECTION 3
GUARANTEE . . . . . . . . . . . . - 30 -
3.01 The Guarantee . . . . . . . . . . . . . . . . . . . . . - 30 -
3.02 Obligations Unconditional . . . . . . . . . . . . . . . - 31 -
3.03 Reinstatement . . . . . . . . . . . . . . . . . . . . . - 31 -
3.04 Certain Additional Waivers . . . . . . . . . . . . . . . - 32 -
3.05 Remedies . . . . . . . . . . . . . . . . . . . . . . . . - 32 -
3.06 Continuing Guarantee . . . . . . . . . . . . . . . . . . - 32 -
3.07 Limitation of Guarantee . . . . . . . . . . . . . . . . - 32 -
SECTION 4
CONDITIONS PRECEDENT . . . . . . . . . - 32 -
4.01 Conditions to Closing . . . . . . . . . . . . . . . . . - 32 -
4.02 Conditions to Initial Loan Advance . . . . . . . . . . . - 32 -
SECTION 5
- i -
REPRESENTATIONS AND WARRANTIES . . . . . . . - 34 -
5.01 Organization and Good Standing . . . . . . . . . . . . . - 34 -
5.02 Due Authorization . . . . . . . . . . . . . . . . . . . - 34 -
5.03 No Conflicts . . . . . . . . . . . . . . . . . . . . . . - 34 -
5.04 Consents . . . . . . . . . . . . . . . . . . . . . . . . - 34 -
5.05 Enforceable Obligations . . . . . . . . . . . . . . . . - 35 -
5.06 Financial Condition . . . . . . . . . . . . . . . . . . - 35 -
5.07 No Default . . . . . . . . . . . . . . . . . . . . . . . - 35 -
5.08 Liens . . . . . . . . . . . . . . . . . . . . . . . . . - 35 -
5.09 Indebtedness . . . . . . . . . . . . . . . . . . . . . . - 35 -
5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . - 35 -
5.11 Material Agreements . . . . . . . . . . . . . . . . . . - 35 -
5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . - 35 -
5.13 Compliance with Law . . . . . . . . . . . . . . . . . . - 36 -
5.14 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . - 36 -
5.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . - 36 -
5.16 Use of Proceeds; Margin Stock . . . . . . . . . . . . . - 36 -
5.17 Government Regulation . . . . . . . . . . . . . . . . . - 36 -
5.18 Hazardous Substances . . . . . . . . . . . . . . . . . . - 36 -
5.19 Patents, Franchises, etc . . . . . . . . . . . . . . . . - 37 -
5.20 Solvency . . . . . . . . . . . . . . . . . . . . . . . . - 37 -
5.21 Investments . . . . . . . . . . . . . . . . . . . . . . - 37 -
SECTION 6
AFFIRMATIVE COVENANTS . . . . . . . . . - 37 -
6.01 Information Covenants . . . . . . . . . . . . . . . . . - 37 -
6.02 Preservation of Existence and Franchises . . . . . . . . - 39 -
6.03 Books, Records and Inspections . . . . . . . . . . . . . - 39 -
6.04 Compliance with Law . . . . . . . . . . . . . . . . . . - 40 -
6.05 Payment of Taxes and Other Indebtedness . . . . . . . . - 40 -
6.06 Insurance . . . . . . . . . . . . . . . . . . . . . . . - 40 -
6.07 Maintenance of Property . . . . . . . . . . . . . . . . - 40 -
6.08 Performance of Obligations . . . . . . . . . . . . . . . - 40 -
6.09 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . - 40 -
6.10 Use of Proceeds . . . . . . . . . . . . . . . . . . . . - 41 -
6.11 Financial Covenants . . . . . . . . . . . . . . . . . . - 41 -
6.12 Additional Subsidiaries . . . . . . . . . . . . . . . . - 42 -
6.13 Interest Rate Protection Agreements . . . . . . . . . . . - 42 -
SECTION 7
NEGATIVE COVENANTS . . . . . . . . . . - 43 -
7.01 Indebtedness . . . . . . . . . . . . . . . . . . . . . . - 43 -
7.02 Liens . . . . . . . . . . . . . . . . . . . . . . . . . - 44 -
7.03 Guaranty Obligations . . . . . . . . . . . . . . . . . . - 44 -
7.04 Nature of Business . . . . . . . . . . . . . . . . . . . - 44 -
7.05 Consolidation, Merger, Sale or Purchase of Assets, etc. - 44 -
7.06 Advances, Investments and Loans . . . . . . . . . . . . - 45 -
7.07 Prepayments of Indebtedness, etc . . . . . . . . . . . . - 45 -
7.08 Transactions with Affiliates . . . . . . . . . . . . . . - 45 -
7.09 Ownership of Subsidiaries . . . . . . . . . . . . . . . - 45 -
- ii -
7.10 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . - 46 -
7.11 Subsidiary Dividends . . . . . . . . . . . . . . . . . . - 46 -
SECTION 8
EVENTS OF DEFAULT . . . . . . . . . . - 46 -
8.01 Events of Default . . . . . . . . . . . . . . . . . . . - 46 -
8.02 Acceleration; Remedies . . . . . . . . . . . . . . . . . - 48 -
SECTION 9
AGENCY PROVISIONS . . . . . . . . . . - 48 -
9.01 Appointment . . . . . . . . . . . . . . . . . . . . . . - 48 -
9.02 Delegation of Duties . . . . . . . . . . . . . . . . . . - 49 -
9.03 Exculpatory Provisions . . . . . . . . . . . . . . . . . - 49 -
9.04 Reliance on Communications . . . . . . . . . . . . . . . - 49 -
9.05 Notice of Default . . . . . . . . . . . . . . . . . . . - 50 -
9.06 Non-Reliance on Agents and Other Banks . . . . . . . . . - 50 -
9.07 Indemnification . . . . . . . . . . . . . . . . . . . . - 51 -
9.08 Agents in their Individual Capacity . . . . . . . . . . - 51 -
9.09 Successor Agent . . . . . . . . . . . . . . . . . . . . - 51 -
SECTION 10
MISCELLANEOUS . . . . . . . . . . . - 52 -
10.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . - 52 -
10.02 Right of Set-Off . . . . . . . . . . . . . . . . . . . - 52 -
10.03 Benefit of Agreement . . . . . . . . . . . . . . . . . - 53 -
10.04 No Waiver; Remedies Cumulative . . . . . . . . . . . . - 54 -
10.05 Payment of Expenses, etc . . . . . . . . . . . . . . . - 55 -
10.06 Amendments, Waivers and Consents . . . . . . . . . . . - 55 -
10.07 Counterparts . . . . . . . . . . . . . . . . . . . . . - 55 -
10.08 Headings . . . . . . . . . . . . . . . . . . . . . . . - 56 -
10.09 Survival . . . . . . . . . . . . . . . . . . . . . . . - 56 -
10.10 Governing Law; Submission to Jurisdiction; Venue . . . - 56 -
10.11 Severability . . . . . . . . . . . . . . . . . . . . . - 56 -
10.12 Entirety . . . . . . . . . . . . . . . . . . . . . . . - 56 -
10.13 Survival . . . . . . . . . . . . . . . . . . . . . . . - 57 -
SCHEDULES
Schedule 2.01(a) Schedule of Banks and Commitments
Schedule 2.02(1) Form of Notice of Borrowing
Schedule 2.02(2) Form of Notice of Conversion
Schedule 2.06 Form of Committed Revolving Note
Schedule 2.07(d) Form of Swingline Note
Schedule 2.08(b) Form of Competitive Bid Request
Schedule 2.08(b)-2 Form of Notice of Competitive Bid Request
Schedule 2.08(c) Form of Competitive Bid
Schedule 2.08(d) Form of Competitive Bid Accept/Reject Letter
Schedule 2.08(h) Form of Competitive Loan Note
- iii -
Schedule 4.01(b)(1) Form of Legal Opinion of Drew St.J. Carneal, Esq.
Schedule 4.01(b)(2) Form of Legal Opinion of Hunton & Williams
Schedule 5.09 Schedule of Outstanding Indebtedness
Schedule 5.10 Schedule of Legal Proceedings
Schedule 5.15 Schedule of Subsidiaries
Schedule 5.18 Schedule of Environmental Exceptions
Schedule 6.01(c) Schedule of Borrowing Base Certificate
Schedule 6.01(d) Form of Officer's Compliance Certificate
Schedule 6.06 Schedule of Insurance
Schedule 6.12 Form of Joinder Agreement
Schedule 7.02 Schedule of Permitted Liens
Schedule 10.03 Form of Assignment and Acceptance Agreement
- iv -
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of April 29, 1994 (the "Credit
Agreement"), is by and among O&M HOLDING, INC., a Virginia corporation,
which is expected to change its name to Owens & Minor, Inc. after the
Initial Funding Date (the "Borrower"), CERTAIN OF ITS SUBSIDIARIES
identified as a "Guarantor" in the definition thereof and on the signature
pages hereto (hereinafter sometimes referred to individually as a
"Guarantor" and collectively as the "Guarantors"), the various banks and
lending institutions identified on the signature pages hereto (each a
"Bank" and collectively, the "Banks"), NATIONSBANK OF NORTH CAROLINA, N.A.
as agent (in such capacity, the "Agent" or "Administrative Agent"),
CHEMICAL BANK and CRESTAR BANK as co-agents (in such capacity, the "Co-
Agents") and NATIONSBANK OF NORTH CAROLINA, N.A., as administrative agent
for the Banks (in such capacity, the "Administrative Agent").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Banks provide a
$350,000,000 credit facility for the purposes hereinafter set forth;
WHEREAS, the Banks have agreed to make the requested credit facility
available to the Borrower, and the Agents have accepted their duties
hereunder, all on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
1.01 Definitions. As used herein, the following terms shall have the
meanings herein specified unless the context otherwise requires. Defined
terms herein shall include in the singular number the plural and in the
plural the singular:
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date.
"Adjusted Eurodollar Rate" means for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate equal
to the rate obtained by dividing (a) the rate of interest determined
by the Administrative Agent to be the average (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such average is not
such a multiple) of the per annum rates at which deposits in U.S.
- 1 -
dollars are offered to the Administrative Agent in the interbank
eurodollar market at 11:00 A.M. (Charlotte, North Carolina time) (or
as soon thereafter as is practicable), in each case two Business Days
before the first day of such Interest Period, in an amount
substantially equal to such Eurodollar Loan comprising part of such
borrowing (including conversions, extensions and renewals) and for a
period equal to such Interest Period by (b) a percentage equal to 100%
minus the Adjusted Eurodollar Rate Reserve Percentage for such
Interest Period. As used herein, "Adjusted Eurodollar Rate Reserve
Percentage" for the Interest Period for each Eurodollar Loan
comprising part of the same borrowing (including conversions,
extensions and renewals), means the percentage applicable two Business
Days before the first day of such Interest Period under regulations
issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York City with respect to
liabilities consisting of or including "eurocurrency liabilities", as
such term is defined in Regulation D (or with respect to any other
category of liabilities which includes deposits by reference to which
the interest rate on Eurodollar Loans is determined) having a term
equal to the Interest Period for which such Adjusted Eurodollar Rate
Reserve Percentage is determined.
"Adjusted Net Worth" means, with respect to any Guarantor as of
any date of determination thereof, the excess of (i) the "fair
valuation" of such Guarantor's property or the amount of the "present
fair saleable value" of the assets of such Guarantor as of such date
of determination, over (ii) the amount of all "debts" or "liabilities,
contingent or otherwise", of such Guarantor as of such date of
determination, as such quoted or similar terms are determined in
accordance with applicable Federal and state laws governing
determinations of the insolvency of debtors. In determining the
Adjusted Net Worth of any Guarantor for purposes of calculating the
Maximum Guaranteed Amount for such Guarantor in respect of any
Extension of Credit, the liabilities of such Guarantor to be used in
such determination pursuant to clause (ii) of the preceding sentence
shall in any event include the liabilities of such Guarantor hereunder
in respect of all Extensions of Credit other than the Extension of
Credit in respect of which such calculation is being made.
"Administrative Agent" means the administrative agent for the
Banks under this Credit Agreement as identified in the recital of
parties hereinabove, and any successors and assigns in such capacity.
"Administrative Agent's Fee Letter" means the letter agreement
dated as of February 15, 1994 between the Administrative Agent and the
Borrower, as amended, modified, supplemented or replaced from time to
time.
- 2 -
"Administrative Agent's Fees" means such term as defined in
Section 2.11(c).
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by or under direct
or indirect common control with such Person. A Person shall be deemed
to control a corporation if such Person possesses, directly or
indirectly, the power (i) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such
corporation or (ii) to direct or cause direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" means the agent for the Banks under this Credit Agreement
as identified in the recital of parties hereinabove, and any
successors and assigns in such capacity.
"Agents" means, collectively, the Agent, the Co-Agents and the
Administrative Agent.
"Applicable Federal Funds Rate" means, for any day, a per annum
rate equal to the sum of (i) the rate at which Federal funds are
offered to the Swingline Lender on an overnight basis as determined by
such Swingline Lender, plus (ii) one-eighth of one percent (1/8%).
"Applicable Margin" means such term as defined in Section 2.05.
"Approving Bank" means such term as defined in Section 2.01.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Base Rate" means, for any day, a rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/16 of 1%)
equal to the greater of (a) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1% or (b) the Prime Rate in effect on such
day. If for any reason the Administrative Agent shall have determined
(which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate for any
reason, including the inability of the Administrative Agent to obtain
sufficient quotations in accordance with the terms hereof, the Base
Rate shall be determined without regard to clause (a) of the first
sentence of this definition until the circumstances giving rise to
such inability no longer exist. Any change in the Base Rate due to a
change in the Prime Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate or
the Federal Funds Effective Rate, respectively.
- 3 -
"Base Rate Loan" means a Loan which bears interest based on the
Base Rate.
"Borrower" means O&M Holding, Inc., a Virginia corporation (to be
renamed Owens & Minor, Inc. after the Initial Funding Date).
"Borrowing Base" means, at any time, the sum of 85% of Eligible
Receivables plus 50% of Eligible Inventory.
"Business Day" means any day other than a Saturday, a Sunday, a
legal holiday or a day on which banking institutions are authorized
by law or other governmental action to close in Richmond, Virginia,
Charlotte, North Carolina or New York, New York; except that in the
case of Eurodollar Loans, such day is also a day on which dealings
between banks are carried on in U.S. dollar deposits in the London
interbank market.
"Capital Expenditures" means all expenditures which in accordance
with generally accepted accounting principles would be classified as
capital expenditures, including without limitation Capitalized Leases.
"Capitalized Lease" means any lease the payments and obligations
with respect to which would be required to be capitalized in
accordance with generally accepted accounting principles.
"Cash Equivalents" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (ii) U.S. dollar denominated (or foreign currency fully
hedged) time deposits, certificates of deposit, Eurodollar time
deposits and Eurodollar certificates of deposit of (y) any domestic
commercial bank of recognized standing having capital and surplus in
excess of $250,000,000 or (z) any bank whose short-term commercial
paper rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof (any such bank
being an "Approved Bank"), in each case with maturities of not more
than 364 days from the date of acquisition, (iii) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the
parent company thereof) or any variable rate notes issued by, or
guaranteed by any domestic corporation rated A-1 (or the equivalent
thereof) or better by S&P or P-1 (or the equivalent thereof) or better
by Moody's and maturing within six months of the date of acquisition
and (iv) repurchase agreements with a bank or trust company (including
a Bank) or a recognized securities dealer having capital and surplus
in excess of $500,000,000 for direct obligations issued by or fully
guaranteed by the United States of America in which the Borrower shall
have a perfected first priority security interest (subject to no other
liens or encumbrances) and having, on the date of purchase thereof, a
fair market value of at least 100% of the amount of the repurchase
obligations.
- 4 -
"Change of Control" means (i) any Person or two or more Persons
acting in concert shall have acquired beneficial ownership, directly
or indirectly, of Voting Stock of the Borrower (or other securities
convertible into such Voting Stock) representing 35% or more of the
combined voting power of all Voting Stock of the Borrower, (ii) during
any period of up to 24 consecutive months, commencing after the
Closing Date, individuals who at the beginning of such 24 month period
were directors of the Borrower cease to constitute a majority of the
board of directors of the Borrower and such event is a result
(directly or indirectly) of the acquisition of 5% or more of the
combined voting power of the Voting Stock by a Person or Persons who
did not own at least 5% or more of the combined voting power of the
Voting Stock as of the Closing Date (specifically excluding for
purposes of this clause (ii) the effect of conversion of all or any
portion of the convertible preferred stock held by the Hillman family
on the Closing Date), or (iii) any Person or two or more Persons
acting in concert shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of, control over
Voting Stock of the Borrower (or other securities convertible into
such securities) representing 35% or more of the combined voting power
of all Voting Stock of the Borrower. As used herein, "beneficial
ownership" shall have the meaning provided in Rule 13d-3 of the
Securities and Exchange Commission under the Securities and Exchange
Act of 1934.
"Closing Date" means the date on which the conditions set forth
in Section 4.01 shall have been fulfilled.
"Co-Agent" means the co-agents for the Banks under this Credit
Agreement as identified and defined in the recital of the parties
hereinabove, and any successors and assigns in such capacity.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" means the commitments of the Banks to make Committed
Revolving Loans, of the Swingline Lender to make Swingline Loans and
of the Banks to purchase participation interests in the Swingline
Loans.
"Commitment Fee" means such term as defined in Section 2.11(b).
"Committed Revolving Loan" means a contractual revolving credit
loan made by the Banks pursuant to the provisions of Section 2.01.
"Committed Revolving Note" means the promissory notes of the
Borrower in favor of each of the Banks evidencing the Committed
Revolving Loans provided pursuant to Section 2.06, individually or
collectively, as appropriate, as such promissory notes may be amended,
modified, supplemented, extended, renewed or replaced from time to
time.
- 5 -
"Competitive Bid" means an offer by a Bank to make a Competitive
Loan pursuant to the terms of Section 2.08.
"Competitive Bid Rate" means, as to any Competitive Bid made by a
Bank in accordance with the provisions of Section 2.08, the fixed rate
of interest offered by the Bank making the Competitive Bid.
"Competitive Bid Request" means a request by the Borrower for
Competitive Bids in accordance with the provisions of Section 2.08.
"Competitive Bid Request Fee" means the administrative fee
payable to the Administrative Agent, if any, in connection with a
Competitive Bid Request as provided in the Administrative Agent's Fee
Letter.
"Competitive Loan" means a loan made by a Bank in its discretion
pursuant to the provisions of Section 2.08.
"Competitive Loan Banks" means, at any time, those Banks which
have Competitive Loans outstanding.
"Competitive Loan Maximum Amount" means such term as defined in
Section 2.08.
"Competitive Loan Note" means the promissory notes of the
Borrower in favor of the Banks evidencing the Competitive Loans, if
any, provided pursuant to Section 2.08(h), individually or
collectively, as appropriate, as such promissory notes may be amended,
modified, supplemented, extended, renewed or replaced from time to
time.
"Consistent Basis" or "consistent basis" means, with regard to
the application of accounting principles, accounting principles
consistent in all material respects with the accounting principles
used and applied in preparation of the financial statements previously
delivered to the Banks and referred to in Section 5.06.
"Consolidated Borrower Group" means the Borrower and its
Restricted Subsidiaries.
"Consolidated Current Assets" means as of the date of
determination thereof the total amount of current assets of the
Borrower and its Restricted Subsidiaries on a consolidated basis
determined in accordance with generally accepted accounting
principles.
"Consolidated Current Liabilities" means as of the date of
determination thereof the total amount of current liabilities of the
Borrower and its Restricted Subsidiaries on a consolidated basis
determined in accordance with generally accepted accounting
principles.
- 6 -
"Consolidated Current Ratio" means, at any time, the ratio of
Consolidated Current Assets to Consolidated Current Liabilities.
"Consolidated Fixed Charges" means, for the applicable period
ending as of a Determination Date, the sum of (i) all Interest Expense
on all Indebtedness during such period, (ii) all Rentals (other than
Rentals on Capitalized Leases to the extent such Rentals are included
in Interest Expense or as a current maturity of a Capitalized Lease
under subsection (iii) hereof) payable during such period, (iii)
current maturities of Funded Debt and current maturities of
Capitalized Leases as of such Determination Date, and (iv) all
dividends paid in cash or property and redemptions made of capital
stock (other than dividends paid to, or redemptions of capital stock
owned by, the Borrower or a wholly-owned Restricted Subsidiary) during
such period, in each case for the Borrower and its Restricted
Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles.
"Consolidated Net Income" means, for the applicable period ending
as of a Determination Date, the net income of the Borrower and its
Restricted Subsidiaries for such period, determined on a consolidated
basis in accordance with generally accepted accounting principles, but
excluding for purposes of determining compliance with the Fixed Charge
Coverage Ratio in Section 6.11(d) hereof:
(a) any extraordinary gains or losses on the sale or
other disposition of assets, and any taxes on such excluded
gains and any tax deductions or credits on account of any
such excluded losses;
(b) restructuring costs associated with the
acquisition of Stuart Medical, which shall include those
costs associated with the restructuring of corporate
administrative functions, including without limitation the
closure of certain Owens & Minor, Inc. distribution
facilities, employee relocation and termination, and
writedown of certain software, in an amount not to exceed
$24,000,000 in the aggregate;
(c) the proceeds of any life insurance policy;
(d) net earnings of any business entity (other than a
Restricted Subsidiary) in which the Borrower or any
Restricted Subsidiary has an ownership interest unless such
net earnings shall have actually been received by the
Borrower or such Restricted Subsidiary in the form of cash
distributions; and
(e) any portion of the net earnings of any Restricted
Subsidiary which for any reason is unavailable for payment
of dividends to the Borrower or any other Restricted
Subsidiary.
- 7 -
"Consolidated Net Income Available for Fixed Charges" means, for
the applicable period ending as of a Determination Date, the sum of
Consolidated Net Income
plus (to the extent deducted in determining Consolidated Net
Income) (i) all provisions for any Federal, state or other income
taxes, (ii) depreciation, amortization and other non-cash
charges, including without limitation any accrual necessary for
purposes of conforming with Financial Accounting Standards Board
Statement Number 106 (as defined by generally accepted accounting
principles) to the extent that the accrued portion thereof
constitutes a non-cash charge, (iii) Interest Expense, and (iv)
all Rentals (but without duplication for the interest component
under the Capitalized Leases to the extent included in Interest
Expense),
minus (v) all Capital Expenditures,
for the Borrower and its Restricted Subsidiaries on a consolidated
basis determined in accordance with generally accepted accounting
principles.
"Consolidated Net Worth" means total stockholders' equity for the
Borrower and its Restricted Subsidiaries on a consolidated basis as
determined in accordance with generally accepted accounting
principles.
"Consolidated Tangible Net Worth" means total stockholders'
equity minus goodwill, patents, trade names, trade marks, copyrights,
franchises, organizational expense, deferred assets other than prepaid
insurance and prepaid taxes and such other assets as are properly
classified as "intangible assets", for the Borrower and its Restricted
Subsidiaries on a consolidated basis as determined in accordance with
generally accepted accounting principles.
"Consolidated Total Capitalization" means the sum of (i)
Consolidated Total Debt plus (ii) Consolidated Net Worth.
"Consolidated Total Debt" means all Indebtedness of the Borrower
and its Restricted Subsidiaries on a consolidated basis determined in
accordance with generally accepted accounting principles.
"Controlled Group" means (i) the controlled group of
corporations as defined in Section 414(b) of the Code and the
applicable regulations thereunder, or (ii) the group of trades or
businesses under common control as defined in Section 414(c) of the
Code and the applicable regulations thereunder, of which the Borrower
is a part or may become a part.
"Credit Documents" means this Credit Agreement, the Notes, any
Joinder Agreement and all other related agreements and documents
- 8 -
issued or delivered hereunder or thereunder or pursuant hereto or
thereto.
"Credit Party" means any of the Borrower and the Guarantors.
"Default" means any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Determination Date" means the last day of each quarterly fiscal
period of the Borrower.
"Disapproving Bank" means such term as defined in Section 2.01.
"Eligible Assignee" means any Bank or Affiliate or subsidiary of
a Bank; and any other commercial bank, financial institution or
"accredited investor" (as defined in Regulation D of the Securities
and Exchange Commission) with combined capital surplus in excess of
$500,000,000 reasonably acceptable to the Administrative Agent and the
Borrower.
"Eligible Inventory" means, as of any date of determination, the
aggregate net book value of all inventory of the Credit Parties on a
consolidated basis after deducting allowances or reserves relating
thereto, as shown on the books and records of such Credit Parties.
"Eligible Receivables" means as of any date of determination, the
aggregate net book value of all accounts, accounts receivable,
receivables, and obligations for payment created or arising from the
sale of inventory or the rendering of services in the ordinary course
of business (hereinafter sometimes referred to collectively as
"Receivables"), owned by or owing to the Credit Parties on a
consolidated basis after deducting allowances or reserves relating
thereto, as shown on the books and records of such Credit Parties.
"Equity Transaction" means such term as defined in Section
6.11(b).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
and the rulings issued thereunder.
"ERISA Affiliate" means each person (as defined in Section 3(9)
of ERISA) which together with the Borrower, any Subsidiary of the
Borrower or member of the Consolidated Borrower Group would be deemed
to be a member of the same "controlled group" within the meaning of
Section 414(b), (c), (m) or (o) of the Code.
"Eurodollar Loan" means a Loan which bears interest based on the
Adjusted Eurodollar Rate.
"Event of Default" has the meaning specified in Section 8.
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"Extension of Credit" means any Loan advance.
"Fed Funds Swingline Loan" means a Loan which bears interest
based on the Applicable Federal Funds Rate.
"Federal Funds Effective Rate" means, for any day, the weighted
average of the rates on overnight Federal funds transactions with
members of the Federal Reserve Bank of New York, or, if such rate is
not so released for any day which is a Business Day, the arithmetic
average (rounded upwards to the next 1/100th of 1%), as determined by
the Administrative Agent, of the quotations for the day of such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Fees" means all fees payable pursuant to Section 2.11.
"Fitch" means Fitch Investors Service, Inc., and any successor
thereof.
"Fixed Charge Coverage Ratio" means the ratio of Consolidated Net
Income Available for Fixed Charges to Consolidated Fixed Charges.
"Fixed Rate Loan" means a Competitive Loan bearing interest at a
fixed percentage rate per annum as provided in accordance with the
provisions of Section 2.08.
"Funded Debt" means, for any Person, (i) all Indebtedness of such
Person for borrowed money or which has been incurred in connection
with the acquisition of assets, in each case having a final maturity
of one or more years from the date of origin thereof (or which is
renewable or extendible at the option of the obligor for a period or
periods more than one year from the date of origin), (ii) all
Capitalized Lease obligations for such Person, and (iii) all Guaranty
Obligations by such Person of Funded Debt of others. Funded Debt
shall include, without duplication, payments in respect of Funded Debt
which constitute current liabilities of the obligor under generally
accepted accounting principles.
"Generally Accepted Accounting Principles" or "generally accepted
accounting principles" means generally accepted accounting principles
at the time in the United States. Except as otherwise expressly
provided, all references to generally accepted accounting principles
shall be applied on a consistent basis.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantor" means those corporations and entities identified as a
"Guarantor" on the signature pages hereto, being Owens & Minor, Inc.,
a Virginia corporation which is expected to change its name after the
Initial Funding Date to Owens & Minor Medical, Inc., National Medical
- 10 -
Supply Corporation, a Delaware corporation, Owens & Minor West, Inc.,
a California corporation, Koley's Medical Supply, Inc., a Nebraska
corporation, Lyons Physician Supply Company, an Ohio corporation, A.
Kuhlman & Company, a Michigan corporation, and Stuart Medical, Inc., a
Pennsylvania corporation; and each Additional Credit Party which has
executed a Joinder Agreement.
"Guaranty Obligations" means any obligations (other than
endorsements in the ordinary course of business of negotiable instru-
ments for deposit or collection) guaranteeing or intended to guarantee
any Indebtedness, leases, dividends or other obligations of any other
Person in any manner, whether direct or indirect, and including
without limitation any obligation, whether or not contingent, (i) to
purchase any such Indebtedness or other obligation or any property
constituting security therefor, (ii) to advance or provide funds or
other support for the payment or purchase of such indebtedness or
obligation or to maintain working capital, solvency or other balance
sheet condition of such other Person (including without limitation
keep well agreements and capital maintenance agreements), (iii) to
lease or purchase property, securities or services primarily for the
purpose of assuring the owner of such Indebtedness or obligation, or
(iv) to otherwise assure or hold harmless the owner of such
Indebtedness or obligation against loss in respect thereof. The
amount of Guaranty Obligations hereunder shall be deemed to be an
amount equal to the stated or determinable amount of the Indebtedness
or obligation in respect of which such Guaranty Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated
amount in respect thereof (assuming such other Person is required to
perform thereunder) as determined in good faith.
"Hygeia Notes" means such term as defined in Section 7.07.
"Indebtedness" means without duplication, (i) all indebtedness
for borrowed money, (ii) the deferred purchase price of assets or
services which in accordance with generally accepted accounting
principles would be shown to be a liability (on the liability side of
a balance sheet), (iii) all Guaranty Obligations, (iv) the maximum
stated amount of all letters of credit issued or acceptance facilities
established for the account of such Person and, without duplication,
all drafts drawn thereunder (other than letters of credit (x)
supporting other Indebtedness of the Borrower or a Subsidiary or (y)
offset by a like amount of cash or government securities pledged or
held in escrow to secure such letter of credit and draws thereunder),
(v) all Capitalized Lease obligations, (vi) all Indebtedness of
another Person secured by any Lien on any property of the Borrower or
a Restricted Subsidiary, whether or not such Indebtedness has been
assumed, in an amount not to exceed the fair market value of the
property of the Borrower or Restricted Subsidiary securing such
Indebtedness, (vii) all obligations under take-or-pay or similar
arrangements or under interest rate, currency, or commodities
agreements, and (viii) indebtedness created or arising under any
conditional sale or title retention agreement; but specifically
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excluding from the foregoing trade payables and accrued expenses
arising or incurred in the ordinary course of business.
"Initial Funding Date" means the date on which the conditions to
initial funding set forth in Section 4.02 hereof shall have been
fulfilled (or waived) and on which the initial Loan advance shall have
been made.
"Initial Interest Rate Period" means such term as defined in
Section 2.05.
"Interest Determination Date" means such term as defined in
Section 2.05.
"Interest Expense" means, for any period, all interest expense,
including the amortization of debt discount and premium and the
interest component under Capitalized Leases, determined in accordance
with generally accepted accounting principles.
"Interest Payment Date" means (i) as to Prime Loans and Fed Funds
Swingline Loans, the last day of each month, the date of repayment and
on the Termination Date and (ii) as to Eurodollar Loans and Fixed Rate
Loans, on the last day of each Interest Period for such Loan, the date
of repayment and on the Termination Date, and in addition where the
applicable Interest Period is more than 3 months, in the case of
Eurodollar Loans, then also on the date 3 months from the beginning of
the Interest Period, and each 3 months thereafter. If an Interest
Payment Date falls on a date which is not a Business Day, such
Interest Payment Date shall be deemed to be the next succeeding
Business Day, except that in the case of Eurodollar Loans where the
next succeeding Business Day falls in the next succeeding calendar
month, then on the next preceding day.
"Interest Period" means (i) as to Eurodollar Loans generally, a
period of one, two, three or six months' duration, and also as to
Eurodollar Loans of up to $25,000,000, a period of 7-days' duration
(provided that no more than one such Committed Revolving Loan with a
7-day Interest Period may be outstanding at any time), as the Borrower
may elect, commencing in each case, on the date of the borrowing
(including conversions, extensions and renewals) and (ii) as to Fixed
Rate Loans, a period beginning on the date of advance and ending on
the date specified in the respective Competitive Bid whereby the offer
to make such Fixed Rate Loan was extended, which shall be not less
than 7 days' nor more than 30 days' duration; provided, however, (A)
if any Interest Period would end on a day which is not a Business Day,
such Interest Period shall be extended to the next succeeding Business
Day (except that in the case of Eurodollar Loans where the next
succeeding Business Day falls in the next succeeding calendar month,
then on the next preceding Business Day), (B) no Interest Period shall
extend beyond the Termination Date and (C) in the case of Eurodollar
Loans, where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the
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Interest Period is to end, such Interest Period shall end on the last
day of such calendar month.
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Schedule 6.12 hereto executed and delivered by an
Additional Credit Party in accordance with the provisions of Section
6.12.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory
or otherwise) or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under
the Uniform Commercial Code as adopted and in effect in the relevant
jurisdiction or other similar recording or notice statute, and any
lease in the nature thereof) securing or purporting to secure any
Indebtedness.
"Loan" means a Committed Revolving Loan, a Competitive Loan
and/or Swingline Loan, as appropriate.
"Material Adverse Effect" means a material adverse effect on (i)
the operations or financial condition of the Borrower and its
Restricted Subsidiaries, or of the Borrower and its Subsidiaries, in
each case taken as a whole, (ii) the ability of the Borrower or
Guarantors to perform their respective obligations under this Credit
Agreement, or (iii) the validity or enforceability of this Credit
Agreement, or any of the other Credit Documents, in each case as to
the obligations of the Borrower or the Guarantors hereunder or
thereunder, or the rights and remedies of the Banks hereunder or
thereunder.
"Maximum Guaranteed Amount" means, for any Guarantor as of the
date of determination thereof, the sum of (i) with respect to each
Extension of Credit (or portion thereof) the proceeds of which are
used to make a Valuable Transfer to such Guarantor, the amount of such
Extension of Credit (or such portion thereof) plus (ii) with respect
to each Extension of Credit (or portion thereof) the proceeds of which
are not used to make a Valuable Transfer to such Guarantor, the lesser
of (a) the outstanding amount of such Extension of Credit (or such
portion thereof) as of such date or (b) the greater of (1) ninety-five
percent (95%) of the Adjusted Net Worth of such Guarantor at the time
of such Extension of Credit or (2) ninety-five percent (95%) of the
Adjusted Net Worth of such Guarantor at the earliest of (A) such date,
(B) the date of commencement of a case under the Bankruptcy Code in
which such Guarantor is a debtor or (C) the date enforcement of such
Guarantor's obligations under Section 3 is sought.
"Moody's" means Moody's Investors Service, Inc., and any
successor thereof.
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"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to
which any member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan
years made contributions, including for these purposes any Person
which ceased to be a member of the Controlled Group during such five
year period.
"NationsBank" means NationsBank of North Carolina, N.A. or its
successor.
"Non-Guarantor Subsidiaries" means Subsidiaries of the Borrower
which are not Guarantors, as referenced in Section 6.12.
"Note" or "Notes" means the Committed Revolving Notes, the
Competitive Loan Notes and/or the Swingline Note, individually or
collectively, as appropriate.
"Notice of Borrowing" shall have such meaning as provided in
Sections 2.02(a) and Section 2.07(b).
"Notice of Conversion" shall have such meaning as provided in
Section 2.03.
"Obligations" means, without duplication, all of the obligations
of the Borrower or other Credit Party to the Banks, the Administrative
Agent and the Co-Agents (including the obligations to pay principal of
and interest on the Loans, to pay and satisfy guaranty obligations in
respect of the Loans, to pay all Fees, to pay certain expenses and the
obligations arising in connection with various indemnities) whenever
arising, under this Credit Agreement, the Notes or any of the other
Credit Documents to which the Borrower or other Credit Party is a
party.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA, and any successor thereto.
"Participation Interest" means the extension of credit by a Bank
by way of purchase of a participation hereunder in Committed Revolving
Loans as provided in Section 2.20 or in Swingline Loans as provided in
Section 2.07(b)(iii).
"Permitted Investments" means (i) cash and Cash Equivalents, (ii)
receivables owing to the Borrower or its Restricted Subsidiaries or
any of its receivables and advances to suppliers, in each case if
created, acquired or made in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms,
(iii) subject to the limitations set out in Section 7.05(b),
investments by the Borrower and its Restricted Subsidiaries in and to
a Credit Party, including any investment in a corporation which, after
giving effect to such investment, will become an Additional Credit
Party (provided such Additional Credit Party shall execute a Joinder
- 14 -
Agreement), (iv) loans and advances in the usual and ordinary course
of business to officers, directors and employees for expenses
(including moving expenses related to a transfer) incidental to
carrying on the business of the Borrower or any Restricted Subsidiary
in an aggregate amount not to exceed $1,500,000 at any time
outstanding, (v) investments (including debt obligations) received in
connection with the bankruptcy or reorganization of suppliers and
customers and in settlement of delinquent obligations of, and other
disputes with, customers and suppliers arising in the ordinary course
of business, and (vi) additional loan advances and/or investments of
a nature not contemplated by the foregoing clauses hereof, provided
that such loans, advances and/or investments made pursuant to this
clause (vi) shall not exceed $3,000,000 in aggregate amount at any
time outstanding. As used herein, "investment" means all investments,
in cash or by delivery of property made, directly or indirectly in any
Person, whether by acquisition of shares of capital stock,
indebtedness or other obligations or securities or by loan advance,
capital contribution or otherwise.
"Permitted Liens" means (i) Liens created by, under or in
connection with this Credit Agreement or the other Credit Documents in
favor of the Banks; (ii) Liens described on Schedule 7.02 attached
hereto; (iii) Liens for taxes not yet delinquent or Liens for taxes
being contested in good faith by appropriate proceedings for which
adequate reserves determined in accordance with generally accepted
accounting principles have been established (and as to which the
property subject to such lien is not yet subject to foreclosure, sale
or loss on account thereof); (iv) Liens in respect of property imposed
by law arising in the ordinary course of business such as
materialmen's, mechanics', warehousemen's and other like Liens
provided that such Liens secure only amounts not more than 30 days
past due or are being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with
generally accepted accounting principles have been established (and as
to which the property subject to such lien is not yet subject to
foreclosure, sale or loss on account thereof); (v) pledges or deposits
made to secure payment of worker's compensation insurance,
unemployment insurance, pensions or social security programs; (vi)
Liens arising from good faith deposits in connection with or to secure
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-
money bonds and other similar obligations incurred in the ordinary
course of business (other than obligations in respect of the payment
of borrowed money); (vii) easements, rights-of-way, restrictions
(including zoning restrictions), minor defects or irregularities in
title and other similar charges or encumbrances not, in any material
respect, impairing the use of such property for its intended purposes
or interfering with the ordinary conduct of business of the Borrower
and its Subsidiaries taken as a whole; (viii) Liens regarding
operating or financing leases permitted by this Credit Agreement; (ix)
leases or subleases granted to others in the ordinary course of
business not interfering in any material respect with the business or
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operations of the Borrower or its Subsidiaries; (x) purchase money
Liens securing purchase money indebtedness to the extent permitted
under Section 7.01; (xi) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; and (xii) any
judgment lien which does not create an Event of Default under Section
8.01(h) of this Credit Agreement.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated), or any government or
political subdivision or any agency, department or instrumentality
thereof.
"Plan" means any single-employer plan as defined in Section 4001
of ERISA, which is maintained, or at any time during the five calendar
years preceding the date of this Credit Agreement was maintained, for
employees of the Borrower, any Subsidiary or an ERISA Affiliate.
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by NationsBank as its prime rate in effect
at its principal office in Charlotte, North Carolina; each change in
the Prime Rate shall be effective on the date such change is publicly
announced as effective. The Prime Rate is not necessarily the best or
lowest rate offered by NationsBank.
"Ratings Services" means such term as defined in Section 2.05.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve
requirements.
"Regulation G" means Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin
requirements.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin
requirements.
"Regulation X" means Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin
requirements.
"Rentals" means, as of the date of determination thereof, all
fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or
surrender of the leased property) payable by a Person, as lessee or
- 16 -
sublessee under a lease of real or personal property, but shall be
exclusive of any amounts required to be paid by such Person (whether
designated as rents or additional rents) on account of maintenance,
repairs, insurance, taxes and similar charges. Fixed rents under any
so-called "percentage leases" shall be computed solely on the basis of
the minimum rents, if any, required to be paid by the lessee
regardless of sales volume or gross revenues.
"Required Banks" means Banks holding in the aggregate at least
51% of the Commitments (other than with respect to Swingline Loans)
or, if the aggregate Commitments have been terminated, Banks in the
aggregate holding at least 51% of the principal amount of the Loans
then outstanding (provided that in the case of Swingline Loans, where
a Mandatory Borrowing cannot be made and the Banks shall have
purchased a participation interest in the Swingline Loans in
accordance with the provisons of Section 2.07(b)(iii), for purposes of
determining the aggregate amount of Loans owing to each Bank
hereunder, such Bank's funded participation interest in the Swingline
Loans shall be considered as if it were a direct loan and not a
participation interest, and the aggregate amount of Swingline Loans
owing to the Swingline Lender shall be reduced by the amount of such
funded participation interests).
"Responsible Officer" means, with respect to the subject matter
of any representation, warranty, covenant, agreement, obligation or
certificate of any Credit Party contained in or delivered pursuant to
any of the Credit Documents, the President, any Executive Vice
President, Senior Vice President, Vice President, Chief Financial
Officer, Treasurer, Controller, or any other officer of the
Consolidated Borrower Group who in the normal performance of his
operational responsibilities would have knowledge of such matter and
the requirements with respect thereto.
"Restricted Subsidiary" means any Subsidiary (i) which is
organized under the laws of the United States or any State thereof;
(ii) which conducts substantially all of its business and has
substantially all of its assets within the United States; and (iii) of
which more than 50% (by number of votes) of the Voting Stock is
beneficially owned, directly or indirectly, by the Borrower.
"Revolving Committed Amount" means collectively the aggregate
amount of all of the Banks' commitments, and individually the amount
of each such Bank's commitment to make Committed Revolving Loans
specified in Schedule 2.01, as such amounts may from time to time be
reduced in accordance with the provisions of Sections 2.10 and 2.12(b)
hereof.
"S&P" means Standard & Poor's Corporation, and any successor
thereof.
"Stuart Medical" means Stuart Medical, Inc., a Pennsylvania
corporation.
"Subordinated Debt" means such term as defined in Section 7.07.
- 17 -
"Subsidiary" means, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, any
class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time
owned by such Person directly or indirectly through Subsidiaries, and
(ii) any partnership, association, joint venture or other entity in
which such person directly or indirectly through Subsidiaries has more
than 50% equity interest at any time. Except as otherwise expressly
provided, all references herein to "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Swingline Committed Amount" means the amount of the Swingline
Lender's commitment to make Swingline Loans as specified in Section
2.07(a), as such amount may from time to time be reduced in accordance
with the provisions of Section 2.10 hereof.
"Swingline Lender" means NationsBank, or such other Bank as the
Borrower has requested and as to which such requested successor
Swingline Lender and the Required Banks may agree, and their
respective successors and assigns. There shall be no more than one
Swingline Lender at any time.
"Swingline Loan" means a swingline revolving credit loan made by
the Swingline Lender pursuant to the provisions of Section 2.07.
"Swingline Note" means the promissory note of the Borrower in
favor of the Swingline Lender evidencing the Swingline Loans as
provided pursuant to Section 2.07(d), as such promissory note may be
amended, modified, supplemented, extended, renewed or replaced from
time to time.
"Taxes" shall have such meaning as provided in Section 2.16.
"Termination Date" means such term as defined in Section 2.01,
being initially April 29, 1999.
"Threshold Requirement" means such term as defined in Section
6.12.
"Upfront Fee" means such term as defined in Section 2.11(a).
"Valuable Transfer" means, in respect of any Guarantor, (i) all
loans, advances or capital contributions made to or for the benefit of
such Guarantor with proceeds of Extensions of Credit, (ii) all debt
securities or other obligations of such Guarantor acquired from such
Guarantor or retired by such Guarantor with proceeds of Extensions of
Credit, (iii) the fair market value of all property acquired with
proceeds of Extensions of Credit and transferred, absolutely and not
as collateral, to such Guarantor and (iv) all equity securities of
such Guarantor acquired from such Guarantor with proceeds from
Extensions of Credit.
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"Voting Stock" means the voting stock or other securities of any
class or classes, the holders of which are ordinarily, in the absence
of contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions).
1.02 Computation of Time Periods. For purposes of computation of
periods of time hereunder, the word "from" means "from and including" and
the words "to" and "until" each mean "to but excluding."
1.03 Accounting Terms. Accounting terms used but not otherwise
defined herein shall have the meanings provided by, and be construed in
accordance with, generally accepted accounting principles. References
herein to "consolidating" financial statements shall mean and include
financial statements for each business segment of the subject Person.
SECTION 2
CREDIT FACILITIES
2.01 Revolving Loan Commitment. Subject to and upon the terms and
conditions and relying upon the representations and warranties herein set
forth, each Bank severally agrees, from time to time from the Initial
Funding Date until April 29, 1999 (such date, as extended, if extended, in
the sole discretion of the Banks as hereinafter provided, is hereinafter
referred to as the "Termination Date") to make revolving credit loans (each
a "Committed Revolving Loan" and, collectively, the "Committed Revolving
Loans") to the Borrower for the purposes hereinafter set forth; provided,
however, that (i) with regard to the Banks collectively, the amount of
Committed Revolving Loans outstanding shall not at any time exceed THREE
HUNDRED FIFTY MILLION DOLLARS ($350,000,000) in the aggregate (as such
aggregate maximum amount may be reduced from time to time as hereinafter
provided, the "Revolving Committed Amount"), and (ii) with regard to each
Bank individually, each such Bank's pro rata share of outstanding Committed
Revolving Loans shall not at any time exceed such Bank's Revolving
Committed Amount; and provided, further, that notwithstanding anything
herein to the contrary, the sum of Committed Revolving Loans plus Swingline
Loans plus Competitive Loans shall not at any time exceed the lesser of the
aggregate Revolving Committed Amount or the Borrowing Base. Committed
Revolving Loans hereunder may consist of Base Rate Loans or Eurodollar
Loans (or a combination thereof) as the Borrower may request, and may be
repaid and reborrowed in accordance with the provisions hereof. The
Borrower may, not more than 90 days but not less than 60 days prior to the
third anniversary date of the Closing Date and each anniversary date
thereafter, by notice to the Administrative Agent, make written request of
the Banks to extend the Termination Date for an additional period of one
year. The Administrative Agent will give prompt notice to each of the
Banks of its receipt of any such request for extension of the Termination
Date. Each Bank shall make a determination not later than 30 days prior to
the then applicable anniversary date as to whether or not it will agree to
extend the Termination Date as requested; provided, however, that failure
by any Bank to make a timely response to the Borrower's request for
extension of the Termination Date shall be deemed to constitute a refusal
- 19 -
by the Bank to extend the Termination Date. If, in response to a request
for an extension of the Termination Date, one or more Banks shall fail to
agree to the requested extension (the "Disapproving Banks"), then provided
that the requested extension is approved by Banks holding at least 75% of
the Commitments hereunder (the "Approving Banks"), the Borrower may, at its
own expense with the assistance of the Administrative Agent, within a
period of 30 days thereafter, make arrangements for another bank or
financial institution agreeable to the extension of such Termination Date
and reasonably acceptable to the Administrative Agent, to acquire, in whole
or in part, the Loans and Commitments of the Disapproving Banks, whereupon
after giving effect to the assignment of the Disapproving Banks' Loans and
Commitments in accordance with the terms hereof the Termination Date shall
be extended and the credit facility continued hereunder at existing levels.
If on the other hand the Borrower is unable to make arrangements for the
replacement of the Disapproving Banks in accordance with the terms hereof,
then the Borrower shall have the option of (i) continuing the credit
facility hereunder at existing levels until the Termination Date then in
effect without extension, or (ii) upon payment to the Disapproving Banks of
the amount of Loans and other amounts owing to them and termination of
their Commitments hereunder, extending and continuing the credit facility
hereunder at a lower aggregate amount equal to the Commitments held by the
Approving Banks until the new Termination Date as extended. Where any such
arrangements are made for another bank or financial institution to acquire
the Loans and Commitments of a Disapproving Bank, or any portion thereof,
then upon payment of the Loans and other amounts owing to it and
termination of its Commitments relating thereto, such Disapproving Bank
shall promptly transfer and assign, in whole or in part, as requested,
without recourse (in accordance with and subject to the provisions of
Section 10.03), all or part of its interests, rights and obligations under
this Credit Agreement to such bank or financial institution which shall
assume such assigned obligations and become a "Bank" under this Credit
Agreement (which assignee may be another Bank, if a Bank accepts such
assignment); provided, that such assignment shall not conflict with any
law, rule or regulation or order of any court or other Governmental
Authority.
2.02 Committed Revolving Loan Advances.
(a) Notices. Whenever the Borrower desires a Committed
Revolving Loan advance hereunder, it shall give written notice
(or telephone notice promptly confirmed in writing) to the
Administrative Agent (a "Notice of Borrowing") not later than
10:00 A.M. (Charlotte, North Carolina time) on the Business Day
of the requested advance in the case of Base Rate Loans and on
the third Business Day prior to the requested advance in the case
of Eurodollar Loans. Each such notice shall be irrevocable and
shall specify (i) that a Committed Revolving Loan is requested,
(ii) the date of the requested advance (which shall be a Business
Day), (iii) the aggregate principal amount of Committed Revolving
Loans requested, and (iv) whether the Loan requested shall
consist of Base Rate Loans, Eurodollar Loans or a combination
thereof, and if Eurodollar Loans are requested, the Interest
Periods with respect thereto. If the Borrower shall fail to
specify in any Notice of Borrowing (A) an applicable Interest
- 20 -
Period in the case of a Eurodollar Loan, then such notice shall
be deemed to be a request for an Interest Period of one month, or
(B) the type of Committed Revolving Loan requested, then such
notice shall be deemed to be a request for a Base Rate Loan
hereunder. The Administrative Agent shall as promptly as
practicable give each Bank notice of each requested Committed
Revolving Loan advance, of such Bank's pro rata share thereof and
of the other matters covered in the Notice of Borrowing.
(b) Minimum Amounts. Committed Revolving Loan advances
shall be in a minimum aggregate amount of $5,000,000 and integral
multiples of $1,000,000 in excess thereof.
(c) Advances. Each Bank will make its pro rata share of
each Committed Revolving Loan advance available to the
Administrative Agent by 2:00 P.M. (Charlotte, North Carolina
time) on the date specified in the Notice of Borrowing by deposit
in U.S. dollars of immediately available funds at the offices of
the Administrative Agent in Charlotte, North Carolina, or at such
other address in the United States as the Administrative Agent
may designate in writing. All Committed Revolving Loan advances
shall be made by the Banks pro rata on the basis of each Bank's
respective share of the aggregate Revolving Committed Amount. No
Bank shall be responsible for the failure or delay by any other
Bank in its obligation to make Committed Revolving Loan advances
hereunder; provided, however, that the failure of any Bank to
fulfill its commitments hereunder shall not relieve any other
Bank of its commitments hereunder. Unless the Administrative
Agent shall have been notified by any Bank prior to the date of
any such Committed Revolving Loan advance that such Bank does not
intend to make available to the Administrative Agent its portion
of the Committed Revolving Loan advance to be made on such date,
the Administrative Agent may assume that such Bank has made such
amount available to the Administrative Agent on the date of such
Committed Revolving Loan advance, and the Administrative Agent,
in reliance upon such assumption, may (in its sole discretion
without any obligation to do so) make available to the Borrower a
corresponding amount. If such corresponding amount is not in
fact made available to the Administrative Agent by a Bank, the
Administrative Agent shall be entitled to recover such
corresponding amount from such Bank. If such Bank does not pay
such corresponding amount forthwith upon the Administrative
Agent's demand therefor, the Administrative Agent will promptly
notify the Borrower and the Borrower shall immediately pay such
corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover from such
Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative
Agent to the Borrower to the date such corresponding amount is
recovered by the Administrative Agent, at a per annum rate equal
to (i) if paid by such Bank, within two (2) Business Days of
making such corresponding amount available to the Borrower, the
overnight Federal Funds Effective Rate, and thereafter the Base
- 21 -
Rate, and (ii) if paid by the Borrower, the then applicable rate
calculated in accordance with Section 2.05.
2.03 Conversion. The Borrower shall have the option, on any Business
Day, to extend existing Committed Revolving Loans into a subsequent
Interest Period or to convert Committed Revolving Loans into Committed
Revolving Loans of another type; provided, however, that (i) except as
provided in Section 2.13(iii), Eurodollar Loans may be converted into
Committed Revolving Loans of another type only on the last day of an
Interest Period applicable thereto, (ii) Eurodollar Loans may be extended,
and Committed Revolving Loans may be converted into Eurodollar Loans, only
if no Default or Event of Default is in existence on the date of extension
or conversion, (iii) Committed Revolving Loans extended as, or converted
into, Eurodollar Loans shall be in such minimum amounts as provided in
Section 2.02(b), and (iv) any request for extension or conversion of a
Eurodollar Loan which shall fail to specify an Interest Period shall be
deemed to be a request for an Interest Period of one month. Each such
extension or conversion shall be effected by the Borrower by giving written
notice (or telephone notice promptly confirmed in writing) to the
Administrative Agent (including requests for extensions and renewals, a
"Notice of Conversion") prior to 10:00 A.M. (Charlotte, North Carolina
time) on the Business Day of, in the case of Base Rate Loans, and on the
third Business Day prior to, in the case of Eurodollar Loans, the date of
the proposed extension or conversion, specifying the date of the proposed
extension or conversion, the Committed Revolving Loans to be so extended or
converted, the types of Committed Revolving Loans into which such Committed
Revolving Loans are to be converted and, if appropriate, the applicable
Interest Periods with respect thereto. Each request for extension or
conversion shall be deemed to be a reaffirmation by the Borrower that no
Default or Event of Default then exists and is continuing and that the
representations and warranties set forth in Section 5 are true and correct
in all material respects (except to the extent they relate to an earlier
period). In the event the Borrower fails to request extension or
conversion of any Eurodollar Loan in accordance with this Section, or any
such conversion or extension is not permitted or required by this Section,
then such Committed Revolving Loans shall be automatically converted into
Base Rate Loans at the end of their Interest Period. The Administrative
Agent shall give each Bank notice as promptly as practicable of any such
proposed conversion affecting any Committed Revolving Loans.
2.04 Repayment of the Committed Revolving Loans. The Committed
Revolving Loans shall be due and payable in full on the Termination Date.
2.05 Interest on Committed Revolving Loans. The Committed Revolving
Loans shall bear interest at a per annum rate equal to:
(a) Base Rate Loans. During such periods as Committed
Revolving Loans shall consist of Base Rate Loans, the sum of the
Base Rate plus the Applicable Margin; and
(b) Eurodollar Loans. During such periods as Committed
Revolving Loans shall consist of Eurodollar Loans, the sum of the
Adjusted Eurodollar Rate plus the Applicable Margin;
- 22 -
provided, however, that from and after any failure to make any payment of
principal or interest in respect of any of the Loans hereunder when due,
whether at scheduled or accelerated maturity or on account of any mandatory
prepayment, the principal of and, to the extent permitted by law, interest
on, the Committed Revolving Loans shall bear interest, payable on demand,
at a per annum rate two percent (2%) in excess of the rate otherwise
applicable hereunder. Interest on Committed Revolving Loans shall be
payable in arrears on each Interest Payment Date. As used herein
"Applicable Margin" means from the Closing Date until the Interest
Determination Date occurring after September 30, 1994 (the "Initial
Interest Rate Period"), seven-eighths percent (.875%) in the case of
Eurodollar Loans and Fed Funds Swingline Loans and zero percent (0%) in the
case of Base Rate Loans, and on Interest Determination Dates occurring
after the Initial Interest Rate Period:
Applicable Margin
Consolidated Total Debt Eurodollar Loan
to Consolidated Total and Fed Funds
Ratings Capitalization Ratio Swingline Loan Base Rate Loan
BB/Ba2 >=55% 1.250% .25%
BB+/Ba1 <55% but >=50% .875% 0%
BBB-/Baa3 <50% but >=45% .750% 0%
BBB/Baa2 <45% but >=40% .625% 0%
BBB+/Baa1 <40% .500% 0%
The appropriate Applicable Margin shall be determined based on the
Borrower's unsecured senior long term debt rating as determined by Moody's,
S&P and Fitch (collectively, the "Ratings Services"). If two or more of
the Ratings Services have rated the Borrower's unsecured senior long term
debt, the Applicable Margin shall be determined by taking the lower of the
two such highest ratings. If only one or none of the Ratings Services have
rated the Borrower's unsecured senior long term debt, the appropriate
Applicable Margin shall be determined based on the Borrower's Consolidated
Total Debt to Consolidated Total Capitalization Ratio. Where the
Applicable Margin is determined based on the Consolidated Total Debt to
Consolidated Total Capitalization Ratio, the appropriate Applicable Margin
shall be determined and adjusted quarterly 45 days after the end of each of
the Borrower's fiscal quarters (an "Interest Determination Date") upon
receipt of, and based on, the company-prepared quarterly financial
statements delivered in accordance with provisions of Section 6.01(b), such
Applicable Margin to be effective from such Interest Determination Date
until the next such quarterly Interest Determination Date.
2.06 Committed Revolving Notes. Committed Revolving Loans by each
Bank shall be evidenced by a duly executed promissory note of the Borrower
to each such Bank dated as of the Closing Date in an original principal
amount equal to such Bank's Revolving Committed Amount and substantially in
the form of Schedule 2.06 (such promissory note, as amended, modified,
extended, renewed or replaced from time to time is hereinafter referred to
individually as a "Committed Revolving Note" and collectively as the
"Committed Revolving Notes").
2.07 Swingline Loan Subfacility.
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(a) Swingline Commitment. Subject to and upon the terms and
conditions and relying upon the representations and warranties herein
set forth, the Swingline Lender, in its individual capacity, agrees to
make certain revolving credit loans to the Borrower (each a "Swingline
Loan" and, collectively, the "Swingline Loans") from time to time from
the Initial Funding Date until the Termination Date for the purposes
hereinafter set forth; provided, however, (i) the aggregate amount of
Swingline Loans outstanding at any time shall not exceed TWENTY-FIVE
MILLION DOLLARS ($25,000,000) (the "Swingline Committed Amount"), and
(ii) the sum of Committed Revolving Loans plus Swingline Loans plus
Competitive Loans outstanding at any time shall not exceed the lesser
of the Revolving Committed Amount or the Borrowing Base. Swingline
Loans hereunder may consist of Base Rate Loans or Fed Funds Swingline
Loans (or a combination thereof) as the Borrower may request, and may
be repaid and reborrowed in accordance with the provisions hereof.
(b) Swingline Loan Advances.
(i) Notices; Disbursement. Whenever the Borrower desires a
Swingline Loan advance hereunder it shall give written notice (or
telephone notice promptly confirmed in writing) to the Swingline
Lender and to the Administrative Agent (not later than 11:00 a.m.
(Charlotte, North Carolina time) on the Business Day of the
requested Swingline Loan advance. Each such notice shall be
irrevocable and shall specify (A) that a Swingline Loan advance
is requested, (B) the date of the requested Swingline Loan
advance (which shall be a Business Day), (C) the aggregate
principal amount of the Swingline Loan advance requested and (D)
whether the Swingline Loan shall consist of Base Rate Loans, Fed
Funds Swingline Loans or a combination thereof. The Swingline
Lender shall initiate the transfer of funds representing the
Swingline Loan advance to the Borrower by 1:30 p.m. (Charlotte,
North Carolina time) on the Business Day specified by the
Borrower in the applicable Notice of Borrowing.
(ii) Minimum Amounts. Each Swingline Loan advance shall be
in a minimum principal amount of $250,000 and integral multiples
of $100,000 in excess thereof.
(iii) Repayment of Swingline Loans. Each Swingline Loan
advance shall be due and payable on the earliest of (A) 30 days
from the date of advance thereof, (B) the date of the next
Committed Revolving Loan advance or Competitive Loan advance
hereunder, if sooner, or (C) the Termination Date. If, and to
the extent, any Swingline Loan advances shall be outstanding on
the date of any Committed Revolving Loan advance or any
Competitive Loan advance, such Swingline Loans shall first be
repaid from the proceeds of such Committed Revolving Loan advance
or Competitive Loan advance prior to distribution to the
Borrower. If, and to the extent, Committed Revolving Loans or
Competitive Loans are not requested prior to the Termination Date
or the end of any such 30 day period from the date of any such
Swingline Loan advance, the Borrower shall be deemed to have
requested a Committed Revolving Loan comprised solely of Base
- 24 -
Rate Loans in the amount of such Swingline Loan advance then
outstanding, the proceeds of which shall be used to repay the
Swingline Lender for such Swingline Loan. In addition, the
Swingline Lender may, at any time, in its sole discretion, by
written notice to the Borrower and the Administrative Agent,
demand repayment of its Swingline Loans by way of a Committed
Revolving Loan advance, in which case the Borrower shall be
deemed to have requested a Committed Revolving Loan advance
comprised solely of Base Rate Loans in the amount of such
Swingline Loans; provided, however, that any such demand shall be
deemed to have been given one Business Day prior to the
Termination Date and upon the occurrence of any Event of Default
described in Section 8.01(f) and also upon acceleration of the
Obligations hereunder, whether on account of an Event of Default
described in Section 8.01(f) or any other Event of Default, and
the exercise of remedies in accordance with the provisions of
Section 8.02 hereof (each such Committed Revolving Loan advance
made on account of any such deemed request therefor as provided
herein being hereinafter referred to as a "Mandatory Borrowing").
Each Bank hereby irrevocably agrees to make such Committed
Revolving Loans promptly upon any such request or deemed request
on account of each Mandatory Borrowing in the amount and in the
manner specified in the preceding sentence and on the same such
date notwithstanding (I) the amount of Mandatory Borrowing may
not comply with the minimum amount for advances of Committed
Revolving Loans otherwise required hereunder, (II) whether any
conditions specified in Section 2.09 are then satisfied, (III)
whether a Default or an Event of Default then exists, (IV)
failure for any such request or deemed request for Committed
Revolving Loan to be made by the time otherwise required in
Section 2.02(a), (V) the date of such Mandatory Borrowing, or
(VI) any reduction in the Revolving Committed Amount or
termination of the Commitments relating thereto immediately prior
to such Mandatory Borrowing or contemporaneous therewith. In the
event that any Mandatory Borrowing cannot for any reason be made
on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under
the Bankruptcy Code with respect to the Borrower or any other
Credit Party), then each Bank hereby agrees that it shall
forthwith purchase (as of the date the Mandatory Borrowing would
otherwise have occurred, but adjusted for any payments received
from the Borrower on or after such date and prior to such
purchase) from the Swingline Lender such participations in the
outstanding Swingline Loans as shall be necessary to cause each
such Bank to share in such Swingline Loans ratably based upon its
respective Revolving Loan Commitment (determined before giving
effect to any termination of the Commitments pursuant to Section
8.02), provided that (A) all interest payable on the Swingline
Loans shall be for the account of the Swingline Lender until the
date as of which the respective participation is purchased, and
(B) at the time any purchase of participations pursuant to this
sentence is actually made, the purchasing Bank shall be required
to pay to the Swingline Lender interest on the principal amount
of participation purchased for each day from and including the
- 25 -
day upon which the Mandatory Borrowing would otherwise have
occurred to but excluding the date of payment for such
participation, at the rate equal to, if paid within two (2)
Business Days of the date of the Mandatory Borrowing, the Federal
Funds Effective Rate, and thereafter at a rate equal to the Base
Rate.
(c) Interest on Swingline Loans. Swingline Loans shall bear
interest at a per annum rate equal to:
(i) Base Rate Loans. During such periods as a
Swingline Loan shall consist of Base Rate Loans, the sum of
the Base Rate plus the Applicable Margin; and
(ii) Fed Funds Swingline Loans. During such period as
a Swingline Loan shall consist of Fed Funds Swingline Loans,
the sum of the Applicable Federal Funds Rate plus the
Applicable Margin;
provided, however, that from and after any failure to make any payment
of principal or interest in respect of any of the Loans hereunder when
due, whether at scheduled or accelerated maturity or on account of any
mandatory prepayment, the principal of and, to the extent permitted by
law, interest on, Swingline Loans shall bear interest, payable on
demand, at a per annum rate two percent (2%) in excess of the rate
otherwise applicable hereunder. Interest on Swingline Loans shall be
payable in arrears on each Interest Payment Date.
(d) Swingline Note. The Swingline Loans shall be evidenced by a
duly executed promissory note of the Borrower to the Swingline Lender
dated as of the Closing Date in the original amount of the Swingline
Committed Amount and substantially in the form of Schedule 2.07(d) (as
amended, modified, supplemented, extended, renewed or replaced from
time to time, the "Swingline Note").
2.08 Competitive Loan Subfacility.
(a) Competitive Loans. Subject to the terms and conditions
and relying upon the representations and warranties herein set
forth, from such time as the Borrower shall have attained, and
for so long as the Borrower shall maintain, a ratio of
Consolidated Total Debt to Consolidated Total Capitalization of
less than .45:1.0 for two consecutive fiscal quarters, the
Borrower may, from time to time from the Initial Funding Date
(for so long as the Borrower shall maintain such ratio of
Consolidated Total Debt to Consolidated Total Capitalization
required hereby) until the earlier of the Termination Date or the
termination of the Commitments hereunder, request and each Bank
may, in its sole discretion, agree to make Competitive Loans to
the Borrower; provided, however, (i) the aggregate amount of
Competitive Loans shall not at any time exceed the lesser of
THREE HUNDRED FIFTY MILLION DOLLARS ($350,000,000) or the
Revolving Committed Amount (the "Competitive Loan Maximum
Amount"), and (ii) the sum of Committed Revolving Loans plus
- 26 -
Swingline Loans plus Competitive Loans shall not at any time
exceed the lesser of the aggregate Revolving Committed Amount or
the Borrowing Base. Each Competitive Loan shall be comprised
entirely of Fixed Rate Loans. Each Competitive Loan shall be not
less than $5,000,000 in the aggregate and integral multiples of
$1,000,000 in excess thereof (or the remaining portion of the
Competitive Loan Maximum Amount, if less).
(b) Competitive Bid Requests. The Borrower may solicit
Competitive Bids by delivery of a Competitive Bid Request
substantially in the form of Schedule 2.08(b) to the
Administrative Agent by 12:00 noon (Charlotte, North Carolina
time) on a Business Day not less than three (3) nor more than ten
(10) Business Days prior to the date of a requested Competitive
Loan advance. A Competitive Bid Request shall specify (i) the
date of the requested Competitive Loan advance (which shall be a
Business Day), (ii) the amount of the requested Competitive Loan
advance and (iii) the applicable Interest Periods requested and
shall be accompanied by payment of the Competitive Bid Request
Fee, if any. The Administrative Agent shall notify the Banks of
its receipt of a Competitive Bid Request and the contents thereof
and invite the Banks to submit Competitive Bids in response
thereto. A form of such notice is provided in Schedule 2.08(b)-
2. No more than three Competitive Bid Requests (e.g., the
Borrower may request Competitive Bids for no more than three
different Interest Periods at a time) shall be submitted at any
one time and Competitive Bid Requests may be made no more
frequently than once every ten (10) Business Days.
(c) Competitive Bid Procedure. Each Bank may, in its sole
discretion, make one or more Competitive Bids to the Borrower in
response to a Competitive Bid Request. Each Competitive Bid must
be received by the Administrative Agent not later than 10:00 a.m.
(Charlotte, North Carolina time) on the proposed date of a
Competitive Loan advance; provided, however, that should the
Administrative Agent, in its capacity as a Bank, desire to submit
a Competitive Bid it shall notify the Borrower of its Competitive
Bid and the terms thereof not later than 9:30 A.M. (Charlotte,
North Carolina time) on the proposed date of a Competitive Loan
advance. A Bank may offer to make all or part of the requested
Competitive Loan advance and may submit multiple Competitive Bids
in response to a Competitive Bid Request. The Competitive Bid
shall specify (i) the particular Competitive Bid Request as to
which the Competitive Bid is submitted, (ii) the minimum (which
shall be not less than $1,000,000 and integral multiples of
$500,000 in excess thereof) and maximum principal amounts of the
requested Competitive Loan or Loans as to which the Bank is
willing to make, and (iii) the applicable interest rate or rates
and Interest Period or Periods therefor. A form of such
Competitive Bid is provided in Schedule 2.08(c). A Competitive
Bid submitted by a Bank in accordance with the provisions hereof
shall be irrevocable. The Administrative Agent shall promptly
notify the Borrower of all Competitive Bids made and the terms
thereof. The Administrative Agent shall send a copy of each of
- 27 -
the Competitive Bids to the Borrower for its records as soon as
practicable.
(d) Acceptance of Competitive Bids. The Borrower may, in
its sole and absolute discretion, subject only to the provisions
of this subsection (d), accept or refuse any Competitive Bid
offered to it. To accept a Competitive Bid, the Borrower shall
give written notification (or telephone notice promptly confirmed
in writing) of its acceptance of any or all such Competitive Bids
to the Administrative Agent by 11:00 A.M. (Charlotte, North
Carolina time) on the proposed date of a Competitive Loan
advance; provided, however, (i) the failure by the Borrower to
give timely notice of its acceptance of a Competitive Bid shall
be deemed to be a refusal thereof, (ii) the Borrower may accept
Competitive Bids only in ascending order of rates, (iii) the
aggregate amount of Competitive Bids accepted by the Borrower
shall not exceed the principal amount specified in the
Competitive Bid Request, (iv) the Borrower may accept a portion
of a Competitive Bid in the event, and to the extent, acceptance
of the entire amount thereof would cause the Borrower to exceed
the principal amount specified in the Competitive Bid Request,
subject however to the minimum amounts provided herein (and
provided that where two or more such Banks may submit such a
Competitive Bid at the same such Competitive Bid Rate, then pro
rata between or among such Banks) and (v) no bid shall be
accepted for a Competitive Loan unless such Competitive Loan is
in a minimum principal amount of $1,000,000 and integral
multiples of $500,000 in excess thereof, except that where a
portion of a Competitive Bid is accepted in accordance with the
provisions of subsection (iv) hereof, then in a minimum principal
amount of $100,000 and integral multiples thereof (but not in any
event less than the minimum amount specified in the Competitive
Bid), and in calculating the pro rata allocation of acceptances
of portions of multiple bids at a particular Competitive Bid Rate
pursuant to subsection (iv) hereof, the amounts shall be rounded
to integral multiples of $100,000 in a manner which shall be in
the discretion of the Borrower. A notice of acceptance of a
Competitive Bid given by the Borrower in accordance with the
provisions hereof shall be irrevocable. The Administrative Agent
shall, not later than 12:00 noon (Charlotte, North Carolina time)
on the proposed date of a Competitive Loan advance, notify each
bidding Bank whether or not its Competitive Bid has been accepted
(and if so, in what amount and at what Competitive Bid Rate), and
each successful bidder will thereupon become bound, subject to
the other applicable conditions hereof, to make the Competitive
Loan in respect of which its bid has been accepted.
(e) Funding of Competitive Loans. Each Bank which is to
make a Competitive Loan shall make its Competitive Loan advance
available to the Administrative Agent by 1:30 P.M. (Charlotte,
North Carolina time) on the date specified in the Competitive Bid
Request by deposit in U.S. dollars of immediately available funds
at the office of the Administrative Agent in Charlotte, North
Carolina, or at such other address as the Administrative Agent
- 28 -
may designate in writing, as provided in Section 2.02(c). The
Administrative Agent will, upon receipt thereof by such time,
initiate the transfer of funds representing such Competitive
Loans to the Borrower by 2:30 p.m. (Charlotte, North Carolina
time) on the same such date specified in the Competitive Bid
Request.
(f) Maturity of Competitive Loans. Each Competitive Loan
shall mature and be due and payable in full on the last day of
the Interest Period applicable thereto. Unless the Borrower
shall give notice to the Administrative Agent otherwise, the
Borrower shall be deemed to have requested a Committed Revolving
Loan advance in the amount of the maturing Competitive Loan, the
proceeds of which will be used to repay such Competitive Loan.
(g) Interest on Competitive Loans. The Competitive Loans
shall bear interest in each case at the Competitive Bid Rate
applicable thereto; provided, however, that from and after any
failure to make any payment of principal or interest in respect
of the Loans hereunder when due, whether at scheduled or
accelerated maturity or on account of any mandatory prepayment,
the principal of and, to the extent permitted by law, interest
on, each Competitive Loan shall bear interest, payable on demand,
at a per annum rate two percent (2%) in excess of the Base Rate.
(h) Competitive Loan Notes. The Competitive Loans shall be
evidenced by a duly executed promissory note of the Borrower to
each Bank dated as of the Closing Date in an original principal
amount equal to the Competitive Loan Maximum Amount and
substantially in the form of Schedule 2.08(h) (such promissory
note, as amended, modified, extended, renewed or replaced from
time to time is hereinafter referred to individually as a
"Competitive Loan Note" and collectively as the Competitive Loan
Notes").
2.09 Conditions of Lending.
(a) Conditions. The obligation to make any Extension of
Credit hereunder is subject to satisfaction of the following
conditions:
(i) receipt of a Notice of Borrowing pursuant to Section
2.02(a) or 2.07(b)(i) or Competitive Bid Request pursuant to
Section 2.08;
(ii) the representations and warranties set forth in
Section 5 hereof shall be true and correct in all material
respects as of such date (except for those which expressly
relate to an earlier date);
(iii) immediately after giving effect to the requested
Extension of Credit, (A) with regard to each Bank
individually, the Bank's pro rata share of the outstanding
Committed Revolving Loans and Swingline Loans shall not
- 29 -
exceed such Bank's Revolving Committed Amount, and (B) with
regard to the Banks collectively, (I) the sum of Committed
Revolving Loans plus Swingline Loans plus Competitive Loans
then outstanding shall not exceed the lesser of the
aggregate Revolving Committed Amount or the Borrowing Base,
(II) the aggregate amount of Swingline Loans shall not
exceed the Swingline Committed Amount, and (III) the
aggregate amount of Competitive Loans shall not exceed the
Competitive Loan Maximum Amount; and
(iv) no Default or Event of Default shall exist and be
continuing either prior to or after giving effect thereto.
(b) Reaffirmation. Each request for a Committed Revolving
Loan advance or Swingline Loan advance pursuant to a Notice of
Borrowing or a Notice of Conversion and for Competitive Bid
pursuant to a Competitive Bid Request shall be deemed to be
representation and warranty by the Borrower of the correctness of
the matters specified in this subsections (a)(ii), (iii) and (iv)
hereof.
2.10 Termination of Commitments. The Borrower may from time to time
permanently terminate the Revolving Committed Amount and/or the Swingline
Committed Amount in whole or in part (in minimum aggregate amounts of
$5,000,000 and integral multiples of $1,000,000 in excess thereof) upon 3
Business Days' prior written notice to the Administrative Agent and, in the
case of a reduction in the Swingline Commitment, also to the Swingline
Lender.
2.11 Fees.
(a) Upfront Fee. The Borrower agrees to pay in immediately
available funds to the Administrative Agent for the benefit of
the Banks on or before the Closing Date an upfront fee (the
"Upfront Fee") in the amounts provided in the Administrative
Agent's Fee Letter between the Borrower and the Administrative
Agent.
(b) Commitment Fees. In consideration for the Commitments
by the Banks hereunder, the Borrower agrees to pay to the
Administrative Agent quarterly in arrears on the 15th day
following the last day of each of the Borrower's fiscal quarters
for the ratable benefit of the Banks a commitment fee (the
"Commitment Fee") of (i) from the Closing Date until the Initial
Funding Date, one-eighth of one percent (1/8%) per annum, and
(ii) from the Initial Funding Date and thereafter, one-fourth of
one percent (1/4%) per annum, on the average daily unused amount
of the Revolving Committed Amount for such prior quarter. This
Commitment Fee shall accrue from the Closing Date. For purposes
of computation of the Commitment Fee, neither Swingline Loans nor
Competitive Loans shall be counted toward or considered usage
under the Committed Revolving Loan facility.
- 30 -
(c) Administrative Agent's Fee. The Borrower agrees to pay
to the Administrative Agent, for its own account, the
administrative and other fees referred to in the Administrative
Agent's Fee Letter other than the Upfront Fee (the
"Administrative Agent's Fees").
(d) Competitive Bid Request Fee. The Borrower shall make
payment to the Administrative Agent of the applicable Competitive
Bid Request Fee, if any, concurrently with delivery of such
Competitive Bid Request (whether or not any Competitive Bid is
offered by a Bank, accepted by the Borrower or extended by the
offering Bank pursuant thereto).
2.12 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the
right to prepay Loans in whole or in part from time to time
without premium or penalty; provided, however, that (A)
Eurodollar Loans and Fixed Rate Loans may only be prepaid (y) on
the last day of an Interest Period applicable thereto or (z) on a
day that is not the last day of an Interest Period applicable
thereto if the Borrower pays to the applicable Banks any amounts
due under Section 2.15(ii), and (B) each such partial prepayment
shall be a minimum principal amount of $5,000,000 and integral
multiples of $1,000,000 in excess thereof (or the amount then
outstanding, if less). Amounts prepaid on the Loans may be
reborrowed in accordance with the provisions hereof. If the
Borrower shall fail to specify the manner of application,
prepayments shall be applied first to Base Rate Loans and Fed
Funds Swingline Loans, then to Eurodollar Loans and Fixed Rate
Loans in direct order of their Interest Period maturities (and
pro-rata to the extent such maturities are the same).
(b) Mandatory Prepayments. If at any time (i) the sum of
Committed Revolving Loans plus Swingline Loans plus Competitive
Loans shall exceed the lesser of the aggregate Revolving
Committed Amount or the Borrowing Base, (ii) the aggregate amount
of Swingline Loans shall exceed the Swingline Committed Amount,
or (iii) the aggregate amount of the Competitive Loans shall
exceed the Competitive Loan Maximum Amount, then in any such
instance the Borrower shall immediately make payment on the Loans
in an amount sufficient to eliminate the deficiency. In the case
of a mandatory payment required on account of subsections (ii) or
(iii), the amount required to be paid hereby shall serve to
temporarily reduce the Revolving Committed Amount (for purposes
of borrowing availability hereunder, but not for purposes of
computation of fees) by the amount of the payment required until
such time as the situation described in subsection (ii) or (iii)
shall no longer exist. Further, in the event the Borrower or any
other Credit Party shall make a public issuance of indebtedness,
then the Borrower shall immediately make payment on the Loans
hereunder in an amount equal to the lesser of (A) fifty percent
(50%) of the amount of net proceeds received from such public
issuance, or (B) the amount of Loans then outstanding, and the
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Revolving Committed Amount hereunder shall be permanently reduced
by an amount equal to fifty percent (50%) of the amount of net
proceeds received from such public issuance. Payments made under
this subsection 2.12(b) shall be applied first to Committed
Revolving Loans, then to Swingline Loans and then to Competitive
Loans, and with respect to the types of Loans, first to Base Rate
Loans and Fed Funds Swingline Loans and then to Eurodollar Loans
and Fixed Rate Loans in direct order of their Interest Period
maturities (and pro-rata to the extent such maturities are the
same). The Administrative Agent will, to the extent it may have
knowledge, as a courtesy and not as a requirement, give prompt
notice to the Borrower of any situation which may give rise to a
mandatory prepayment under this Section 2.12(b); provided,
however, delivery of any such notice by the Administrative Agent
shall not constitute any kind of condition to the Borrower's
obligation to make such mandatory prepayment, which obligation
shall exist and be immediately owing notwithstanding the failure
or inability of the Administrative Agent to give such notice.
(c) Notice. The Borrower will provide notice to the
Administrative Agent of any prepayment by 10:00 a.m. (Charlotte,
North Carolina time) on the date of prepayment.
2.13 Increased Costs, Illegality, etc. In the event any Bank shall
determine (which determination shall be final and conclusive and binding on
all the parties hereto absent manifest error) that:
(i) Unavailability. On any date for determining the
appropriate Adjusted Eurodollar Rate for any Interest Period,
that by reason of any changes arising on or after the date of
this Credit Agreement affecting the interbank Eurodollar market,
dollar deposits in the principal amount requested are not
generally available in the interbank Eurodollar Market, or
adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the
definition of Adjusted Eurodollar Rate; then Eurodollar Loans
will no longer be available, and request for a Eurodollar Loan
shall be deemed requests for Base Rate Loans, until such time as
such Bank shall notify the Borrower that the circumstances giving
rise thereto no longer exist.
(ii) Increased Costs. At any time that such Bank shall
incur increased costs or reductions in the amounts received or
receivable hereunder with respect to any Eurodollar Loans because
of (x) any change since the date of this Credit Agreement in any
applicable law, governmental rule, regulation, guideline or order
(or in the interpretation or administration thereof and including
the introduction of any new law or governmental rule, regulation,
guideline or order) including without limitation the imposition,
modification or deemed applicability of any reserves, deposits or
similar requirements (excluding taxes) as related to Eurodollar
Loans (such as, for example, but not limited to, a change in
official reserve requirements, but, in all events, excluding
reserves required under Regulation D to the extent included in
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the computation of the Adjusted Eurodollar Rate and/or (y) other
circumstances (excluding taxes) arising after the date of this
Credit Agreement affecting such Bank, the interbank Eurodollar
market or the position of such Bank in such market; then the
Borrower shall pay to such Bank promptly upon written demand
therefor, such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or
otherwise as such Bank may determine in its reasonable
discretion) as may be required to compensate such Bank for such
increased costs or reductions in amounts receivable hereunder
(written notice as to the additional amounts owed to such Bank,
showing the basis for calculation thereof, shall, absent manifest
error, be final and conclusive and binding on all parties hereto;
provided, however, that such determinations are made on a
reasonable basis).
(iii) Illegality. At any time after the date of this
Credit Agreement, that the making or continuance of any
Eurodollar Loan has become unlawful by compliance by such Bank in
good faith with any law, governmental rule, regulation, guideline
or order (or would conflict with any such governmental rule,
regulation, guideline or order not having the force of law even
though the failure to comply therewith would not be unlawful), or
has become impossible as a result of a contingency occurring
after the date of this Credit Agreement which materially and
adversely affects the interbank Eurodollar market; then
Eurodollar Loans will no longer be available, requests for
Eurodollar Loans shall be deemed requests for Base Rate Loans and
the Borrower may, and upon direction of the Bank, shall, as
promptly as possible and, in any event within the time period
required by law, have any such Eurodollar Loans then outstanding
converted into Base Rate Loans.
2.14 Capital Adequacy. If after the date of this Credit Agreement,
any Bank has determined that the adoption or effectiveness of any
applicable law, rule or regulation regarding capital adequacy, or any
change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance 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 or assets as a consequence of its commitments
or obligations hereunder to a level below that which such Bank could have
achieved but for such adoption, effectiveness, change or compliance (taking
into consideration such Bank's policies with respect to capital adequacy),
then from time to time, within 15 days after demand by such Bank, the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such reduction. Upon determining in good faith
that any additional amounts will be payable pursuant to this Section, such
Bank will give prompt written notice thereof to the Borrower, which notice
shall set forth the basis of the calculation of such additional amounts,
although the failure to give any such notice shall not release or diminish
any of the Borrower's obligations to pay additional amounts pursuant to
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this Section. Determination by any such Bank of amounts owing under this
Section shall, absent manifest error, be final and conclusive and binding
on the parties hereto; provided, however, that such determinations are made
on a reasonable basis. Failure on the part of any Bank to demand
compensation for any period hereunder shall not constitute a waiver of such
Bank's rights to demand any such compensation in such period or in any
other period; provided, however, that if such demand is made more than 180
days after the Bank had knowledge of the occurrence of any event described
above regarding capital adequacy, the Borrower shall not be obligated to
reimburse the Bank for amounts incurred prior to the date on which the
Borrower receives such demand for compensation under this Section 2.14.
2.15 Compensation. The Borrower shall compensate each Bank, upon its
written request (which request shall set forth the basis for requesting
such compensation), for all reasonable losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds
required by the Bank to fund its Eurodollar Loans or Fixed Rate Loans)
which such Bank may sustain:
(i) if for any reason a borrowing of Eurodollar Loans or
Fixed Rate Loans does not occur on a date specified therefor in a
Notice of Borrowing, Notice of Conversion or Competitive Bid
Request;
(ii) if any repayment or conversion of any Eurodollar Loan
or Fixed Rate Loan occurs on a date which is not the last day of
an Interest Period applicable thereto including without
limitation in connection with any demand, repayment, acceleration
or otherwise;
(iii) if any prepayment of any Eurodollar Loan or Fixed Rate
Loan is not made on any date specified in a notice of prepayment
given by the Borrower; or
(iv) as a consequence of (x) any other default by the
Borrower to repay its Loans when required by the terms of this
Credit Agreement or (y) an election made pursuant to this
Section.
Calculation of all amounts payable to a Bank under this Section shall be
made as though the Bank has actually funded its relevant Eurodollar Loan or
Fixed Rate Loan, in the case of Eurodollar Loans through the purchase of a
Eurodollar deposit bearing interest at the Adjusted Eurodollar Rate in an
amount equal to the amount of that Loan, having a maturity comparable to
the relevant Interest Period and in the case of Eurodollar Loans, through
the transfer of such Eurodollar deposit from an offshore office of that
Bank to a domestic office of that Bank in the United States of America;
provided, however, that each Bank may fund each of its Eurodollar Loans in
any manner it sees fit and the foregoing assumption shall be utilized only
for the calculation of amounts payable under this Section.
2.16 Net Payments. All payments made by the Borrower hereunder will
be made without setoff or counterclaim. All payments by the Borrower under
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this Credit Agreement to or for the benefit of a Bank that is not a United
States person within the meaning of Section 7701(a)(30) of the Internal
Revenue Code shall be made free and clear of and without deduction or
withholding for any future withholding or similar tax imposed by the United
States or any political subdivision thereof excluding any tax (i) on income
effectively connected with such Bank's conduct of a business within the
United States or (ii) that would not be imposed absent a failure of such
Bank to provide the documentation required by Section 2.21 hereof (such
nonexcluded taxes being hereafter referred to as the "Taxes"). If the
Borrower shall be required to withhold or deduct Taxes from any sum payable
hereunder, (i) the sum payable shall be increased as may be necessary so
that the amount received is equal to the sum which would have been received
had no withholdings or deductions been made, (ii) the Borrower shall make
such necessary withholdings or deductions, and (iii) the Borrower shall pay
the full amount withheld or deducted to the relevant authority according to
applicable law so that such Bank shall not be required to make any
deduction or payment of Taxes. If any such Bank receives a refund or
credit (against any other tax) of any Taxes paid by the Borrower hereunder,
the Bank shall promptly pay the full amount of such refund (including any
interest received thereon) or credit to the Borrower.
2.17 Change of Lending Office; Right to Substitute Lender.
(a) Each Bank agrees that, upon the occurrence of any event
giving rise to the operation of Section 2.13(ii) or (iii) or 2.16, it
will, if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Bank) to designate another
lending office for any Loans affected by such event, provided that
such designation is made on such terms that such Bank and its lending
office suffer no economic, legal or regulatory disadvantage, with the
object of avoiding the consequence of the event giving rise to the
operation of any such Section. Except in the case of a change of
lending office made at the request of the Borrower, no change in
lending office will be made if greater costs and expenses would result
under Section 2.13(ii) or (iii) or 2.16 on account of any such change
in designation. Nothing in this Section shall affect or postpone any
of the obligations of the Borrower or the right of any Bank provided
in Section 2.13, 2.14 or 2.16.
(b) In addition to the Borrower's rights under Section 2.17(a),
upon the occurrence of any event giving rise to the operation of
Section 2.13(ii) or (iii) or 2.16, the Borrower may, within a period
of sixty (60) days following the Borrower's obtaining knowledge of the
occurrence of the event giving rise to the operation of such
provisions, at its own expense, make arrangements for another bank or
financial institution reasonably acceptable to the Administrative
Agent to purchase and accept the rights and obligations under this
Credit Agreement of any Bank entitled to payment under Section
2.13(ii) or (iii) or Section 2.16, whereupon such Bank shall assign to
the bank or financial institution designated by the Borrower its
rights and obligations hereunder pursuant to the provisions of Section
10.03(b) of this Credit Agreement.
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2.18 Payments and Computations. Except as otherwise specifically
provided herein, all payments hereunder shall be made to the Administrative
Agent in U.S. dollars in immediately available funds at its offices at
NationsBank Plaza, NC1-002-06-19, Charlotte, North Carolina not later than
2:00 p.m. (Charlotte, North Carolina time) on the date when due. Payments
received after such time shall be deemed to have been received on the next
succeeding Business Day. The Administrative Agent may (but shall not be
obligated to) debit the amount of any such payment which is not made by
such time to any ordinary deposit account of the Borrower maintained with
the Administrative Agent (with notice to the Borrower). The Borrower
shall, at the time it makes any payment under this Credit Agreement,
specify to the Administrative Agent the Loans, Fees or other amounts
payable by the Borrower hereunder to which such payment is to be applied
(and in the event that it fails so to specify, or if such application would
be inconsistent with the terms hereof, the Administrative Agent shall
distribute such payment to the Banks in such manner as the Administrative
Agent may determine to be appropriate in respect of obligations owing by
the Borrower hereunder, subject to the terms of Section 2.20). The
Administrative Agent will thereafter cause to be distributed promptly like
funds relating to the payment of principal or interest or fees ratably to
the Banks entitled to receive such payments in accordance with the terms of
this Credit Agreement. Whenever any payment hereunder shall be stated to
be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day (subject to accrual of
interest and Fees for the period of such extension), except that in the
case of Eurodollar Loans, if the extension would cause the payment to be
made in the next following calendar month, then such payment shall instead
be made on the next preceding Business Day. Except as expressly provided
otherwise herein, all computations of interest and fees shall be made on
the basis of actual number of days elapsed over a year of 365/366 days, in
the case of interest on Base Rate Loans, and over a year of 360 days in all
other instances. Interest shall accrue from and include the date of
advance, but exclude the date of payment.
2.19 Pro Rata Treatment. Except to the extent otherwise provided
herein:
(a) Committed Revolving Loans. Each Committed Revolving
Loan (including without limitation each Mandatory Borrowing),
each payment or prepayment of principal of any Committed
Revolving Loan, each payment of interest on the Committed
Revolving Loans, each payment of Commitment Fees, each reduction
of the Revolving Committed Amount, and each conversion or
continuation of any Committed Revolving Loan, shall be allocated
pro rata among the relevant Banks in accordance with the
respective applicable Revolving Loan Commitments (or, if the
Commitments of such Banks have expired or been terminated, in
accordance with the principal amounts of the outstanding
Committed Revolving Loans and Participation Interests of such
Banks); and
(b) Competitive Loans. Should the Borrower fail to specify
the particular Competitive Loans as to which any payment or other
amount should be applied and it is not otherwise clear as to the
- 36 -
particular Competitive Loans to which such payment or other
amounts relate, or any such payment or other amount is to be
applied to Competitive Loans without regard to any such direction
by the Borrower, then each payment or prepayment of principal on
Competitive Loans and each payment of interest or other amount on
or in respect of Competitive Loans, shall be allocated pro rata
among the relevant Competitive Loan Banks in accordance with the
then outstanding amounts of their respective Competitive Loans.
2.20 Sharing of Payments. The Banks agree among themselves that, in
the event that any Bank shall obtain payment in respect of any Loan through
the exercise of a right of set-off, banker's lien, counterclaim or
otherwise in excess of its pro rata share as provided for in this Credit
Agreement, such Bank shall promptly purchase from the other Banks a
participation in such Loans and other obligations in such amounts, and make
such other adjustments from time to time, as shall be equitable to the end
that all Banks share such payment in accordance with their respective
ratable shares as provided for in this Credit Agreement. The Banks further
agree among themselves that if payment to a Bank obtained by such Bank
through the exercise of a right of set-off, banker's lien, counterclaim or
otherwise as aforesaid shall be rescinded or must otherwise be restored,
each Bank which shall have shared the benefit of such payment shall, by
repurchase of a participation theretofore sold, return its share of that
benefit to each Bank whose payment shall have been rescinded or otherwise
restored. The Borrower and each other Credit Party agrees that any Bank so
purchasing such a participation may, to the fullest extent permitted by
law, exercise all rights of payment, including set-off, banker's lien or
counterclaim, with respect to such participation as fully as if such Bank
were a holder of such Loan or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit
Agreement, if any Bank or the Administrative Agent shall fail to remit to
the Administrative Agent or any other Bank an amount payable by such Bank
or the Administrative Agent to the Administrative Agent or such other Bank
pursuant to this Credit Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from
the date such amount is due until the date such amount is paid to the
Administrative Agent or such other Bank at a rate per annum equal to the
Federal Funds Effective Rate.
2.21 Foreign Lenders. Each Bank (which, for purposes of this
Section 2.21, shall include any Affiliate of a Bank that makes any
Eurodollar Loan advance pursuant to the terms of this Credit Agreement)
that is not a "United States person" (as such term is defined in Section
7701(a)(30) of the Code) shall submit to the Borrower and the
Administrative Agent on or before the Closing Date (or, in the case of a
Person that becomes a Bank after the Closing Date by assignment, promptly
upon such assignment), two duly completed and signed copies of (A) either
(1) Form 1001 of the United States Internal Revenue Service entitling such
Bank to a complete exemption from withholding on all amounts to be received
by such Bank pursuant to this Agreement and/or the Notes or (2) Form 4224
of the United States Internal Revenue Service relating to all amounts to be
received by such Bank pursuant to this Agreement and/or the Notes and (B)
an Internal Revenue Service Form W-8 or W-9 entitling such Bank to receive
a complete exemption from United States backup withholding tax. Each such
- 37 -
Bank shall, from time to time thereafter, submit to the Borrower and the
Administrative Agent such additional duly completed and signed copies of
such forms (or such successor forms or other documents as shall be adopted
from time to time by the relevant United States taxing authorities) as may
be (1) reasonably requested in writing by the Borrower or the
Administrative Agent or (2) appropriate under then current United States
laws or regulations. Upon the reasonable request of the Borrower or the
Administrative Agent, each Bank that has not provided the forms or other
documents, as provided above, on the basis of being a United States person
shall submit to the Borrower and the Administrative Agent a certificate to
the effect that it is such a "United States person."
SECTION 3
GUARANTEE
3.01 The Guarantee. Each of the Guarantors hereby jointly and
severally guarantees to each Bank, the Agent, Administrative Agent and Co-
Agents as hereinafter provided the prompt payment of the Obligations in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise) strictly in accordance with the terms thereof.
The Guarantors hereby further agree that if any of the Obligations are not
paid in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or renewal of any
of the Obligations, the same will be promptly paid in full when due
(whether at extended maturity, as a mandatory prepayment, by acceleration
or otherwise) in accordance with the terms of such extension or renewal.
3.02 Obligations Unconditional. The obligations of the Guarantors
under Section 3.01 hereof are joint and several, absolute and
unconditional, irrespective of the value, genuineness, validity, regularity
or enforceability of any of the Credit Documents, or any other agreement or
instrument referred to therein, or any substitution, release or exchange of
any other guarantee of or security for any of the Obligations, and, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor, it being the
intent of this Section 3.02 that the obligations of the Guarantors
hereunder shall be absolute and unconditional under any and all
circumstances. Without limiting the generality of the foregoing, it is
agreed that, to the fullest extent permitted by law, the occurrence of any
one or more of the following shall not alter or impair the liability of any
Guarantor hereunder which shall remain absolute and unconditional as
described above:
(i) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any
of the Obligations shall be extended, or such performance or
compliance shall be waived;
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(ii) any of the acts mentioned in any of the provisions of any
of the Credit Documents or any other agreement or instrument
referred to therein shall be done or omitted;
(iii) the maturity of any of the Obligations shall be
accelerated, or any of the Obligations shall be modified,
supplemented or amended in any respect, or any right under any of
the Credit Documents or any other agreement or instrument
referred to therein shall be waived or any other guarantee of any
of the Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Administrative
Agent or any Bank or Banks as security for any of the Obligations
shall fail to attach or be perfected; or
(v) any of the Obligations shall be determined to be void or
voidable (including, without limitation, for the benefit of any
creditor of any Guarantor) or shall be subordinated to the claims
of any Person (including, without limitation, any creditor of any
Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Administrative Agent or any Bank
exhaust any right, power or remedy or proceed against any Person under any
of the Credit Documents or any other agreement or instrument referred to
therein, or against any other Person under any other guarantee of, or
security for, any of the Obligations.
3.03 Reinstatement. The obligations of the Guarantors under this
Section 3 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of any Person in respect of the
Obligations is rescinded or must be otherwise restored by any holder of any
of the Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will
indemnify each of the Administrative Agent and each Bank on demand for all
reasonable costs and expenses (including, without limitation, fees of
counsel) incurred by the Administrative Agent or such Bank in connection
with such rescission or restoration, including any such costs and expenses
incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
3.04 Certain Additional Waivers. Without limiting the generality of
the provisions of any other Section of this Section 3, each Guarantor
hereby specifically waives the benefits of VA. Code Ann. (section mark)
(section mark) 49-25 and 49-26
(1950, as amended). Each Guarantor further agrees that such Guarantor
shall have no right of recourse to security for the Obligations. In
addition, each Guarantor hereby waives and renounces any and all rights it
has or may have for subrogation, indemnity, reimbursement or contribution
against the Borrower for amounts paid by such Guarantor pursuant to Section
3.01. This waiver is expressly intended to prevent the existence of any
claim in respect to such reimbursement by any Guarantor against the estate
- 39 -
of the Borrower within the meaning of Section 101 of the Bankruptcy Code,
and to prevent any Guarantor from constituting a creditor of the Borrower
in respect of such reimbursement within the meaning of Section 547(b) of
the Bankruptcy Code in the event of a subsequent case involving the
Borrower.
3.05 Remedies. The Guarantors agree that, to the fullest extent
permitted by law, as between the Guarantors, on the one hand, and the
Administrative Agent and the Banks, on the other hand, the Obligations may
be declared to be forthwith due and payable as provided in Section 8.02
hereof (and shall be deemed to have become automatically due and payable in
the circumstances provided in said Section 8.02) for purposes of Section
3.01 hereof notwithstanding any stay, injunction or other prohibition
preventing such declaration (or preventing such Obligations from becoming
automatically due and payable) as against any other Person and that, in the
event of such declaration (or such Obligations being deemed to have become
automatically due and payable), such Obligations (whether or not due and
payable by any other Person) shall forthwith become due and payable by the
Guarantors for purposes of said Section 3.01.
3.06 Continuing Guarantee. The guarantee in this Section 3 is a
continuing guarantee, and shall apply to all Obligations whenever arising.
3.07 Limitation of Guarantee. The liability of each Guarantor with
respect to the Obligations guaranteed hereunder shall not exceed the
Maximum Guaranteed Amount as determined at the earlier of the date of
commencement of a case under the Bankruptcy Code in which the Guarantor is
a debtor or the date enforcement is sought under this Section 3.
SECTION 4
CONDITIONS PRECEDENT
4.01 Conditions to Closing. The closing of this credit facility is
subject to satisfaction of the following conditions (in form and substance
acceptable to the Administrative Agent:
(a) Executed Credit Documents. Receipt by the Administrative
Agent of copies of the Credit Agreement, the Notes and the other
Credit Documents, if any (in sufficient numbers to provide a fully
executed original to each Bank) as executed by the Borrower and the
other Credit Parties other than Stuart Medical.
(b) Fees. Payment to the Administrative Agent of the portion of
the Upfront Fees and Administrative Agent's Fees payable on the
Closing Date.
4.02 Conditions to Initial Loan Advance. The obligation of the Banks
to make the initial Loan advance is subject, at the time of the making of
such initial Loan advance, to satisfaction of the following conditions (in
form and substance acceptable to the Administrative Agent and the Required
Banks):
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(a) No Default; Representations and Warranties. Both at the
time of the making of such Loan and after giving effect thereto (i)
there shall exist no Default or Event of Default and (ii) all
representations and warranties contained herein or in the other Credit
Documents then in effect shall be true and correct in all material
respects.
(b) Opinions of Counsel. Receipt by the Administrative Agent of
the opinions of Drew St.J. Carneal, Esq., Senior Vice President and
Corporate Counsel of the Borrower, and Hunton & Williams, special
counsel to the Borrower and the Guarantors, substantially in the forms
of Schedules 4.01(b)(1) and (2), respectively, (in sufficient numbers
to provide a fully executed original to each Bank).
(c) Corporate Documents. Receipt by the Administrative Agent of
the following:
(i) Articles of Incorporation. Copies of the articles of
incorporation or charter documents of the Borrower and the
Guarantors certified to be true and complete as of a recent date
by the appropriate governmental authority of the state of its
incorporation.
(ii) Resolutions. Copies of resolutions of the Board of
Directors of the Borrower and the Guarantors approving and
adopting the Credit Documents, the transactions contemplated
therein and authorizing execution and delivery thereof, certified
by a secretary or assistant secretary as of the Closing Date to
be true and correct and in force and effect as of such date and
containing therein certification of the incumbency and specimen
signatures of the officers of the Credit Parties executing the
Credit Documents.
(iii) Bylaws. A copy of the bylaws of the Borrower and the
Guarantors certified by a secretary or assistant secretary as of
the Closing Date to be true and correct and in force and effect
as of such date.
(iv) Good Standing. Copies of (i) certificates of good
standing, existence or its equivalent with respect to the
Borrower and the Guarantors certified as of a recent date by the
appropriate governmental authorities of the state of
incorporation and each other state in which the failure to so
qualify and be in good standing would have a Material Adverse
Effect and (ii) a certificate indicating payment of all corporate
franchise taxes in such states of incorporation certified as of a
recent date by the appropriate governmental taxing authorities,
to the extent generally available from such authorities.
(d) Acquisition of Stuart Medical. Receipt by the
Administrative Agent of the Agreement of Exchange dated as of December
22, 1993 as amended and restated as of March 31, 1994 among Stuart
Medical, the Borrower and Owens & Minor, Inc. and certain shareholders
of Stuart Medical (the "Exchange Agreement") relating to the
- 41 -
acquisition of Stuart Medical by the Borrower, together with evidence
(i) that consummation of the acquisition of Stuart Medical pursuant to
the terms thereof shall have occurred prior to or will occur
contemporaneous with the initial Loan advance hereunder; (ii) that
Stuart Medical (or its assets, as appropriate) shall have been
acquired free and clear of liens, security interests, claims and other
encumbrances, except for certain permitted liens as provided in the
Exchange Agreement, all of which Liens shall, upon consummation of the
acquisition contemplated in the Exchange Agreement and the corporate
reorganization contemplated in connection therewith and funding of the
Loans hereunder, constitute Permitted Liens hereunder, (iii) that the
aggregate amount paid (including indebtedness assumed) in connection
with the acquisition of Stuart Medical shall not exceed $325,000,000
(with the Series B Preferred Stock of the Borrower to be issued in
connection with such acquisition being valued at $115,000,000 for this
purpose); (iv) that the corporate structure of the Borrower and its
Subsidiaries upon consummation of such acquisition of Stuart Medical
shall not differ in any material respect from the corporate structure
contemplated in the Exchange Agreement, (v) that all consents and
approvals, if any, necessary in connection with consummation of such
acquisition (including compliance with the Hart-Scott-Rodino Act)
shall have been obtained and (vi) that the cash amount of accounting,
investment banking, financial advisory and legal fees and expenses
paid or incurred by the Borrower in connection with such acquisition
shall not exceed $5,000,000 in the aggregate.
(e) Addition of Stuart Medical as a Credit Party. Stuart
Medical shall have joined in the execution of this Credit Agreement as
a Guarantor and Credit Party contemporaneous with the initial funding
hereunder.
(f) Termination of Existing Credit Facilities. Receipt by the
Administrative Agent of evidence of repayment and termination of the
existing revolving credit facility extended to Owens & Minor, Inc. by
Crestar Bank and NationsBank of Virginia, N.A.
(g) Outside Initial Funding Date. The Initial Funding Date
shall not occur later than May 31, 1994.
SECTION 5
REPRESENTATIONS AND WARRANTIES
Each Credit Party hereby represents and warrants to the Agents and
each Bank that:
5.01 Organization and Good Standing. Such Credit Party is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of its incorporation, is duly qualified and in good
standing as a foreign corporation authorized to do business in every
jurisdiction where the failure to so qualify would have a Material Adverse
Effect, and has the requisite corporate power and authority to own its
- 42 -
properties and to carry on its business as now conducted and as proposed to
be conducted.
5.02 Due Authorization. Such Credit Party (i) has the requisite
corporate power and authority to execute, deliver and perform this Credit
Agreement and the other Credit Documents to which it is a party and to
incur the obligations herein and therein provided for, and (ii) is duly
authorized to, and has been authorized by all necessary corporate action,
to execute, deliver and perform this Credit Agreement and the other Credit
Documents to which it is a party.
5.03 No Conflicts. Neither the execution and delivery of the Credit
Documents, nor the consummation of the transactions contemplated therein,
nor performance of and compliance with the terms and provisions thereof by
such Credit Party will (i) violate or conflict with any provision of its
articles of incorporation or bylaws, (ii) violate, contravene or materially
conflict with any law, regulation (including without limitation Regulation
U or Regulation X), order, writ, judgment, injunction, decree or permit
applicable to it, (iii) violate, contravene or materially conflict with
contractual provisions of, or cause an event of default under, any
indenture, loan agreement, mortgage, deed of trust, contract or other
agreement or instrument to which it is a party or by which it may be bound,
the violation of which would have a Material Adverse Effect, (iv) result in
or require the creation of any lien, security interest or other charge or
encumbrance (other than those contemplated in or created in connection with
the Credit Documents) upon or with respect its properties, the creation of
which would have a Material Adverse Effect.
5.04 Consents. No consent, approval, authorization or order of, or
filing, registration or qualification with, any court or governmental
authority or third party in respect of such Credit Party is required in
connection with the execution, delivery or performance of this Credit Agr-
eement or any of the other Credit Documents by the Borrower or any
Guarantor, or if required, such consent, approval and authorization has
been obtained.
5.05 Enforceable Obligations. This Credit Agreement and the other
Credit Documents have been duly executed and delivered and constitute
legal, valid and binding obligations of such Credit Party enforceable
against such Credit Party in accordance with their respective terms, except
as may be limited by bankruptcy or insolvency laws or similar laws
affecting creditors' rights generally or by general equitable principles.
5.06 Financial Condition. The financial statements and financial
information provided to the Banks, consisting of, among other things, an
audited consolidated balance sheet of the Borrower and its Subsidiaries
dated as of December 31, 1993 together with related consolidated statements
of income, stockholders' equity and changes in financial position or cash
flow certified by KPMG Peat Marwick, certified public accountants, are true
and correct in all material respects and fairly represent the financial
condition of the Borrower and its Subsidiaries as of such date; such
financial statements were prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as noted
therein); and since the date of such financial statements there have
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occurred no changes or circumstances which have had or are likely to have a
Material Adverse Effect.
5.07 No Default. No Default or Event of Default presently exists.
5.08 Liens. Except for Permitted Liens, such Credit Party has good
and marketable title to all of its properties and assets free and clear of
all liens, encumbrances, mortgages, pledges, security interests and other
adverse claims of any nature.
5.09 Indebtedness. Such Credit Party has no Indebtedness (including
without limitation Guaranty Obligations, reimbursement or other contingent
obligations) except as disclosed in the financial statements referenced in
Section 5.06 and as set forth in Schedule 5.09.
5.10 Litigation. Except as disclosed in Schedule 5.10, there are no
actions, suits or legal, equitable, arbitration or administrative
proceedings, pending or, to the knowledge of a Responsible Officer of such
Credit Party, threatened against such Credit Party or any of its Restricted
Subsidiaries which, if adversely determined, would likely have a Material
Adverse Effect. For purposes hereof, in the case of proceedings involving
only monetary damages, $5,000,000 or more in any instance shall be
considered as having a Material Adverse Effect. Since the date of this
Credit Agreement (or the date of the most recent update hereunder), there
has been no material adverse change in the status of any actions, suits,
investigations, litigation or proceedings disclosed hereunder which is
likely to result in a Material Adverse Effect.
5.11 Material Agreements. Such Credit Party is not in default in any
material respect under any contract, lease, loan agreement, indenture,
mortgage, security agreement or other material agreement or obligation to
which it is a party or by which any of its properties is bound which
default would have a Material Adverse Effect.
5.12 Taxes. Such Credit Party has filed, or caused to be filed, all
material tax returns (federal, state, local and foreign) required to be
filed and paid all amounts of taxes shown thereon to be due (including
interest and penalties) and has paid all other taxes, fees, assessments and
other governmental charges (including mortgage recording taxes, documentary
stamp taxes and intangibles taxes) owing (or necessary to preserve any
liens in favor of the Banks) by it, except for such taxes (i) which are not
yet delinquent or (ii) as are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with generally accepted accounting principles. Such Credit
Party is not aware of any proposed material tax assessments against it or
any other members of the Consolidated Borrower Group.
5.13 Compliance with Law. Such Credit Party is in substantial
compliance with all laws, rules, regulations, orders and decrees (including
without limitation environmental laws) applicable to it, or to its
properties, the failure to comply with which would have a Material Adverse
Effect.
- 44 -
5.14 ERISA. (i) No Reportable Event (as defined in ERISA) has
occurred and is continuing with respect to any Plan; (ii) no Plan has an
unfunded current liability (determined under Section 412 of the Code) or an
accumulated funding deficiency, (iii) no proceedings have been instituted,
or, to the knowledge of any Responsible Officer of such Credit Party,
planned, to terminate any Plan, (iv) neither such Credit Party nor any
member of a Controlled Group, nor any duly-appointed administrator of a
Plan has instituted or intends to institute proceedings to withdraw from
any Multiemployer Plan; and (v) each Plan has been maintained and funded in
all material respects with its terms and with the provisions of ERISA
applicable thereto.
5.15 Subsidiaries. Set forth in Schedule 5.15 is a complete and
accurate list of all Subsidiaries of each of such Credit Party. Further,
the Non-Guarantor Subsidiaries, as a group, do not exceed the Threshold
Requirement as provided in Section 6.12. Information on the attached
Schedule includes state of incorporation; the number of shares of each
class of capital stock or other equity interests outstanding; the number
and percentage of outstanding shares of each class owned (directly or
indirectly) by such Credit Party; and the number and effect, if exercised,
of all outstanding options, warrants, rights of conversion or purchase and
similar rights. The outstanding capital stock and other equity interests
of all such Subsidiaries is validly issued, fully paid and non-assessable
and is owned by such Credit Party, directly or indirectly, free and clear
of all liens, security interests and other charges or encumbrances (other
than those arising under or contemplated in connection with the Credit
Documents).
5.16 Use of Proceeds; Margin Stock. The proceeds of the Loans
hereunder will be used solely for the purposes specified in Section 6.10.
None of such proceeds will be used for the purpose of purchasing or
carrying any "margin stock" as defined in Regulation U, Regulation X or
Regulation G, or for the purpose of reducing or retiring any Indebtedness
which was originally incurred to purchase or carry "margin stock" or for
any other purpose which might constitute this transaction a "purpose
credit" within the meaning of Regulation U, Regulation X or Regulation G.
Such Credit Party does not own "margin stock" except as identified in the
financial statements referred to in Section 5.06 hereof and, as of the date
hereof, the aggregate value of all "margin stock" owned by such Credit
Party and its Subsidiaries does not exceed 25% of the value of all such
Credit Party's and its Subsidiaries' assets.
5.17 Government Regulation. Such Credit Party is not subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Investment Company Act of 1940 or the Interstate
Commerce Act, each as amended. In addition, such Credit Party is not (i)
an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, and is not controlled by such a
company, or (ii) a "holding company," or a "Subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a
"Subsidiary" or a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
- 45 -
5.18 Hazardous Substances. Except as disclosed on Schedule 5.18 or
except as would not reasonably be expected to have a Material Adverse
Effect, to the knowledge of any Responsible Officer of such Credit Party,
the real property owned or leased by such Credit Party and its Subsidiaries
or on which it or its Subsidiaries operates (the "Subject Property") (i) is
free from "hazardous substances" as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
(section mark)(section mark) 9601 et seq., as amended, and the regulations
promulgated thereunder;
(ii) no portion of the Subject Property is subject to federal, state or
local regulation or liability because of the presence of stored, leaked or
spilled petroleum products, waste materials or debris, "PCB's" or PCB items
(as defined in 40 C.F.R. (section mark)763.3), underground storage tanks,
"asbestos" (as
defined in 40 C.F.R. (section mark)763.63) or the past or present accumulation,
spillage
or leakage of any such substance; (iii) such Credit Party and its
Subsidiaries are in substantial compliance with all federal, state and
local requirements relating to protection of health or the environment in
connection with the operation of their businesses; and (iv) no Responsible
Officer of such Credit Party knows of any complaint or investigation
regarding real property which it or any other Credit Party owns or leases
or on which it or any other Credit Party operates.
5.19 Patents, Franchises, etc. Such Credit Party possesses all
material patents, trademarks, service marks, trade names, copyrights,
licenses and other rights, free from burdensome restrictions, that are
reasonably necessary for the operation of its business as presently
conducted and as proposed to be conducted. Such Credit Party has obtained
all material licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its respective property and to
the conduct of its business except as would not reasonably be expected to
have a Material Adverse Effect.
5.20 Solvency. Such Credit Party and each of its Restricted
Subsidiaries, both collectively and individually, is and, after
consummation of this Credit Agreement and after giving effect to all
Indebtedness incurred hereunder, will be, solvent.
5.21 Investments. All investments of such Credit Party are Permitted
Investments.
SECTION 6
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans, together with interest,
fees and other obligations hereunder, have been paid in full and the
Commitments hereunder shall have terminated:
6.01 Information Covenants. The Credit Parties will furnish, or
cause to be furnished, to the Administrative Agent and each Bank:
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(a) Annual Financial Statements. As soon as available and
in any event within 90 days after the close of each fiscal year
of the Borrower, a consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such fiscal year together with
related consolidated statements of income and retained earnings
and of cash flows for such fiscal year, setting forth in
comparative form consolidated figures for the preceding fiscal
year, all in reasonable detail and examined by KPMG Peat Marwick,
or other independent certified public accountants of recognized
national standing reasonably acceptable to the Required Banks and
whose opinion shall be to the effect that such consolidated
financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis (except for changes with which such accountants concur).
It is specifically understood and agreed that failure of the
annual financial statements to be accompanied by an opinion and
certificate of such accountants in form and substance as provided
herein shall constitute a Default hereunder.
(b) Quarterly Financial Statements. As soon as available
and in any event within 45 days after the end of each fiscal
quarter of the Borrower, a consolidated balance sheet of the
Borrower and its Subsidiaries and consolidating balance sheet for
the Borrower which shall include detail for Owens & Minor, Inc.
(to be renamed Owens & Minor Medical, Inc. after the Initial
Funding Date) and Stuart Medical only, and statements of income
and retained earnings and of cash flows for the Borrower and its
Subsidiaries and consolidating statements of income and retained
earnings for the Borrower which shall include detail for Owens &
Minor, Inc. (to be renamed Owens & Minor Medical, Inc. after the
Initial Funding Date) and Stuart Medical only, each for such
quarterly period and for the portion of the fiscal year ending
with such period, in each case setting forth in comparative form
consolidated figures for the corresponding period of the
preceding fiscal year (except that the balance sheet shall be
compared to that at prior year end), all in reasonable form and
detail acceptable to the Required Banks, and accompanied by a
certificate of the chief financial officer, treasurer, controller
or chief accounting officer of the Borrower, to the best of his
knowledge and belief, as being true and correct in all material
respects and as having been prepared in accordance with generally
accepted accounting principles applied on a consistent basis,
subject to changes resulting from normal year-end audit
adjustments.
(c) Borrowing Base Certificates. As soon as practicable
and in any event within 15 days after the end of each fiscal
quarter of the Borrower, a statement of the Borrowing Base and
its components as of the end of the immediately preceding fiscal
quarter, substantially in the form of Schedule 6.01(c) hereto,
certified by the chief financial officer, treasurer, controller
or chief accounting officer of the Borrower as being, to the best
of his knowledge and belief, true and correct in all material
respects as of such date.
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(d) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 6.01(a) and (b)
hereof, a certificate of the chief financial officer, treasurer,
controller or chief accounting officer of the Borrower
substantially in the form of Schedule 6.01(d) to the effect that
no Default or Event of Default exists, or if any Default or Event
of Default does exist specifying the nature and extent thereof
and what action the Borrower proposes to take with respect
thereto. In addition, the Officer's Certificate shall
demonstrate compliance of the financial covenants contained in
Section 6.11 by calculation thereof as of the end of each such
fiscal period.
(e) Accountant's Certificate. Within the period for
delivery of the annual financial statements provided in Section
6.01(a), a certificate of the accountants conducting the annual
audit stating that they have reviewed this Credit Agreement and
stating further whether, in the course of their audit, they have
become aware of any Default or Event of Default arising as a
result of a violation of the financial covenants contained in
Section 6.11 of this Credit Agreement and, if any such Default or
Event of Default exists, specifying the nature and extent
thereof.
(f) SEC and Other Reports. Promptly upon transmission
thereof, copies of any filings and registrations with, and
reports to, (i) the Securities and Exchange Commission, or any
successor agency, by the Borrower or any of its Subsidiaries, and
copies of all financial statements, proxy statements, notices and
reports as the Borrower or its Subsidiaries shall send to its
shareholders or to the holders of any other Indebtedness
(including specifically without limitation, any Subordinated
Debt) in their capacity as such holders and (ii) the United
States Environmental Protection Agency, or any state or local
agency responsible for environmental matters, the United States
Occupational Health and Safety Administration, or any state or
local agency responsible for health and safety matters, or any
successor agencies or authorities concerning environmental,
health or safety matters.
(g) Other Information. With reasonable promptness upon any
such request, such other information regarding the business,
properties or financial condition of the Borrower and its
Subsidiaries as the Administrative Agent or the Required Banks
may reasonably request.
(h) Notice of Default or Litigation. Upon any Responsible
Officer of a Credit Party obtaining knowledge thereof, such
Credit Party will give written notice to the Administrative Agent
(i) immediately, but in any event within 3 Business Days, of the
occurrence of an event or condition consisting of a Default or
Event of Default, specifying the nature and existence thereof and
what action the Borrower proposes to take with respect thereto,
and (ii) promptly, but in any event within 5 Business Days, of
- 48 -
the occurrence of any of the following with respect to any member
of the Consolidated Borrower Group: (A) the pendency or
commencement of any litigation, arbitral or governmental
proceeding against any member of the Consolidated Borrower Group
which if adversely determined is likely to have a Material
Adverse Effect, (B) any levy of an attachment, execution or other
process against its assets having a value of $500,000 or more,
(C) the occurrence of an event or condition which shall
constitute a default or event of default under any Indebtedness
of any member of the Consolidated Borrower Group which, if
accelerated as a result of such event of default would have a
Material Adverse Effect, (D) any development in its business or
affairs which has resulted in, or which any Credit Party
reasonably believes may result in, a Material Adverse Effect, or
(E) the institution of any proceedings against any member of the
Consolidated Borrower Group with respect to, or the receipt of
notice by a Responsible Officer of such Person of potential
liability or responsibility for violation, or alleged violation
of any federal, state or local law, rule or regulation, including
but not limited to, regulations promulgated under the Resource
Conservation and Recovery Act of 1976, 42 U.S.C.
(section mark)(section mark)6901 et seq.,
regulating the generation, handling or disposal of any toxic or
hazardous waste or substance or the release into the environment
or storage of any toxic or hazardous waste or substance, the
violation of which would likely have a Material Adverse Effect,
or (F) any notice or determination concerning the imposition of
any withdrawal liability by a multiemployer Plan against any
member of the Consolidated Borrower Group or any of its ERISA
Affiliates, the determination that a multiemployer Plan is, or is
expected to be, in reorganization within the meaning of Title IV
or ERISA, the termination of any Plan, and the amount of
liability incurred or which may be incurred in connection with
any such event.
6.02 Preservation of Existence and Franchises. Except as otherwise
permitted under Section 7.05, each member of the Consolidated Borrower
Group will do all things necessary in any material respect to preserve and
keep in full force and effect its existence, rights, franchises and
authority for the normal conduct of its business.
6.03 Books, Records and Inspections. Each member of the Consolidated
Borrower Group will keep complete and accurate books and records of its
transactions in accordance with good accounting practices on the basis of
generally accepted accounting principles applied on a consistent basis
(including the establishment and maintenance of appropriate reserves).
Each member of the Consolidated Borrower Group will permit on reasonable
notice and, prior to the occurrence or during the continuance of an Event
of Default, during normal business hours, officers or designated
representatives of Administrative Agent or any Bank to visit and inspect
its books of account and records and any of its properties or assets (in
whomever's possession) and to discuss the affairs, finances and accounts of
such member of the Consolidated Borrower Group with, and be advised as to
the same by, its and their officers, directors and independent accountants.
- 49 -
6.04 Compliance with Law. Each member of the Consolidated Borrower
Group will comply with all applicable laws, rules, regulations and orders
of, and all applicable restrictions imposed by all applicable Governmental
Authorities applicable to it and its property (including applicable
statutes, regulations, orders and restrictions relating to environmental
standards and controls) if noncompliance with any such law, rule,
regulation or restriction would have a Material Adverse Effect.
6.05 Payment of Taxes and Other Indebtedness. Each member of the
Consolidated Borrower Group will pay and discharge (i) all taxes,
assessments and governmental charges or levies imposed upon it, or upon its
income or profits, or upon any of its properties, before they shall become
delinquent, (ii) all lawful claims (including claims for labor, materials
and supplies) which, if unpaid, might give rise to a Lien or charge upon
any of its properties, and (iii) except as prohibited hereunder, all of its
other Indebtedness as it shall become due; provided, however, that members
of the Consolidated Borrower Group shall not be required to pay any such
tax, assessment, charge, levy, claim or Indebtedness which is being
contested in good faith by appropriate proceedings and as to which adequate
reserves therefor have been established in accordance with generally
accepted accounting principles, unless the failure to make any such payment
(a) shall give rise to an immediate right to foreclosure on a Lien securing
such amounts or (b) otherwise would have a Material Adverse Effect.
6.06 Insurance. Each member of the Consolidated Borrower Group will
at all times maintain in full force and effect insurance (including
worker's compensation insurance, liability insurance, casualty insurance
and business interruption insurance) in such amounts, covering such risks
and liabilities and with such deductibles or self-insurance retentions as
are in accordance with normal industry practice unless higher limits or
other types of coverage are required by the terms of the other Credit
Documents or are otherwise reasonably required by the Required Banks. The
present coverage of the members of the Consolidated Borrower Group is
outlined as to carrier, policy number, expiration date, type and amount on
Schedule 6.06 hereto and is acceptable to the Banks as of the Closing Date.
6.07 Maintenance of Property. Each member of the Consolidated
Borrower Group will maintain and preserve its properties and equipment used
or useful in any material portion of its business (in whomsoever's
possession as they may be) in good repair, working order and condition,
normal wear and tear, obsolescence and replacement excepted, and will make,
or cause to be made, in such properties and equipment from time to time all
repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto as may be needed or proper, to the extent and in the
manner customary for companies in similar businesses.
6.08 Performance of Obligations. Each member of the Consolidated
Borrower Group will perform in all material respects all of its obligations
(including, except as may be otherwise prohibited or contemplated
hereunder, payment of Indebtedness in accordance with its terms) under the
terms of all material agreements, indentures, mortgages, security
agreements or other debt instruments to which it is a party or by which it
is bound if the failure to do so would have a Material Adverse Effect.
- 50 -
6.09 ERISA. Each Credit Party and ERISA Affiliate will, (a) at all
times, make prompt payment of all contributions required under all employee
pension benefit plans (as defined in Section 3(2) of ERISA) ("Pension
Plans") and required to meet the minimum funding standard set forth in
ERISA with respect to each Plan; (b) promptly upon request, furnish the
Administrative Agent and the Banks copies of each annual report/return
(Form 5500 Series), as well as all schedules and attachments required to be
filed with the Department of Labor and/or the Internal Revenue Service
pursuant to ERISA, and the regulations promulgated thereunder, in
connection with each of its Pension Plans for each Plan Year; (c) notify
the Administrative Agent immediately of any fact, including, but not
limited to, any Reportable Event (as defined in ERISA) arising in
connection with any Plan, which might constitute grounds for termination
thereof by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such Plan, together with a
statement, if requested by the Bank, as to the reason therefor and the
action, if any, proposed to be taken with respect thereof; and (d) furnish
to the Administrative Agent, upon its request, such additional information
concerning any of the Pension Plans as may be reasonably requested. The
Borrower will not, nor will it permit any of its Subsidiaries or ERISA
Affiliates to (I) terminate a Plan if any such termination would have a
Material Adverse Effect, or (II) cause or permit to exist any Reportable
Event (as defined in ERISA) or other event or condition which presents a
material risk of termination at the request of the PBGC.
6.10 Use of Proceeds. The proceeds of the Loans hereunder shall be
used for the purpose of (i) financing the acquisition of the capital stock
of Stuart Medical, (ii) refinancing approximately $150,000,000 in existing
indebtedness of Stuart Medical, (iii) financing costs and expenses incurred
in connection with the acquisition of Stuart Medical, (iv) refinancing and
replacing the existing credit facility extended to Owens & Minor, Inc. by
NationsBank of Virginia, N.A. and Crestar Bank and other existing bank
indebtedness, (v) financing general working capital needs and other
corporate purposes.
6.11 Financial Covenants.
(a) Consolidated Current Ratio. The Borrower will maintain at
all times a Consolidated Current Ratio of at least 1.4 to 1.0.
(b) Consolidated Tangible Net Worth. On each Determination Date
Consolidated Tangible Net Worth will not be less than:
(i) from the Closing Date through June 29, 1994,
$50,000,000; and
(ii) on June 30, 1994 and thereafter, the sum of the
greater of
(A) $50,000,000, or
(B) the amount equal to Consolidated Tangible Net Worth as
of June 30, 1994 minus $15,000,000;
- 51 -
plus (y) on the last day of each of the Borrower's fiscal years
to occur after June 30, 1994, 50% of Consolidated Net Income for
the period from January 1, 1994 to such date (or if Consolidated
Net Income for such period is a deficit figure, then zero) plus
(z) 50% of the net proceeds received by the Borrower or any
Subsidiary pursuant to any Equity Transaction from and after the
Closing Date. As used herein, "Equity Transaction" means (i) the
issuance by the Borrower or any Subsidiary of new shares of
capital stock, unless such new shares are being issued in
exchange for an ownership interest in another Person or in
exchange for substantially all of the assets of another Person in
connection with an acquisition permitted by Section 7.05, (ii)
the issuance by the Borrower or any Subsidiary of any shares of
capital stock (or any warrants or options relating to the
subsequent purchase thereof) pursuant to the exercise of options
or warrants, and (iii) the issuance by the Borrower or any
Subsidiary of any shares of capital stock pursuant to the
conversion of any debt securities (including any Subordinated
Debt) to equity.
(c) Leverage Ratio. On each Determination Date the ratio
of Consolidated Total Debt to Consolidated Total Capitalization
will not exceed:
Leverage Ratio
From the Closing Date through the
First Anniversary Date of the
Closing Date .65 to 1.0
Thereafter through the Third Anniversary
Date of the Closing Date .60 to 1.0
Thereafter .55 to 1.0
(d) Fixed Charge Coverage Ratio. As of each Determination
Date for the Applicable Period set forth below, the Fixed Charge
Coverage Ratio will be not less than 1.5 to 1.0. The Applicable
Period for which the Fixed Charge Coverage Ratio shall be
determined shall be as follows:
Duration of Applicable
Period ending as of
Determination Date Determination Date*
End of Second Quarter 1994 One Quarter
End of Third Quarter 1994 Two Quarters
End of Fourth Quarter 1994 Three Quarters
End of First Quarter 1995 and
thereafter Four Quarters
- 52 -
* Components of the Fixed Charge Coverage Ratio shall be
determined for the Applicable Period ending as of the Determination
Date, except that determination of current maturities of Funded Debt
and current maturities of Capitalized Leases under subsection (iii) of
the definition of Consolidated Fixed Charges shall be for the duration
shown for the Applicable Period above as of the Determination Date.
6.12 Additional Subsidiaries. Where the Subsidiaries which are not
Guarantors hereunder (the "Non-Guarantor Subsidiaries") shall, as a group,
at any time constitute more than either (i) 5% of the consolidated gross
revenues for the Borrower and its Subsidiaries, (ii) 5% of consolidated net
income for the Borrower and its Subsidiaries, or (iii) 5% of consolidated
assets for the Borrower and its Subsidiaries (collectively, the "Threshold
Requirement"), the Borrower will promptly notify the Administrative Agent
thereof, and promptly cause one or more of the Non-Guarantor Subsidiaries
to become a "Guarantor" hereunder by way of execution of a Joinder
Agreement, such that immediately after the joinder of such Subsidiaries as
Guarantors hereunder, the remaining Non-Guarantor Subsidiaries shall not,
as a group, exceed the Threshold Requirement. The Borrower may at any
time, at its option, cause a Non-Guarantor Subsidiary to sign a Joinder
Agreement at which time such Subsidiary shall become a Guarantor and a
Credit Party under this Credit Agreement.
6.13 Interest Rate Protection Agreements. The Borrower shall, within
90 days of the Closing Date, enter into interest rate protection agreements
protecting against fluctuations in interest rates as to which the material
terms are reasonably satisfactory to the Administrative Agent and the
Required Banks, which agreements shall provide coverage for an amount equal
to at least (i) 50% of the initial borrowing on the Closing Date hereunder
less (ii) the amount of any mandatory prepayments made by the Borrower
pursuant to Section 2.12(b) in connection with the public issuance of
indebtedness. If at any time following the Borrower's entering into such
interest rate protection agreement the Borrower makes a mandatory
prepayment pursuant to Section 2.12(b) in connection with the public
issuance of indebtedness, the Borrower may reduce the amount subject to
such interest rate protection agreement by an amount equal to the amount of
such mandatory prepayment.
SECTION 7
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans, together with interest,
fees and other obligations hereunder, have been paid in full and the
Commitments hereunder shall have terminated:
7.01 Indebtedness. Neither the Borrower nor any of its Restricted
Subsidiaries will contract, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and
the other Credit Documents;
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(b) Indebtedness existing as of the Closing Date as
referenced in Section 5.09 (and renewals, refinancings or
extensions thereof on terms and conditions no more favorable to
such Person than such existing Indebtedness (taking into account
reasonable market conditions existing at such time) and in a
principal amount not in excess of that outstanding as of the date
of such renewal, refinancing or extension), including
specifically without limitation the Hygeia Notes;
(c) Indebtedness in respect of current accounts payable or
accrued (other than for borrowed money or purchase money
obligations) and incurred in the ordinary course of business,
provided, that all such liabilities, accounts and claims shall be
paid when due (or in conformity with customary trade terms);
(d) Purchase money Indebtedness and capital lease
obligations relating to Capitalized Leases incurred to finance
the purchase or lease of fixed assets provided that (i) the total
of all such Indebtedness and obligations shall not exceed an
aggregate principal amount of $10,000,000 at any one time
outstanding; (ii) such Indebtedness and obligations when incurred
shall not exceed the purchase price of the asset financed; and
(iii) no such Indebtedness and obligations shall be refinanced
for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing; and
(e) Publicly issued Indebtedness of the Borrower on terms
acceptable to the Administrative Agent and the Required Banks,
subject to a prepayment of net proceeds thereof and reduction in
the Commitments hereunder in accordance with the provisions of
Section 2.12(b);
(f) Unsecured intercompany Indebtedness among the Credit
Parties;
(g) Other short term unsecured indebtedness for borrowed
money (including Guaranty Obligations) by the Borrower which does
not exceed $5,000,000 in the aggregate at any time outstanding;
(h) Obligations under or arising in connection with the
Interest Rate Protection Agreements required pursuant to Section
6.13.
7.02 Liens. Neither the Borrower nor any of its Restricted
Subsidiaries will contract, create, incur, assume or permit to exist any
Lien with respect to any of its property or assets of any kind (whether
real or personal, tangible or intangible), whether now owned or after
acquired, except for Permitted Liens.
7.03 Guaranty Obligations. Neither the Borrower nor any of its
Restricted Subsidiaries will enter into or otherwise become or be liable in
respect of any Guaranty Obligations (excluding specifically therefrom
endorsements in the ordinary course of business of negotiable instruments
for deposit or collection) other than (i) those in favor of the Banks in
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connection herewith, (ii) guaranty of indebtedness of account debtors of
the Credit Parties relating to the financing or refinancing of trade
receivables owing to the Credit Parties in an aggregate amount not to
exceed $1,000,000, (iii) guaranty by the Credit Parties in respect of
publicly issued Indebtedness of the Borrower permitted under Section
7.01(e) and in respect of Obligations under or arising in connection with
Interest Rate Protection Agreements required pursuant to Section 6.13, and
(iv) other Guaranty Obligations to the extent permitted pursuant to Section
7.01.
7.04 Nature of Business. Neither the Borrower nor any of its
Restricted Subsidiaries will substantively alter the character of its
business in any material respect from that conducted as of the Closing
Date.
7.05 Consolidation, Merger, Sale or Purchase of Assets, etc. Neither
the Borrower nor any of its Restricted Subsidiaries will
(a) dissolve, liquidate, or wind up its affairs, sell, transfer,
lease or otherwise dispose of all or any substantial part of its
property or assets (other than in the ordinary course of business for
fair consideration), or agree to any of the foregoing at a future
time, except for the sale or disposition of machinery and equipment no
longer useful in the conduct of its business. As used herein,
"substantial part" shall mean if the book value of such assets, when
added to the book value of all other assets sold, leased or otherwise
disposed of by the Borrower and its Restricted Subsidiaries (other
than in the ordinary course of business), (i) during the 12-month
period ending with the date of such sale, lease or other disposition
exceeds 10% of consolidated assets, determined as of the end of the
immediately preceding fiscal year, or (ii) during the period beginning
on the date of this Credit Agreement and ending on the date of such
sale, lease or other disposition, exceeds an amount equal to 20% of
consolidated assets determined as of the end of the immediately
preceding fiscal year (but with adjustment to include the assets of
Stuart Medical in the case of fiscal year 1994); or
(b) purchase, lease or otherwise acquire (in a single
transaction or a series of related transactions) all or any
substantial part of the property or assets of any Person (other than
purchases or other acquisitions of inventory, leases, materials,
property and equipment in the ordinary course of business, except as
otherwise limited or prohibited herein), or enter into any transaction
of merger or consolidation, or agree to do any of the foregoing at a
future time, except for (i) Capital Expenditures to the extent of the
limitations set out in Section 6.11(d) by way of inclusion of Capital
Expenditures in the definition of "Consolidated Net Income Available
for Fixed Charges" as used therein, (ii) investments, acquisitions and
transfers or dispositions of properties permitted pursuant to Section
7.06, (iii) the merger or consolidation of a Restricted Subsidiary
into, or a sale, transfer or lease of all or a substantial part of its
properties (at fair value) to, a Credit Party, and (iv) the merger of
any Person into a Credit Party, provided that the Credit Party shall
be the surviving corporation, and management and control of the Credit
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Party shall remain substantially unchanged and no Default or Event of
Default shall exist either immediately prior to or after giving effect
to such merger. Notwithstanding the foregoing, other than Capital
Expenditures permitted pursuant to Section 6.11(d) by way of inclusion
of Capital Expenditures in the definition of "Consolidated Net Income
Available for Fixed Charges" as used therein, investments pursuant to
Section 7.06 and the acquisition of Stuart Medical, in the case of an
acquisition by the Borrower or its Restricted Subsidiaries, whether by
way of asset purchase, stock or securities purchase or merger or
consolidation, the aggregate consideration paid in connection with
such acquisitions whether in cash, securities, property or other
consideration, shall not exceed $25,000,000 for the remainder of
fiscal year 1994, and thereafter, for any fiscal year, 40% of
Consolidated Tangible Net Worth as of the last day of the immediately
preceding fiscal year. The Borrower will, in connection with any such
material purchase, lease or acquisition and prior to giving effect
thereto, deliver to the Administrative Agent a pro forma statement
demonstrating compliance with the provisions hereof.
7.06 Advances, Investments and Loans. Neither the Borrower nor any
of its Restricted Subsidiaries will lend money or credit or make advances
to any Person, or purchase or acquire any stock, obligations or securities
of, or any other interest in, or make any capital contribution to any
Person except for Permitted Investments.
7.07 Prepayments of Indebtedness, etc. Except (A) as to the 61/2%
Convertible Subordinated Note Due May 31, 1996 of Owens & Minor, Inc.
(which is to be exchanged for a 9.10% Convertible Subordinated Note of the
Borrower in connection with the consummation of the Exchange Agreement) and
the 0% Subordinated Note Due May 31, 1997 of Owens & Minor, Inc., as the
same is to be amended in connection with the consummation of the Exchange
Agreement (collectively referred to as the "Hygeia Notes") and (B)
prepayments in respect of capital lease obligations relating to Capitalized
Leases not to exceed $5,000,000 in the aggregate in any fiscal year,
neither the Borrower nor any of its Restricted Subsidiaries will (i) after
the issuance thereof, amend or modify (or permit the amendment or
modification of), any of the terms of any subordinated or senior funded
indebtedness for borrowed money to the extent any such amendment or
modification would be reasonably adverse to the interests of the Banks,
(ii) make (or give any notice with respect thereto) any voluntary or
optional payment or prepayment or redemption or acquisition for value of
(including without limitation, by way of depositing money or securities
with the trustee with respect thereto before due for the purpose of paying
when due) or exchange of any other Indebtedness for borrowed money or (iii)
make any payment, prepayment, redemption, acquisition for value of
(including without limitation, by way of depositing money or securities
with the trustee with respect thereto before due for the purpose of paying
when due) refund, refinance or exchange of any Subordinated Debt. As used
herein, "Subordinated Debt" means any indebtedness for borrowed money which
by its terms is, or upon the happening of certain events may become,
subordinated in right of payment to the Loans and other amounts owing
hereunder or in connection herewith.
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7.08 Transactions with Affiliates. No member of the Consolidated
Borrower Group will enter into any transaction or series of transactions,
whether or not in the ordinary course of business, with any officer,
director, shareholder, Subsidiary or Affiliate other than on terms and
conditions substantially as favorable as would be obtainable in a
comparable arm's-length transaction with a Person other than an Affiliate.
7.09 Ownership of Subsidiaries. Neither the Borrower nor any of its
Restricted Subsidiaries will sell, transfer or otherwise dispose of, any
shares of capital stock of any Subsidiaries or permit any Subsidiaries to
issue, sell or otherwise dispose of, any shares of capital stock of any
Subsidiary. Neither the Borrower nor any of its Restricted Subsidiaries
will create, form or acquire a Subsidiary unless such Subsidiary is or
would be a Restricted Subsidiary.
7.10 Fiscal Year. Neither the Borrower nor any of its Restricted
Subsidiaries will change its fiscal year.
7.11 Subsidiary Dividends. Neither the Borrower nor any of the other
Credit Parties will enter into, assume or otherwise become subject to, or
permit any of their respective Subsidiaries to enter into, assume or
otherwise become subject to, any agreement prohibiting or otherwise
restricting the payment of dividends by any of the Borrower's Subsidiaries.
SECTION 8
EVENTS OF DEFAULT
8.01 Events of Default. An Event of Default shall exist upon the
occurrence of any of the following specified events (each an "Event of
Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal of
any of the Loans, or
(ii) default, and such default shall continue for three
(3) or more days, in the payment when due of any interest
on the Loans, or of any fees or other amounts owing
hereunder, under any of the other Credit Documents or in
connection herewith; or
(b) Representations. Any representation, warranty or
statement made or deemed to be made by any Credit Party herein,
in any of the other Credit Documents, or in any statement or
certificate delivered or required to be delivered pursuant hereto
or thereto shall prove untrue in any material respect on the date
as of which it was deemed to have been made; or
(c) Covenants. Any Credit Party shall
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(i) default in the due performance or observance of any
term, covenant or agreement contained in Sections 6.01(h),
6.02, 6.10, 6.11 or 7.01 through 7.11, inclusive, or
(ii) default in the due performance or observance by it
of any term, covenant or agreement (other than those
referred to in subsections (a), (b) or (c)(i) of this
Section 8.01) contained in this Credit Agreement and such
default shall continue unremedied for a period of at least
30 days after the earlier of a Responsible Officer becoming
aware of such default or notice thereof by the
Administrative Agent; provided, however, that if such
default cannot be cured within such period, the Borrower or
other Credit Party may have such additional period of time
not to exceed 30 days after the expiration of such original
30 day period, and such default shall not constitute an
Event of Default hereunder, so long as the applicable Credit
Party shall commence within such original 30 day period, and
diligently pursue, appropriate curative efforts; or
(d) Other Credit Documents. (i) Any Credit Party shall
default in the due performance or observance of any term,
covenant or agreement in any of the other Credit Documents
(subject to applicable grace or cure periods, if any), or (ii)
any Credit Document shall fail to be in full force and effect or
to give the Administrative Agent and/or the Banks the liens,
rights, powers and privileges purported to be created thereby; or
(e) Guaranties. The guaranty given by the Credit Parties
hereunder or by any Additional Credit Party hereafter or any
material provision thereof shall cease to be in full force and
effect, or any Guarantor thereunder or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's
obligations under such guaranty, or any Guarantor shall default
in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to any
guaranty; or
(f) Bankruptcy, etc. The Borrower or any Restricted
Subsidiary shall commence a voluntary case concerning itself
under the Bankruptcy Code; or an involuntary case is commenced
against the Borrower or any Restricted Subsidiary under the
Bankruptcy Code and the petition is not dismissed within 90 days
after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of all or
substantially all of the property of the Borrower or any
Restricted Subsidiary; or the Borrower or any Restricted
Subsidiary commences any other proceeding under any
reorganization, arrangement, adjustment of the debt, relief of
creditors, dissolution, insolvency or similar law of any
jurisdiction whether now or hereafter in effect relating to the
Borrower or any Restricted Subsidiary; or there is commenced
against the Borrower or any Restricted Subsidiary any such
proceeding which remains undismissed for a period of 90 days; or
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the Borrower or any Restricted Subsidiary is adjudicated
insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Borrower
or any Restricted Subsidiary suffers appointment of any custodian
or the like for it or for any substantial part of its property to
continue unchanged or unstayed for a period of 90 days; or the
Borrower or any Restricted Subsidiary makes a general assignment
for the benefit of creditors; or any corporate action is taken by
the Borrower or any Restricted Subsidiary for the purpose of
effecting any of the foregoing; or
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this
Credit Agreement) in excess of $15,000,000 in the aggregate for
the Borrower and its Restricted Subsidiaries, (i) the Borrower or
any of its Restricted Subsidiaries shall (A) default in any
payment (beyond the applicable grace period with respect thereto,
if any) with respect to any such Indebtedness, or (B) default in
the observance or performance relating to such Indebtedness or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event or condition shall occur or
condition exist, the effect of which default or other event or
condition is to cause, or permit, the holder or holders of such
Indebtedness (or trustee or agent on behalf of such holders) to
cause, any such Indebtedness to become due prior to its stated
maturity; or (ii) any such Indebtedness shall be declared due and
payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity
thereof; or
(h) Judgments. One or more judgments or decrees shall be
entered against the Borrower or any Restricted Subsidiary
involving a liability of $500,000 or more in the aggregate (to
the extent not paid or fully covered by insurance provided by a
carrier who has acknowledged coverage) and any such judgments or
decrees shall not have been vacated, discharged or stayed or
bonded pending appeal within 30 days from the entry thereof; or
(i) ERISA. (i) Any Credit Party or any member of the
Controlled Group shall fail to pay when due an amount or amounts
aggregating in excess of $500,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans which in the aggregate have unfunded
liabilities in excess of $500,000 (individually and collectively,
a "Material Plan") shall be filed under Title IV of ERISA by any
such member of the Consolidated Borrower Group or any member of
the Controlled Group, any plan administrator or any combination
of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to
cause a trustee to be appointed to administer any Material Plan;
or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan
must be terminated; or there shall occur a complete or partial
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withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer
Plans which could cause one or more members of the Controlled
Group to incur a current payment obligation in excess of
$500,000; or
(j) Ownership. There shall occur a Change of Control.
8.02 Acceleration; Remedies. Upon the occurrence of an Event of
Default, and at any time thereafter unless and until such Event of Default
has been waived by the Required Banks or cured to the satisfaction of the
Required Banks (pursuant to the voting procedures in Section 10.06), the
Administrative Agent may, and upon the request and direction of the
Required Banks, shall, by written notice to the Borrower take any of the
following actions without prejudice to the rights of the Administrative
Agent or any Bank to enforce its claims against the Credit Parties, except
as otherwise specifically provided for herein:
(i) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately
terminated.
(ii) Acceleration of Loans. Declare the unpaid principal of
and any accrued interest in respect of all Loans and any and all
other indebtedness or obligations of any and every kind owing by
the Borrower to any of the Banks hereunder to be due whereupon
the same shall be immediately due and payable without
presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower.
(iii) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents and all
rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
8.01(f) shall occur, then the Commitments shall automatically terminate and
all Loans, all accrued interest in respect thereof, all accrued and unpaid
Fees and other indebtedness or obligations owing to the Banks hereunder
shall immediately become due and payable without the giving of any notice
or other action by the Administrative Agent or the Banks.
SECTION 9
AGENCY PROVISIONS
9.01 Appointment. Each Bank hereby designates and appoints
NationsBank of North Carolina, N.A. as agent (in such capacity as Agent
hereunder, the "Agent"), Chemical Bank, N.A. and Crestar Bank as co-agents
(in such capacity as Co-Agent hereunder, the "Co-Agents") and NationsBank
of North Carolina, N.A. as administrative agent (in such capacity as
Administrative Agent hereunder, the "Administrative Agent") of such Bank to
act as specified herein and the other Credit Documents, and each such Bank
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hereby authorizes the Agent, the Administrative Agent and the Co-Agents,
respectively, as the agent for such Bank, to take such action on its behalf
under the provisions of this Credit Agreement and the other Credit
Documents and to exercise such powers and perform such duties as are
expressly delegated by the terms hereof and of the other Credit Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere herein and in the
other Credit Documents, neither the Agent, the Co-Agents nor the
Administrative Agent shall have any duties or responsibilities, except
those expressly set forth herein and therein, or any fiduciary relationship
with any Bank, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Credit Agreement
or any of the other Credit Documents, or shall otherwise exist against the
Agents. To the extent that the provisions of this Section relate to
intercreditor or other issues as between and among the Agents and the
Banks, they are solely for the benefit of the Agents and the Banks and none
of the Credit Parties shall have any rights as a third party beneficiary of
the provisions hereof. In performing its functions and duties under this
Credit Agreement and the other Credit Documents, the Agent, the
Administrative Agent and the Co-Agents shall act solely as agents of the
Banks and do not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for the Borrower or
any other Credit Party.
9.02 Delegation of Duties. The Agents may execute any of their
respective duties hereunder or under the other Credit Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Agents shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
9.03 Exculpatory Provisions. Neither the Agent, the Co-Agents nor
the Administrative Agent nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for
any action lawfully taken or omitted to be taken by it or such Person under
or in connection herewith or in connection with any of the other Credit
Documents (except for its or such Person's own gross negligence or willful
misconduct), or (ii) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by any of the
Credit Parties contained herein or in any of the other Credit Documents or
in any certificate, report, statement or other document referred to or
provided for in, or received by the Administrative Agent under or in
connection herewith or in connection with the other Credit Documents, or
enforceability or sufficiency hereof or of any of the other Credit
Documents, or for any failure of the Borrower to perform its obligations
hereunder or thereunder. Neither the Agent, the Co-Agents nor the
Administrative Agent shall be responsible to any Bank for the
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Credit Agreement, or any of the other Credit Documents
or for any representations, warranties, recitals or statements made herein
or therein or made by the Borrower or any Credit Party in any written or
oral statement or in any financial or other statements, instruments,
reports, certificates or any other documents in connection herewith or
therewith furnished or made by the Agent, the Co-Agents or the
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Administrative Agent to the Banks or by or on behalf of the Credit Parties
to the Agent, the Co-Agents or the Administrative Agent or any Bank or be
required to ascertain or inquire as to the performance or observance of any
of the terms, conditions, provisions, covenants or agreements contained
herein or therein or as to the use of the proceeds of the Loans or of the
existence or possible existence of any Default or Event of Default or to
inspect the properties, books or records of the Credit Parties.
9.04 Reliance on Communications. The Agent, the Co-Agents and the
Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation
reasonably believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower or any of the other Credit Parties, independent accountants and
other experts selected by the Administrative Agent with reasonable care).
The Administrative Agent may deem and treat the Banks as the owner of their
respective interests hereunder for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent in accordance with Section 10.03(b) hereof. The
Administrative Agent shall be fully justified in failing or refusing to
take any action under this Credit Agreement or under any of the other
Credit Documents unless it shall first receive such advice or concurrence
of the Required Banks as it deems appropriate or it shall first be
indemnified to its satisfaction by the Banks against any and all liability
and expense which may be incurred by it by reason of taking or continuing
to take any such action. The Administrative Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or under
any of the other Credit Documents in accordance with a request of the
Required Banks (or to the extent specifically provided in Section 10.06,
all the Banks) and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Banks (including their
successors and assigns).
9.05 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from
a Bank or a Credit Party referring to the Credit Document, describing such
Default or Event of Default and stating that such notice is a "notice of
default." In the event that the Administrative Agent receives such a
notice, the Administrative Agent shall give prompt notice thereof to the
Banks. The Administrative Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the
Required Banks.
9.06 Non-Reliance on Agents and Other Banks. Each Bank expressly
acknowledges that neither the Agent, the Co-Agents nor the Administrative
Agent nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates has made any representations or warranties
to it and that no act by the Agent, the Co-Agents or the Administrative
Agent or any affiliate thereof hereinafter taken, including any review of
the affairs of the Borrower, shall be deemed to constitute any
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representation or warranty by the Agent, the Co-Agents or the
Administrative Agent to any Bank. Each Bank represents to the Agent, the
Co-Agents and the Administrative Agent that it has, independently and
without reliance upon the Agent, the Co-Agents or the Administrative Agent
or any other Bank, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Borrower and made its own decision to
make its Loans hereunder and enter into this Credit Agreement. Each Bank
also represents that it will, independently and without reliance upon the
Agent, the Co-Agents or the Administrative Agent or any other Bank, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Credit Agreement, and to make such
investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Banks by the
Administrative Agent hereunder, neither the Agent, the Co-Agents nor the
Administrative Agent shall have any duty or responsibility to provide any
Bank with any credit or other information concerning the business,
operations, assets, property, financial or other conditions, prospects or
creditworthiness of the Borrower which may come into the possession of the
Agent, the Co-Agents nor the Administrative Agent or any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates.
9.07 Indemnification. The Banks agree to indemnify the Agent, the
Co-Agents and the Administrative Agent in their respective capacities as
such (to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably according to their respective
Commitments, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including
without limitation at any time following the payment of the Obligations) be
imposed on, incurred by or asserted against the Agent, the Co-Agents or the
Administrative Agent in their respective capacities as such in any way
relating to or arising out of this Credit Agreement or the other Credit
Documents or any documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby or any action taken or
omitted by the Agent, the Co-Agents or the Administrative Agent under or in
connection with any of the foregoing; provided that no Bank shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or willful misconduct of
the Agent, a Co-Agent or the Administrative Agent. If any indemnity
furnished to the Agent, the Co-Agents or the Administrative Agent for any
purpose shall, in the opinion of the Agent, the Co-Agents or the
Administrative Agent, be insufficient or become impaired, the
Administrative Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional
indemnity is furnished. The agreements in this Section shall survive the
payment of the Obligations and all other amounts payable hereunder and
under the other Credit Documents.
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9.08 Agents in their Individual Capacity. The Agent, the Co-Agents
and the Administrative Agent and their respective affiliates may make loans
to, accept deposits from and generally engage in any kind of business with
the Borrower or any other members of the Consolidated Borrower Group as
though the Agent, the Co-Agents or the Administrative Agent were not the
Agent, a Co-Agent or Administrative Agent hereunder. With respect to the
Loans made and all Obligations owing to it, the Agent, the Co-Agent or the
Administrative Agent shall have the same rights and powers under this
Credit Agreement as any Bank and may exercise the same as though they were
not the Agent, a Co-Agent or Administrative Agent, and the terms "Bank" and
"Banks" shall include the Agent, the Co-Agents and the Administrative Agent
in their individual capacity.
9.09 Successor Agent. The Agent, the Administrative Agent and any
Co-Agent may, at any time, resign upon 30 days' written notice to the Banks
and the Borrower, and be removed with or without cause by the Required
Banks upon 30 days' written notice to the Borrower and the Agent, the Co-
Agent or Administrative Agent. Upon any such resignation or removal, the
Required Banks, with the consent of the Borrower (which consent shall not
be unreasonably withheld or delayed), shall have the right to appoint a
successor Agent, Co-Agent or Administrative Agent. If no successor Agent,
Co-Agent or Administrative Agent shall have been so appointed by the
Required Banks, and shall have accepted such appointment, within 30 days
after the notice of resignation or notice of removal, as appropriate, then
the retiring Agent, Co-Agent or Administrative Agent shall select a
successor Agent, Co-Agent or Administrative Agent, with the consent of the
Borrower (which consent shall not be unreasonably withheld or delayed),
provided such successor is a Bank hereunder or a commercial bank organized
under the laws of the United States of America or of any State thereof and
has a combined capital and surplus of at least $400,000,000. Upon the
acceptance of any appointment as Agent, Co-Agent or Administrative Agent
hereunder by a successor, such successor Co-Agent or Administrative Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, Co-Agent or Administrative
Agent, and the retiring Agent, Co-Agent or Administrative Agent shall be
discharged from its duties and obligations as Agent, Co-Agent or
Administrative Agent, as appropriate, under this Credit Agreement and the
other Credit Documents and the provisions of this Section 9.09 shall inure
to its benefit as to any actions taken or omitted to be taken by it while
it was Agent, Co-Agent or Administrative Agent under this Credit Agreement.
SECTION 10
MISCELLANEOUS
10.01 Notices. Except as otherwise expressly provided herein, all
notices and other communications shall have been duly given and shall be
effective (i) when delivered, (ii) when transmitted via telecopy (or other
facsimile device) to the number set out below, (iii) the day following the
day on which the same has been delivered prepaid to a reputable national
overnight air courier service, or (iv) the third Business Day following the
day on which the same is sent by certified or registered mail, postage
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prepaid, in each case to the respective parties at the address, in the case
of the Borrower and the Administrative Agent, set forth below, and in the
case of the Banks, set forth on Schedule 2.01(a), or at such other address
as such party may specify by written notice to the other parties hereto:
if to the Borrower or the Guarantors:
Owens & Minor, Inc.
4800 Cox Road
Glen Allen, Virginia 23060
Attn: Richard F. Bozard
Telephone: (804) 965-2921
Telecopy: (804) 965-5403
if to the Agent, the Administrative Agent or the Swingline Lender:
NationsBank of North Carolina, N.A.
NationsBank Plaza, 6th Floor
NC1-002-06-19
Charlotte, North Carolina 28255
Attn: Tracy Crotts
Telephone: (704) 386-9368
Telecopy: (704) 386-9923
with a copy to:
NationsBank of North Carolina, N.A.
1111 East Main Street
Fourth Floor Pavilion
VA2-310-04-07
Richmond, Virginia 23277-0001
Attn: Robert Y. Bennett
Vice President
Telephone: (804) 788-3631
Telecopy: (804) 788-3669
10.02 Right of Set-Off. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of
any such rights, the Borrower agrees that upon the occurrence and during
the continuance of an Event of Default and the commencement of the remedies
described in Section 8.02 hereof, each Bank is authorized at any time and
from time to time, without presentment, demand, protest or other notice of
any kind (all of which rights being hereby expressly waived), to set-off
and to appropriate and apply any and all deposits (general or special) and
any other indebtedness at any time held or owing by such Bank (including,
without limitation branches, agencies or Affiliates of such Bank wherever
located) to or for the credit or the account of the Borrower against
obligations and liabilities of the Borrower to such Bank hereunder, under
the Notes, the other Credit Documents or otherwise, irrespective of whether
such Bank shall have made any demand hereunder and although such
obligations, liabilities or claims, or any of them, may be contingent or
unmatured, and any such set-off shall be deemed to have been made
immediately upon the occurrence of an Event of Default even though such
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charge is made or entered on the books of such Bank subsequent thereto.
The Borrower hereby agrees that any Person purchasing a participation in
the Loans and Commitments hereunder pursuant to Section 10.03(c) or Section
2.20. may exercise all rights of set-off with respect to its participation
interest as fully as if such Person were a Bank hereunder. The
Administrative Agent and the Banks agree to give written notice to the
appropriate Credit Party of any exercise of set-off, bankers' lien or other
similar right; provided, however, that any such notice need not be given in
advance of the exercise thereof.
10.03 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided that the
Borrower may not assign and transfer any of its interests without
prior written consent of the Banks; provided further that the
rights of each Bank to transfer, assign or grant participations
in its rights and/or obligations hereunder shall be limited as
set forth in this Section 10.03, provided however that nothing
herein shall prevent or prohibit any Bank from (i) pledging its
Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank, or
(ii) granting assignments or participation in such Bank's Loans
and/or Commitments hereunder to its parent company and/or to any
affiliate of such Bank which is at least 50% owned by such Bank
or its parent company.
(b) Assignments. Each Bank may with the prior written
consent of the Borrower and the Administrative Agent, which
consent shall not be unreasonably withheld or delayed, assign all
or a portion of its rights and obligations hereunder pursuant to
an assignment agreement (an "Assignment") substantially in the
form of Schedule 10.03(b) to one or more Eligible Assignees,
provided that (i) any such prospective assignment shall first be
offered to the other Banks on the same terms and conditions as
are available to the prospective assignee, (ii) so long as no
Event of Default shall then exist and be continuing, after a
period of 15 days from first offering such assignment interest to
the Banks as provided in the foregoing subsection (i) hereof, the
assigning Bank shall give notice to the Borrower of any such
prospective assignment and the Borrower may, at its own expense
with the assistance of the Administrative Agent, within a period
of 30 days thereafter, make arrangements for another bank or
financial institution reasonably acceptable to the Administrative
Agent to purchase and accept such assignment interest (at par
without payment of any fee, other than the $1,500 transfer fee to
the Administrative Agent described below, on account thereof),
(iii) any such assignment shall be in a minimum aggregate amount
of $10,000,000 of the Commitments and in integral multiples of
$1,000,000 above such amount, and (iv) each such assignment shall
be of a constant not varying the percentage of all of the
assigning Bank's rights and obligations under this Credit
Agreement. The Administrative Agent shall maintain a copy of
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each Assignment and the names and addresses of the Banks, and the
Commitment of, and principal amount of the Loans owing to, each
Bank pursuant to the terms hereof from time to time (the
"Register"). The entries in the Register shall be conclusive in
the absence of manifest error and the Credit Parties, the Agents
and the Banks may treat each person whose name is recorded in the
Register pursuant to the terms hereof as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for
inspection by the Borrower and any Bank, at any reasonable time
and from time to time upon reasonable prior notice. Any such
assignment hereunder shall be effective upon (i) the written
consent of the Borrower and the Administrative Agent, (ii)
delivery to the Administrative Agent of a copy of the Assignment
together with a transfer fee of $1,500 payable by the assigning
Bank to the Administrative Agent for its own account and (iii)
the Administrative Agent's recordation of the name of the
assignee in the Register. The assigning Bank will give prompt
notice to the Administrative Agent and the Borrower of any
Assignment. Upon the effectiveness of any such assignment (and
after notice to the Borrower as provided herein), the assignee
shall become a "Bank" for all purposes of this Credit Agreement
and the other Credit Documents and, to the extent of such
assignment, the assigning Bank shall be relieved of its
obligations hereunder to the extent of the Loans and Commitment
components being assigned. Along such lines the Borrower agrees
that upon notice of any such assignment and surrender of the
appropriate Note or Notes, it will promptly provide to the
assigning Bank and to the assignee separate promissory notes in
the amount of their respective interests substantially in the
form of the original Note (but with notation thereon that it is
given in substitution for and replacement of the original Note or
any replacement notes thereof). All surrendered Notes shall be
canceled and returned to the Borrower.
(c) Participations. Each Bank may sell, transfer, grant or
assign participations in all or any part of such Bank's interests
and obligations hereunder; provided that (i) such selling Bank
shall remain a "Bank" for all purposes under this Credit
Agreement (such selling Bank's obligations under the Credit
Documents remaining unchanged) and the participant shall not
constitute a Bank hereunder, (ii) no such participant shall have,
or be granted, rights to approve any amendment or waiver relating
to this Credit Agreement or the other Credit Documents except to
the extent any such amendment or waiver would (A) reduce the
principal of or rate of interest on or fees in respect of any
Loans in which the participant is participating, (B) postpone the
date fixed for any payment of principal (including extension of
the Termination Date or the date of any mandatory prepayment),
interest or fees in which the participant is participating, or
(C) release all or substantially all of the collateral or
guaranties (except as expressly provided in the Credit Documents)
supporting any of the Loans or Commitments in which the
participant is participating, (iii) sub-participations by the
participant (except to an affiliate, parent company or affiliate
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of a parent company of the participant) shall be prohibited and
(iv) any such participations shall be in a minimum aggregate
amount of $5,000,000 of the Commitments and in integral multiples
of $1,000,000 in excess thereof. In the case of any such
participation, the participant shall not have any rights under
this Credit Agreement or the other Credit Documents (the
participant's rights against the selling Bank in respect of such
participation to be those set forth in the participation
agreement with such Bank creating such participation) and all
amounts payable by the Borrower hereunder shall be determined as
if such Bank had not sold such participation.
10.04 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Administrative Agent or any Bank in exercising any right, power
or privilege hereunder or under any other Credit Document and no course of
dealing between the Borrower or any Guarantor and the Administrative Agent
or any Bank shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any
other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder.
The rights and remedies provided herein are cumulative and not exclusive of
any rights or remedies which the Administrative Agent or any Bank would
otherwise have. No notice to or demand on the Borrower in any case shall
entitle the Borrower or any Guarantor to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the
rights of the Administrative Agent or the Banks to any other or further
action in any circumstances without notice or demand.
10.05 Payment of Expenses, etc. The Borrower agrees to: (i) pay all
reasonable out-of-pocket costs and expenses of the Administrative Agent in
connection with the negotiation, preparation, execution and delivery and
administration of this Credit Agreement and the other Credit Documents and
the documents and instruments referred to therein (including, without
limitation, the reasonable fees and expenses of Moore & Van Allen, special
counsel to the Administrative Agent) and any amendment, waiver or consent
relating hereto and thereto including, but not limited to, any such
amendments, waivers or consents resulting from or related to any work-out,
renegotiation or restructure relating to the performance by the Borrower
under this Credit Agreement and of the Administrative Agent and the Banks
in connection with enforcement of the Credit Documents and the documents
and instruments referred to therein (including, without limitation, in
connection with any such enforcement, the reasonable fees and disbursements
of counsel for the Administrative Agent and each of the Banks, including
in-house counsel); (ii) pay and hold each of the Banks harmless from and
against any and all present and future stamp and other similar taxes with
respect to the foregoing matters and save each of the Banks harmless from
and against any and all liabilities with respect to or resulting from any
delay or omission (other than to the extent attributable to such Bank) to
pay such taxes; and (iii) indemnify each Bank, its officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses
incurred by any of them as a result of, or arising out of, or in any way
related to, or by reason of, any investigation, litigation or other
proceeding (whether or not any Bank is a party thereto) related to the
- 68 -
entering into and/or performance of any Credit Document or the use of
proceeds of any Loans (including other extensions of credit) hereunder or
the consummation of any other transactions contemplated in any Credit
Document, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investiga-
tion, litigation or other proceeding (but excluding (i) any costs or
expenses associated with the transfer of a participation interest under
Section 10.03(a)(ii) or 10.03(c), and (ii) any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of gross
negligence or willful misconduct on the part of the Person to be
indemnified).
10.06 Amendments, Waivers and Consents. Neither this Credit
Agreement nor any other Credit Document nor any of the terms hereof or
thereof may be amended, changed, waived, discharged or terminated unless
such amendment, change, waiver, discharge or termination is in writing
signed by the Required Banks, provided that no such amendment, change,
waiver, discharge or termination shall, without the consent of each Bank,
(i) extend the scheduled maturities (including the final maturity and any
mandatory prepayments) of any Loan, or any portion thereof, or reduce the
rate or extend the time of payment of interest (other than as a result of
waiving the applicability of any post-default increase in interest rates)
thereon or fees hereunder or reduce the principal amount thereof, or
increase the Commitments of the Banks over the amount thereof in effect (it
being understood and agreed that a waiver of any Default or Event of
Default or of a mandatory reduction in the total commitments shall not
constitute a change in the terms of any Commitment of any Bank), (ii)
release any Guarantor from its guaranty obligations hereunder, (iii) amend,
modify or waive any provision of this Section or Section 2.13, 2.14, 2.15,
2.16, 2.19, 8.01(a), 9.07, 10.02, 10.03 and the provisions of Section
2.12(b) relating to a mandatory reduction in Commitments on account of a
public issuance of indebtedness, (iv) reduce any percentage specified in,
or otherwise modify, the definition of Required Banks or (v) consent to the
assignment or transfer by the Borrower (or Guarantor) of any of its rights
and obligations under (or in respect of) this Credit Agreement. No
provision of Section 9 may be amended without the consent of the
Administrative Agent.
10.07 Counterparts. This Credit Agreement may be executed in any
number of counterparts, each of which where so executed and delivered shall
be an original, but all of which shall constitute one and the same
instrument. It shall not be necessary in making proof of this Credit
Agreement to produce or account for more than one such counterpart.
10.08 Headings. The headings of the sections and subsections hereof
are provided for convenience only and shall not in any way affect the
meaning or construction of any provision of this Credit Agreement.
10.09 Survival of Indemnification. All indemnities set forth herein,
including, without limitation, in Sections 2.13, 2.15 or 10.05 shall
survive the execution and delivery of this Credit Agreement, and the making
of the Loans, the repayment of the Loans and other obligations and the
termination of the Commitment hereunder.
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10.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA. Any
legal action or proceeding with respect to this Credit Agreement
or any other Credit Document may be brought in the courts of the
Commonwealth of Virginia in City of Richmond, or of the United
States for the Eastern District of Virginia, and, by execution
and delivery of this Credit Agreement, each of the Credit Parties
hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of such
courts. Each of the Credit Parties further irrevocably consents
to the service of process out of any of the aforementioned courts
in any such action or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, to it at the
address set out for notices pursuant to Section 10.01, such
service to become effective 30 days after such mailing. Nothing
herein shall affect the right of the Agent to serve process in
any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against the Borrower in any
other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives
any objection which it may now or hereafter have to the laying of
venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Credit Agreement or any other
Credit Document brought in the courts referred to in subsection
(a) hereof and hereby further irrevocably waives and agrees not
to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an
inconvenient forum.
(c) EACH OF THE AGENTS, EACH OF THE BANKS AND EACH OF THE
CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
10.11 Severability. If any provision of any of the Credit Documents
is determined to be illegal, invalid or unenforceable, such provision shall
be fully severable and the remaining provisions shall remain in full force
and effect and shall be construed without giving effect to the illegal,
invalid or unenforceable provisions.
10.12 Entirety. This Credit Agreement together with the other Credit
Documents represent the entire agreement of the parties hereto and thereto,
and supersede all prior agreements and understandings, oral or written, if
any, including any commitment letters or correspondence relating to the
Credit Documents or the transactions contemplated herein and therein.
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10.13 Survival of Representations and Warranties. All
representations and warranties made by the Borrower herein shall survive
delivery of the Notes and the making of the Loans hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Credit Agreement to be duly executed and delivered as
of the date first above written.
BORROWER:
O&M HOLDING, INC.,
a Virginia corporation
(to be renamed Owens & Minor, Inc. after the
Initial Funding Date)
By____________________________
Title_________________________
GUARANTORS:
OWENS & MINOR, INC.
a Virginia corporation
(to be renamed Owens & Minor Medical, Inc. after the
Initial Funding Date)
By____________________________
Title_________________________
NATIONAL MEDICAL SUPPLY CORPORATION
a Delaware corporation
By____________________________
Title_________________________
OWENS & MINOR WEST, INC.
a California corporation
By____________________________
Title_________________________
KOLEY'S MEDICAL SUPPLY, INC.
a Nebraska corporation
By____________________________
Title_________________________
LYONS PHYSICIAN SUPPLY COMPANY
an Ohio corporation
By____________________________
Title_________________________
A. KUHLMAN & COMPANY
a Michigan corporation
By____________________________
Title_________________________
STUART MEDICAL, INC.
a Pennsylvania corporation
By____________________________
Title_________________________
BANKS:
NATIONSBANK OF NORTH CAROLINA, N.A.,
individually in its capacity as a
Bank and in its capacity as Agent and
Administrative Agent
By____________________________
Robert Y. Bennett,
Vice President
CHEMICAL BANK,
individually in its capacity as a
Bank and in its capacity as a Co-Agent
By____________________________
Title_________________________
CRESTAR BANK,
individually in its capacity as a
Bank and in its capacity as a Co-Agent
By____________________________
Title_________________________
BANK OF AMERICA NT & SA
By____________________________
Title_________________________
THE BANK OF NOVA SCOTIA
By____________________________
Title_________________________
FIRST UNION NATIONAL BANK OF VIRGINIA
By____________________________
Title_________________________
PNC BANK, NATIONAL ASSOCIATION
By____________________________
Title_________________________
BANK OF MONTREAL
By____________________________
Title_________________________
THE BANK OF NEW YORK
By____________________________
Title_________________________
MELLON BANK, N.A.
By____________________________
Title_________________________
NATIONAL WESTMINSTER BANK USA
By____________________________
Title_________________________
NBD BANK, N.A.
By____________________________
Title_________________________
THE SANWA BANK LTD.
By____________________________
Title_________________________
SHAWMUT BANK CONNECTICUT N.A.
By____________________________
Title_________________________
SIGNET BANK/VIRGINIA
By____________________________
Title_________________________
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By____________________________
Title_________________________
Exhibit 4 (e)
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT (the "First Amendment") dated as of February 28,
1995 is to that Credit Agreement dated as of April 29, 1994 (as amended and
modified hereby and as further amended and modified from time to time
hereafter, the "Credit Agreement"; terms used but not otherwise defined
herein shall have the meanings assigned in the Credit Agreement), by and
among OWENS & MINOR, INC., a Virginia corporation (formerly known as O & M
Holding, Inc.) (the "Borrower"), CERTAIN OF ITS SUBSIDIARIES identified as a
"Guarantor" in the definition thereof and on the signature pages hereof
(hereinafter sometimes referred to individually as a "Guarantor" and
collectively as the "Guarantors"), the various banks and lending
institutions identified on the signature pages hereto (each a "Bank" and
collectively, the "Banks"), NATIONSBANK, N.A. (CAROLINAS) (formerly known as
NationsBank of North Carolina, N.A.) as agent (in such capacity, the
"Agent"), CHEMICAL BANK and CRESTAR BANK as co-agents (in such capacity, the
"Co-Agents") and NATIONSBANK, N.A. (CAROLINAS) (formerly known as
NationsBank of North Carolina, N.A.) as administrative agent for the Banks
(in such capacity, the "Administrative Agent").
W I T N E S S E T H
WHEREAS, the Banks have, pursuant to the terms of the Credit
Agreement, made available to the Borrower a $350,000,000 credit facility;
and
WHEREAS, the Borrower has requested an increase in the size of the
credit facility to $425,000,000; and
WHEREAS, the Banks have agreed to an increase in the credit facility
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
A. By execution of this First Amendment, the Borrower, the
Guarantors, the Banks and the Agents hereby agree as follows:
(i) As to Committed Revolving Loans which are Base Rate Loans
("Existing Floating Rate Loans") outstanding on the date this First
Amendment shall be effective pursuant to Section D of this First
Amendment (the "Effective Date"), the Revolving Committed Amounts of
the Banks shall be adjusted as of the Effective Date based on the
reallocation provided in Section B(1) hereof. On the Effective Date,
each Bank whose relative share of the Revolving Committed Amount (the
"Revolving Commitment Percentage") shall increase based on Schedule
2.01(a) as revised, shall increase the amount of its Committed
Revolving Loans outstanding to the Borrower by paying to the
Administrative Agent an amount equal to the increase in such Bank's
Revolving Commitment Percentage multiplied by the Existing Floating
Rate Loans, and the Administrative Agent shall in turn pay to each of
the Banks whose Revolving Commitment Percentages shall decrease an
amount equal to the decrease in such Reducing Bank's Revolving
Commitment Percentage multiplied by the Existing Floating Rate Loans
for application to the outstanding principal balance of such Loans.
(ii) As to Committed Revolving Loans which are Eurodollar Loans
outstanding on the Effective Date ("Existing Fixed Rate Loans"), each
Bank's interest in such Existing Fixed Rate Loans and the Revolving
Commitment Percentage for each Bank in such Existing Fixed Rate Loans
shall remain as in effect immediately prior to the Effective Date
until the end of the applicable Interest Periods relating thereto. At
the maturity of each Interest Period for Existing Fixed Rate Loans,
the Reducing Banks shall be paid an amount equal to the decrease in
such Reducing Bank's Revolving Commitment Percentage multiplied by the
Eurodollar Loans maturing on such date for application to the
outstanding principal balance of such Loans, from the amounts paid on
the Committed Revolving Loans by the Borrower or with the proceeds of
New Loans (as hereafter defined).
(iii) As to Loans made on or after the Effective Date (including
extensions and conversions of Existing Fixed Rate Loans at the end of
an Interest Period, hereafter "New Loans"), the Revolving Commitment
Percentages of the Banks shall be as provided in Schedule 2.01(a) as
reallocated and amended as provided in Section B(1) hereof.
(iv) Notwithstanding anything contained herein to the contrary,
no Bank shall be obligated to make Loans in an aggregate amount at any
time outstanding in excess of its Revolving Committed Amount, as
reallocated and amended pursuant to Section B(1) hereof.
(v) The Borrower shall not be liable for any amounts under
Section 2.15 of the Credit Agreement as a result of the increase in
the size of the credit facility under the Credit Agreement or the
reallocation of Commitments in respect thereof as contemplated by this
First Amendment.
B. The Credit Agreement is amended in the following respects:
1. In connection with the increase in the size of the credit
facility made available under the Credit Agreement, the Revolving Committed
Amounts of the respective Banks have been reallocated among the Banks to be
as provided in Schedule 2.01(a) attached hereto. Schedule 2.01(a) of the
Credit Agreement is hereby amended and modified to read as provided in
Schedule 2.01(a) attached hereto.
2. The definition of "Credit Agreement" as used in the Credit
Documents shall mean the Credit Agreement as amended by this First Amendment
and as further amended, modified, extended, renewed or replaced from time to
time.
3. The following definitions in Section 1.01 are amended and
modified to read as follows:
"Consolidated Fixed Charges" means, for the applicable
period ending as of a Determination Date, the sum of (i) all
Interest Expense on all Indebtedness during such period, (ii) all
Rentals (other than Rentals on Capitalized Leases to the extent
such Rentals are included in Interest Expense or as a current
maturity of a Capitalized Lease under subsection (iii) hereof)
payable during such period, (iii) current maturities of Funded
Debt and current maturities of Capitalized Leases as of such
Determination Date, and (iv) all dividends paid in cash or
property and redemptions made of capital stock (other than
dividends paid to, or redemptions of capital stock owned by, the
Borrower or a wholly-owned Restricted Subsidiary) during such
period, in each case for the Borrower and its Restricted
Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles; but excluding, for
purposes hereof:
(a) amounts owing under the 9.10% Convertible
Subordinated Note due May 31, 1996 in the principal amount
of $3,332,912 made by the Borrower payable to Hygeia
Limited, in an amount not to exceed $3,500,000; and
(b) Rentals related to leases of certain medical
supply equipment manufactured by Omnicell and Pyxis or
other manufacturers of similar equipment, in an aggregate
annual amount not to exceed $5,000,000.
"Consolidated Net Income" means, for the applicable period
ending as of a Determination Date, the net income of the Borrower
and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with generally accepted
accounting principles, but excluding for purposes of determining
compliance with the Fixed Charge Coverage Ratio in Section 6.11(e)
hereof:
(a) any extraordinary gains or losses on the
sale or other disposition of assets, and any taxes on such
excluded gains and any tax deductions or credits on
account of any such excluded losses;
(b) restructuring costs taken in fiscal year
1994 associated with the acquisition of Stuart Medical,
which shall include those costs associated with the
restructuring of corporate administrative functions,
including without limitation the closure of certain
distribution facilities, employee relocation and
termination, and writedown of certain software, in an
amount not to exceed $24,000,000 in the aggregate;
(c) the proceeds of any life insurance policy;
(d) net earnings of any business entity (other
than a Restricted Subsidiary) in which the Borrower or any
Restricted Subsidiary has an ownership interest unless
such net earnings shall have actually been received by the
Borrower or such Restricted Subsidiary in the form of cash
distributions;
(e) any portion of the net earnings of any
Restricted Subsidiary which for any reason is unavailable
for payment of dividends to the Borrower or any other
Restricted Subsidiary; and
(f) one-time restructuring charges taken after
December 31, 1994 but before January 1, 1996 in an amount
not to exceed $12,000,000 in the aggregate.
"Consolidated Net Income Available for Fixed Charges"
means, for the applicable period ending as of a Determination
Date, the sum of Consolidated Net Income
plus (to the extent deducted in determining
Consolidated Net Income) (i) all provisions for any
federal, state or other income taxes, (ii) depreciation,
amortization and other non-cash charges, including without
limitation any accrual necessary for purposes of
conforming with Financial Accounting Standards Board
Statement Number 106 (as defined by generally accepted
accounting principles) to the extent that the accrued
portion thereof constitutes a non-cash charge, (iii)
Interest Expense, and (iv) all Rentals (except for Rentals
relating to leases of medical supply equipment
manufactured by Omnicell and Pyxis and any other
manufacturer of similar equipment to the extent such
Rentals are excluded from the definition of "Consolidated
Fixed Charges", and without duplication for the interest
component under the Capitalized Leases to the extent
included in Interest Expense),
minus (v) all Capital Expenditures,
for the Borrower and its Restricted Subsidiaries on a consolidated
basis determined in accordance with generally accepted accounting
principles.
"Consolidated Total Debt" means all Indebtedness of the
Borrower and its Restricted Subsidiaries on a consolidated basis
determined in accordance with generally accepted accounting
principles, but excluding, for purposes hereof, the amount of
capital lease obligations attributable to those leases of certain
medical supply equipment manufactured by Omnicell and Pyxis and
any other manufacturer of similar equipment to the extent Rentals
thereunder shall not exceed an aggregate annual amount of
$5,000,000.
4. Clause (i) of Section 2.01, defining the "Revolving
Committed Amount," is amended and modified to read as follows:
(i) with regard to the Banks collectively, the amount
of the Committed Revolving Loans outstanding shall not at any time
exceed FOUR HUNDRED TWENTY-FIVE MILLION DOLLARS ($425,000,000) in
the aggregate (as such aggregate maximum amount may be reduced
from time to time as hereinafter provided, the "Revolving
Committed Amount"), and
5. The reference in Section 2.02(a) to "10:00 A.M."
and in Section 2.07(b)(i) to "11:00 A.M.", being the time by which notice
must be given in the case of Revolving Loans and Swingline Loans,
respectively, is amended and modified in each case to "12:00 Noon".
6. The table in Section 2.05, regarding the Applicable
Margin, is amended and modified to read as follows:
Applicable Margin
<TABLE>
Consolidated Total Debt Eurodollar Loan
to Consolidated Total and Fed Funds Base Rate
Ratings Capitalization Ratio Swingline Loan Loan
<S> <C> <C> <C>
BB/Ba2 >=55% 1.000% .25%
BB+/Ba1 <55% but >=50% .875% 0%
BBB-/Baa3 <50% but >=45% .750% 0%
BBB/Baa2 <45% but >=40% .625% 0%
BBB+/Baa1 <40% .500% 0%
</TABLE>
7. Clause (i) of Section 2.08, defining the
"Competitive Loan Maximum Amount," is amended and modified to read as
follows:
(i) the aggregate amount of Competitive Loans shall not
at any time exceed the lesser of FOUR HUNDRED TWENTY-FIVE MILLION
DOLLARS ($425,000,000) or the Revolving Committed Amount (the
"Competitive Loan Maximum Amount"), and
8. Section 2.11(b), regarding the Commitment Fee, is
amended and restated in its entirety to read as follows:
(b) Commitment Fees. In consideration for the
Commitments by the Banks hereunder, the Borrower agrees to pay to
the Administrative Agent quarterly in arrears on the 15th day
following the last day of each of the Borrower's fiscal quarters
for the ratable benefit of the Banks a commitment fee (the
"Commitment Fee") of (i) one-fourth of one percent (1/4%) per
annum, on the first $75,000,000 of the average daily unused amount
of the Revolving Committed Amount for such prior quarter, and (ii)
one-eighth of one percent (1/8%) per annum, on the remaining
average daily unused amount of the Revolving Committed Amount for
such prior quarter. This Commitment Fee shall accrue from the
Effective Date of the First Amendment to Credit Agreement. For
purposes of computation of the Commitment Fee, neither Swingline
Loans nor Competitive Loans shall be counted toward or considered
usage under the Committed Revolving Loan facility.
9. Section 6.10, regarding the use of proceeds, is
amended and restated in its entirety to read as follows:
6.10 Use of Proceeds. The proceeds of the Loans
hereunder shall be used for the purpose of (i) financing the
acquisition of the capital stock of Stuart Medical, (ii)
refinancing approximately $150,000,000 in existing indebtedness of
Stuart Medical, (iii) financing costs and expenses incurred in
connection with the acquisition of Stuart Medical, (iv)
refinancing and replacing the existing credit facility extended to
Owens & Minor, Inc. by NationsBank of Virginia, N.A. and Crestar
Bank and other existing bank indebtedness, (v) negotiating
discounts from trade suppliers in return for quicker trade
payments, (vi) general working capital purposes, (vii) capital
expenditures and (viii) other general corporate purposes.
10. Section 6.11, regarding financial covenants, is
amended and modified to read as follows:
6.11 Financial Covenants.
(a) Consolidated Current Ratio. The Borrower will
maintain at all times a Consolidated Current Ratio of at least 1.5
to 1.0.
(b) Consolidated Tangible Net Worth. The Borrower will
maintain Consolidated Tangible Net Worth, as determined on each
Determination Date, of not less than $50,000,000; provided,
however, the minimum Consolidated Tangible Net Worth required
hereunder shall be increased on the last day of each of the
Borrower's fiscal quarters to occur after January 1, 1995, by an
amount equal to 50% of Consolidated Net Income for the fiscal
quarter then ended (or if Consolidated Net Income for such period
is a deficit figure, then zero).
(c) Consolidated Net Worth. The Borrower will maintain
Consolidated Net Worth, as determined on each Determination Date,
of not less than $240,000,000; provided, however, the minimum
Consolidated Net Worth required hereunder shall be increased on
the last day of each of the Borrower's fiscal quarters to occur
after January 1, 1995, by an amount equal to 50% of Consolidated
Net Income for the fiscal quarter then ended (or if Consolidated
Net Income for such period is a deficit figure, then zero).
(d) Leverage Ratio. On each Determination Date the
ratio of Consolidated Total Debt to Consolidated Total
Capitalization will not exceed:
Leverage Ratio
From the Closing Date through the
First Anniversary Date of the
Closing Date .65 to 1.0
Thereafter through the Third
Anniversary Date of the Closing
Date .60 to 1.0
Thereafter .55 to 1.0
(e) Fixed Charge Coverage Ratio. As of each
Determination Date for the Applicable Period set forth below,
the Fixed Charge Coverage Ratio will not be less than:
Fixed Charge
Coverage Ratio
From the Closing Date through
the fiscal quarter ending on
December 31, 1994 1.5 to 1.0
From the fiscal quarter ending on
March 31, 1995 through and
including the fiscal quarter
ending on March 31, 1997 1.3 to 1.0
From the fiscal quarter ending on
June 30, 1997 and thereafter 1.5 to 1.0
The Applicable Period for which the Fixed Charge Coverage Ratio
shall be determined shall be as follows:
Duration of Applicable
Period ending as of
Determination Date Determination Date*
End of Fourth Quarter 1994 Three Quarters
End of First Quarter 1995 and
thereafter Four Quarters
* Components of the Fixed Charge Coverage Ratio shall be
determined for the Applicable Period ending as of the
Determination Date, except that determination of current
maturities of Funded Debt and current maturities of Capitalized
Leases under subsection (iii) of the definition of Consolidated
Fixed Charges shall be for the duration shown for the
Applicable Period above as of the Determination Date.
11. Section 7.01(h) is amended and restated to read as
follows:
(h) Obligations under or arising in connection with
Interest Rate Protection Agreements relating to Loans under
this Credit Agreement.
12. The address for the Agent, the Administrative Agent
or the Swingline Lender, as referenced in Section 10.01 is amended to read
as follows:
NationsBank, N.A. (Carolinas)
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Iris Boger
Agency Services
Telephone: (704) 386-9372
Telecopy: (704) 386-9923
With a copy to:
NationsBank, N.A. (Carolinas)
1111 East Main Street
Fourth Floor Pavilion
VA2-310-04-07
Richmond, Virginia 23219-2321
Attn: Robert Y. Bennett
Senior Vice President
Telephone: (804) 788-3631
Telecopy: (804) 788-3669
13. The Committed Revolving Notes shall be amended,
restated and substituted in the form attached as Schedule 2.06, such
amended, restated and substituted Committed Revolving Notes thereupon being
considered as the "Committed Revolving Notes" for all purposes under the
Credit Agreement. The Competitive Loan Notes shall be amended, restated and
substituted in the form attached as 2.08(h), such amended, restated and
substituted Competitive Loan Notes thereupon being considered as the
"Competitive Loan Notes" for all purposes under the Credit Agreement.
C. The Borrower hereby represents and warrants that:
(i) any and all representations and warranties
made by the Borrower and contained in the Credit Agreement (other
than those which expressly relate to a prior period) are true and
correct in all material respects as of the date of this First
Amendment; and
(ii) No Default or Event of Default currently
exists and is continuing under the Credit Agreement as of the date
of this First Amendment.
D. This First Amendment shall not be effective until
receipt by the Administrative Agent of the following in form and substance
satisfactory to the Banks:
1. Executed Documents. Executed copies of this
First Amendment, Amended, Restated and Substituted Committed
Revolving Notes, Amended, Restated and Substituted Competitive Loan
Notes, and related documentation.
2. Legal Opinions. Legal opinions of Drew St.J.
Carneal, Esq., Senior Vice President and Corporate Counsel of the
Borrower, and Hunton & Williams, special counsel to the Borrower and
the Guarantors, addressed to the Administrative Agent and the Banks
in form acceptable to the Administrative Agent and the Required
Banks.
3. Corporate Documents.
(i) Articles of Incorporation. Copies of
the articles of incorporation or charter documents of the
Borrower and the Guarantors certified to be true and complete as
of a recent date by the appropriate governmental authority of
the state of its incorporation.
(ii) Resolutions. Copies of resolutions of
the Board of Directors of the Borrower and the Guarantors
approving and adopting this First Amendment, the Amended,
Restated and Substituted Committed Revolving Notes, and the
Amended, Restated and Substituted Competitive Loan Notes, the
transactions contemplated therein and authorizing execution and
delivery thereof, certified by a secretary or assistant
secretary as of the Closing Date to be true and correct and in
force and effect as of such date and containing therein
certification of the incumbency and specimen signatures of the
officers of the Credit Parties executing the First Amendment,
the Amended, Restated and Substituted Committed Revolving Notes,
and the Amended, Restated and Substituted Competitive Loan
Notes.
(iii) Bylaws. A copy of the bylaws of the
Borrower and the Guarantors certified by a secretary or
assistant secretary as of the date hereof to be true and correct
and in force and effect as of such date.
(iv) Good Standing. Copies of (i)
certificates of good standing, existence or its equivalent with
respect to the Borrower and the Guarantors certified as of a
recent date by the appropriate governmental authorities of the
state of incorporation and each other state in which the failure
to so qualify and be in good standing would have a Material
Adverse Effect and (ii) a certificate indicating payment of all
corporate franchise taxes in such states of incorporation
certified as of a recent date by the appropriate governmental
taxing authorities, to the extent generally available from such
authorities.
4. Other Information. Such other information
and documents as the Administrative Agent may reasonably request.
E. The Borrower will execute such additional documents
as are reasonably requested by the Administrative Agent to reflect the terms
and conditions of this First Amendment.
F. Except as modified hereby, all of the terms and
provisions of the Credit Agreement (and Schedules) remain in full force and
effect.
G. The Borrower agrees to pay all reasonable costs and
expenses in connection with the preparation, execution and delivery of this
First Amendment, including without limitation the reasonable fees and
expenses of Moore & Van Allen, special counsel to the Administrative Agent.
H. This First Amendment may be executed in any number
of counterparts, each of which when so executed and delivered shall be
deemed an original and it shall not be necessary in making proof of this
First Amendment to produce or account for more than one such counterpart.
I. This First Amendment and the Credit Agreement, as
amended hereby, shall be deemed to be contracts made under, and for all
purposes shall be construed in accordance with the laws of the Commonwealth
of Virginia.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this First Amendment to Credit Agreement to be duly executed
under seal and delivered as of the date and year first above written.
BORROWER:
OWENS & MINOR, INC.,
a Virginia corporation
(formerly known as O & M Holding, Inc.)
By____________________________
Title_________________________
GUARANTORS:
OWENS & MINOR MEDICAL, INC.
a Virginia corporation
(formerly known as Owens & Minor, Inc.)
By____________________________
Title_________________________
NATIONAL MEDICAL SUPPLY CORPORATION
a Delaware corporation
By____________________________
Title_________________________
OWENS & MINOR WEST, INC.
a California corporation
By____________________________
Title_________________________
KOLEY'S MEDICAL SUPPLY, INC.
a Nebraska corporation
By____________________________
Title_________________________
Signature Pages to
Owens & Minor, Inc. First Amendment
LYONS PHYSICIAN SUPPLY COMPANY
an Ohio corporation
By____________________________
Title_________________________
A. KUHLMAN & COMPANY
a Michigan corporation
By____________________________
Title_________________________
STUART MEDICAL, INC.
a Pennsylvania corporation
By____________________________
Title_________________________
BANKS:
NATIONSBANK, N.A. (CAROLINAS),
individually in its capacity as a
Bank and in its capacity as Agent and
Administrative Agent (formerly known as
NationsBank of North Carolina, N.A.)
By_____________________________
Robert Y. Bennett,
Senior Vice President
CHEMICAL BANK,
individually in its capacity as a
Bank and in its capacity as a Co-Agent
By
Title
CRESTAR BANK,
individually in its capacity as a
Bank and in its capacity as a Co-Agent
By
Title
Signature Pages to
Owens & Minor, Inc. First Amendment
BANK OF AMERICA NT & SA
By
Title
THE BANK OF NOVA SCOTIA
By
Title
FIRST UNION NATIONAL BANK OF VIRGINIA
By
Title
PNC BANK, NATIONAL ASSOCIATION
By
Title
BANK OF MONTREAL
By
Title
THE BANK OF NEW YORK
By
Title
MELLON BANK, N.A.
By
Title
NATWEST BANK N.A. (formerly known as
National Westminster Bank USA)
By
Title
Signature Pages to
Owens & Minor, Inc. First Amendment
NBD BANK
By
Title
THE SANWA BANK LTD.
By
Title
SHAWMUT BANK CONNECTICUT N.A.
By
Title
SIGNET BANK/VIRGINIA
By
Title
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By
Title
Exhibit 10(n)
August 9, 1994 Amendment to
Enhanced Authorized Distribution Agency Agreement
Dated as November 16, 1993
1. The phrase "Capital Equipment" shall be deleted and
replaced with "Equipment" in Section 1 (5) and in the
first sentence of Section 6(A).
2. Add the following after the first sentence in Section
6(A), "Any additional charges or fees stated as a
percentage negotiated or agreed to by a Designated VHA
Member or Affiliate shall be calculated as a percent
of Cost, exclusive of other Cost plus charges."
3. The following shall be added to Schedule 8: "Credit
for prepay shall be a percent of the amount on deposit
with ADA, not the amount of the invoice."
4. The following revisions shall be made to Schedule 6:
(a) The second sentence of the double-asterisked
paragraph shall be amended to read: "There is a
6 month grace period on the Electronic Order
Entry Requirement; that requirement will be
effective July 1, 1994.
(b) The following shall be added to Schedule 6:
"Note: Any additional charges or fees stated as
a percentage negotiated or agreed to by a
designated VHA member or affiliate shall be
calculated as a percent of Cost, exclusive of
other Cost plus charges."
5. The following shall be added to Schedule 15: "Note:
Any additional charges or fees stated as a percentage
negotiated or agreed to by a designated VHA member or
affiliate shall be calculated as a percent of Cost,
exclusive of other Cost plus charges."
September 15, 1994 Amendment to
Enhanced Authorized Distribution Agency Agreement
Dated as November 16, 1993
Page 17 Section 6 Letter A Annual Price
Matrix Slotting
Change: "On or before January 1 of each year after 1994
during the term of this Agreement", to "On or before April 1
of each year after 1994 during the term of this Agreement".
November 15, 1994 Amendment to
Enhanced Authorized Distribution Agency Agreement
Dated as November 16, 1993
Add to the end of the first sentence of Section 3 (F)(2),
the following:
", from any vendor which meets industry standards of
GMP and has credit worthiness comparable to other
vendors with which the aDA does business where the VHA
Members or Affiliates usage will meet the demand
levels described in Section 3(F)(3)."
In the first sentence of Section 3 (F)(3), delete "$100..."
through the end of the sentence and replace with the
following: "$500 per quarter and three transactions per
month." Insert in next to last sentence after the words
"usage estimate" the following: "in excess of $500 per
quarter".
Schedule 9 Return Goods Policy
The follwing shall be added to the Return Goods
Policy:
"No hazardous materials will be accepted for return
with the exception of shipping errors and defective
merchandise. Opened, leaking or damaged containers
cannot be returned to the ADA, but should be disposed
of in accordance with applicable laws and regulations.
To obtain proper credit, contact your ADA Customer
Service Representative. Return shipments of hazardous
materials must be packed, marked, labeled and shipped
in accordance with DOT regulations governing the
transportation of hazardous materials.
<PAGE>
Exhibit 11
OWENS & MINOR, INC. AND SUBSIDIARIES
Calculation Of Net Income Per Common Share
(In thousands, except per share amounts)
Year ended December 31
1994 1993 1992
Income from continuing operations $ 7,919 $18,517 $15,435
Discontinued operations:
Income from discontinued
operations, net of taxes - - 77
Gain on disposals, net of other
provisions and taxes - 911 5,610
Cumulative effect of change in
accounting principles - 706 (730)
Net income 7,919 20,134 20,392
Dividends on preferred stock 3,309 - -
Net income attributable to
common shares $ 4,610 $20,134 $20,392
Weighted average common shares
and common share equivalents*:
Common shares outstanding 30,764 30,428 29,394
Common share equivalents-dilutive
stock options 344 585 288
Weighted average common shares
and common share equivalents 31,108 31,013 29,682
Net income per common share:
Continuing operations $ .15 $ .60 $ .52
Discontinued operations - .03 .20
Cumulative effect of change
in accounting principles - .02 (.03)
Net income per common share $ .15 $ .65 $ .69
* A 3-for-2 stock split was distributed on June 8, 1994 to shareholders
of record as of May 24, 1994. All applicable share and per share
information has been restated to reflect this transaction.
SELECTED FINANCIAL DATA(2) (IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
OWENS & MINOR, INC. AND SUBSIDIARIES
<TABLE>
Year ended December 31, 1994 1993 1992
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Continuing operations:
Net sales $ 2,395,803 $ 1,396,971 $1,177,298
Cost of sales 2,163,459 1,249,660 1,052,998
Gross margin 232,344 147,311 124,300
Selling, general and administrative expenses 163,621 106,362 90,027
Depreciation and amortization 13,034 7,593 5,861
Interest expense, net 12,098 2,939 2,472
Nonrecurring restructuring expenses (1) 29,594 - -
Total expenses 218,347 116,894 98,360
Income before income taxes 13,997 30,417 25,940
Provision for income taxes 6,078 11,900 10,505
Income from continuing operations 7,919 18,517 15,435
Discontinued operations:
Income from discontinued operations, net of taxes - - 77
Gain on disposals, net of other provisions and taxes - 911 5,610
Cumulative effect of change in accounting principles - 706 (730)
Net income 7,919 20,134 20,392
Dividends on preferred stock 3,309 - -
Net income attributable to common stock $ 4,610 $ 20,134 $ 20,392
COMMON SHARE DATA:
Net income per common share:
Continuing operations $ .15 $ .60 $ .52
Discontinued operations - .03 .20
Cumulative effect of change in accounting principles - .02 (.03)
Net income per common share $ .15 $ .65 $ .69
Cash dividends per common share $ .170 $ .140 $ .110
Weighted average common shares and common share
equivalents 31,108 31,013 29,682
Price range of common stock per share:
High $ 18.13 $ 15.59 $ 10.11
Low $ 13.25 $ 8.42 $ 7.33
SELECTED RATIOS:
Gross margin as a percent of net sales* 9.7% 10.5% 10.6%
Selling, general and administrative expenses as a percent
of net sales* 6.8% 7.6% 7.7%
Average receivable days sales outstanding* 35.9 34.2 35.7
Average inventory turnover* 8.8 11.5 11.4
Return on average total equity* 3.7% 14.6% 14.4%
Current ratio 1.8 2.0 1.8
BALANCE SHEET DATA:
Working capital $ 281,788 $ 139,091 $ 99,826
Total assets 868,560 334,322 274,540
Long-term debt 248,427 50,768 24,986
Capitalization ratio 49.2% 27.1% 17.6%
Shareholders' equity 256,176 136,943 116,659
Shareholders' equity per common share outstanding $ 4.59 $ 4.50 $ 3.97
</TABLE>
* CONTINUING OPERATIONS ONLY.
(1) THE COMPANY INCURRED $17.9 MILLION (NET OF $11.7 MILLION TAX
BENEFIT) OR $.57 PER COMMON SHARE OF NONRECURRING RESTRUCTURING EXPENSES
RELATED TO ITS RESTRUCTURING PLAN DEVELOPED IN CONJUNCTION WITH ITS
COMBINATION WITH STUART MEDICAL, INC. SEE FURTHER DISCUSSION IN NOTE 3
OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
(2) SEE NOTE 2 OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR A
DISCUSSION OF ACQUISITIONS AND DIVESTITURES THAT MAY AFFECT
COMPARABILITY OF DATA.
<TABLE>
1991 1990 1989 1988
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Continuing operations:
Net sales $1,021,014 $ 916,709 $ 708,089 $500,435
Cost of sales 918,304 827,441 641,011 445,456
Gross margin 102,710 89,268 67,078 54,979
Selling, general and administrative expenses 77,082 67,171 57,943 42,668
Depreciation and amortization 4,977 4,210 2,795 2,416
Interest expense, net 4,301 5,858 5,078 2,230
Nonrecurring restructuring expenses (1) - - - -
Total expenses 86,360 77,239 65,816 47,314
Income before income taxes 16,350 12,029 1,262 7,665
Provision for income taxes 6,681 4,634 628 3,032
Income from continuing operations 9,669 7,395 634 4,633
Discontinued operations:
Income from discontinued operations, net of taxes 2,358 1,380 1,855 3,734
Gain on disposals, net of other provisions and taxes - - - -
Cumulative effect of change in accounting principles - - - -
Net income 12,027 8,775 2,489 8,367
Dividends on preferred stock - - - -
Net income attributable to common stock $ 12,027 $ 8,775 $ 2,489 $ 8,367
COMMON SHARE DATA:
Net income per common share:
Continuing operations $ .33 $ .26 $ .02 $ .16
Discontinued operations .08 .05 .07 .13
Cumulative effect of change in accounting principles - - - -
Net income per common share $ .41 $ .31 $ .09 $ .29
Cash dividends per common share $ .088 $ .077 $ .077 $ .075
Weighted average common shares and common share
equivalents 29,462 28,755 28,412 28,263
Price range of common stock per share:
High $ 10.78 $ 4.45 $ 4.71 $ 4.52
Low $ 4.17 $ 3.19 $ 3.37 $ 2.62
SELECTED RATIOS:
Gross margin as a percent of net sales* 10.1% 9.7% 9.5% 11.0%
Selling, general and administrative expenses as a percent
of net sales* 7.6% 7.3% 8.2% 8.5%
Average receivable days sales outstanding* 38.1 39.2 41.4 41.0
Average inventory turnover* 11.1 10.8 8.5 7.6
Return on average total equity* 10.6% 9.1% .8% 6.3%
Current ratio 1.9 1.9 2.4 2.7
BALANCE SHEET DATA: $ 122,675 $ 117,983 $ 133,309 $106,545
Working capital 311,786 290,233 258,683 189,916
Total assets
Long-term debt 67,675 71,339 85,324 46,819
Capitalization ratio 41.1% 45.6% 52.4% 37.8%
Shareholders' equity 97,091 85,002 77,560 77,170
Shareholders' equity per common share outstanding $ 3.34 $ 2.99 $ 2.75 $ 2.75
</TABLE>
<TABLE>
1987 1986 1985 1984
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Continuing operations:
Net sales $ 367,034 $ 272,222 $ 199,294 $170,777
Cost of sales 326,651 239,170 171,099 145,990
Gross margin 40,383 33,052 28,195 24,787
Selling, general and administrative expenses 31,302 26,204 23,196 21,262
Depreciation and amortization 1,922 1,319 1,050 772
Interest expense, net 2,006 1,789 1,303 1,279
Nonrecurring restructuring expenses (1) - - - -
Total expenses 35,230 29,312 25,549 23,313
Income before income taxes 5,153 3,740 2,646 1,474
Provision for income taxes 2,148 1,806 1,224 652
Income from continuing operations 3,005 1,934 1,422 822
Discontinued operations:
Income from discontinued operations, net of taxes 3,481 2,968 2,986 2,815
Gain on disposals, net of other provisions and taxes - - - -
Cumulative effect of change in accounting principles - - - -
Net income 6,486 4,902 4,408 3,637
Dividends on preferred stock - - - -
Net income attributable to common stock $ 6,486 $ 4,902 $ 4,408 $ 3,637
COMMON SHARE DATA:
Net income per common share:
Continuing operations $ .11 $ .07 $ .06 $ .04
Discontinued operations .12 .11 .12 .15
Cumulative effect of change in accounting principles - - - -
Net income per common share $ .23 $ .18 $ .18 $ .19
Cash dividends per common share $ .065 $ .059 $ .053 $ .047
Weighted average common shares and common share
equivalents 28,187 27,702 24,245 19,259
Price range of common stock per share:
High $ 4.37 $ 4.00 $ 3.61 $ 2.04
Low $ 2.32 $ 2.62 $ 1.75 $ 1.48
SELECTED RATIOS:
Gross margin as a percent of net sales* 11.0% 12.1% 14.1% 14.5%
Selling, general and administrative expenses as a percent
of net sales* 8.5% 9.6% 11.6% 12.5%
Average receivable days sales outstanding* 41.0 40.6 45.9 44.0
Average inventory turnover* 8.0 8.3 7.9 7.0
Return on average total equity* 5.4% 5.0% 4.2% 2.7%
Current ratio 2.8 2.7 2.6 3.0
BALANCE SHEET DATA: $ 89,056 $ 71,317 $ 54,248 $ 44,840
Working capital 154,390 126,779 96,825 74,702
Total assets
Long-term debt 33,713 42,562 27,546 20,092
Capitalization ratio 32.3% 51.0% 43.4% 38.5%
Shareholders' equity 70,761 40,878 35,914 32,059
Shareholders' equity per common share outstanding $ 2.52 $ 2.05 $ 1.85 $ 1.69
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
OWENS & MINOR, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
NET SALES
Net sales increased 71.5% to $2.4 billion in 1994. Assuming the
Stuart Medical, Inc. (Stuart) combination occurred January 1, 1993, the
increase was approximately 16.6%. The "same store" sales increase is due
primarily to new contracts with large healthcare providers such as
Columbia/HCA Healthcare Corp., Premier Health Alliance and the
Department of Defense; a new distribution agreement with VHA Inc., the
Company's largest contract, which provided incentives to member
hospitals to increase purchases from Owens & Minor; and the continued
product line expansion by the Company. Sales under the VHA agreement
grew to approximately $960 million, or 40% of total net sales, in 1994
from approximately $460 million, or 33% of net sales, in 1993. During
the fourth quarter of 1994, VHA expanded its distribution agreement to
include Baxter Healthcare Corporation, the Company's single largest
competitor. The loss of sales related to this change in the agreement is
projected to be offset by the ability of the Company to distribute
Baxter products to VHA member hospitals, which was not previously
possible.
GROSS MARGIN
Gross margin as a percent of net sales decreased by .8
percentage points to 9.7% in 1994. The decrease is a result of the sales
increases from large lower margin contracts. As the healthcare industry
consolidates, gross margin as a percent to net sales will continue to be
under pressure. However, the Company should continue to be able to
offset percentage decreases with sales volume increases, producing an
overall increase in gross margin dollars (58% increase in 1994).
Additionally, the Company anticipates stabilizing the gross margin
percent by offering more value-added services to its customers and
working with its manufacturing partners in achieving equitable returns,
on the sales it provides these partners.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased to 6.8%
of net sales in 1994 from 7.6% in 1993. This decrease was primarily the
result of the synergies obtained from the Stuart combination and the
sales volume increases from large customers such as VHA, Columbia/HCA
Healthcare Corp. and Premier Health Alliance. The Company will be able
to reduce this ratio further as conversions to one computer system are
completed, a distributed (client/server) environment is implemented and
the healthcare industry continues to consolidate. The majority of system
conversions are scheduled for completion by the latter part of 1995, the
client/server applications and distributed workflow will continue over
the next few years and the Company will continue to pursue consolidation
opportunities within the distribution segment of the healthcare industry
and assist its partners in the consolidation of other segments.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by 71.7%, due primarily
to the additional goodwill amortization and depreciation expenses
related to the Stuart combination and the depreciation of the Company's
continued investment in new and improved technology.
INTEREST EXPENSE, NET
Net interest expense increased $9.2 million to $12.1 million in
1994. The increase is due primarily to the debt increase related to the
Stuart combination and the increase in the Company's average interest
rate on its variable rate revolving credit facility from 3.8% in 1993 to
5.6% in 1994. The rate increase is due to the overall rate increases in
the lending markets. The Company has initiated an interest rate
management program to fix the interest rate on a portion of the
revolving credit facility.
NONRECURRING RESTRUCTURING EXPENSES
As a result of the Company's combination with Stuart and its
related decision to outsource the operation of its mainframe computer
system, the Company implemented a restructuring plan. The plan was
designed to eliminate duplicate costs within the Company by closing
overlapping facilities and redesigning ineffective processes, and to
focus internal teammates on implementing client/server technology.
During 1994, the Company incurred approximately $29.6 million (pretax)
or $.57 per common share (after tax) of nonrecurring expenses related to
the plan. These expenses are comprised primarily of duplicate facility
costs (approximately $15.2 million), costs associated with redesigning
and implementing operating processes to increase efficiencies within the
combined company (approximately $7.1 million) and costs associated with
the contracting out of the Company's mainframe computer operations
(approximately $7.3 million). The total expenses and timeframe of the
plan have expanded from the Company's initial estimates for several
reasons. The sales growth combined with the Stuart combination created a
need to outsource the operations of the mainframe computer. Efforts were
extended to reduce duplicate costs and improveefficiencies in the
Company's operating processes. Finally and most importantly, the Company
wanted to ensure the effectiveness of the plan. The restructuring plan
is anticipated to be completed during 1995 with expected charges to
income of approximately $9.0 million in 1995.
INCOME TAXES
The effective tax rate increased by 4.3 percentage points to
43.4% in 1994, due primarily to the non-deductible goodwill arising out
of the Stuart combination. A complete reconciliation of the statutory
income tax rate to the Company's effective income tax rate is provided
in Note 11 of the Notes to Consolidated Financial Statements.
INCOME FROM CONTINUING OPERATIONS
Income decreased by $10.6 million due to the nonrecurring
restructuring expenses previously discussed. Without these expenses the
Company's income increased by $7.3 million or 39.3% and the Company's
income per common share increased to $.72 from $.60 in 1993. The
increase is due primarily to the sales growth and administrative
synergies the Company has achieved.
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
point 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
commitment 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 11 of the Notes to Consolidated
Financial Statements.
INCOME FROM CONTINUING OPERATIONS
Income increased by $3.1 million to $18.5 million in
1993. Income per common share increased by $.08 to $.60
per common 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.
FINANCIAL CONDITION
CAPITAL RESOURCES
As part of the Company's growth and commitment to being the low
cost distributor of medical/surgical supplies, the Company began in 1994
a major initiative to move from a mainframe computer system to an open
dis- tributed (client/server) environment. This initiative will be
ongoing over the next several years and will require significant capital
investment. The first phase of this project is scheduled for rollout
during the second quarter of 1995 and the payback is expected to be
realized immediately upon each phase's rollout. The payback should
consist of significantly improved asset management and reduced selling,
general and administrative expenses.
ASSET MANAGEMENT
During 1994, several factors unfavorably impacted the Company's
measurements of asset management. The Stuart combination, and several
new customer contracts requiring higher fill rates and expanded product
lines, combined to decrease asset turnover from 4.6 in 1993 to 3.7 in
1994, decrease inventory turnover from 11.5 in 1993 to 8.8 in 1994, and
increase accounts receivable days outstanding from 34.2 in 1993 to 35.9
in 1994. Although these measurements have declined, the Company
continues to be a leader in asset management within the industry. The
Company will continue to focus on asset management and, as its new
technology is implemented, should improve its measurements.
LIQUIDITY
The Company increased its debt to equity ratio to 49.2% in 1994
from 27.1% in 1993. This increase was caused by its combination with
Stuart, its interrelated restructuring plan, a reduction in operating
cash flow from Stuart receivables not purchased as part of the
combination, a reduction in operating cash flow from increased inventory
levels in response to customer requirements and its technology
investments. At December 31, 1994, the Company had approximately $115
million of unused credit under its $350 million revolving credit
facility. Subsequent to year end, the Company increased its credit
facility to $425 million to finance its technology initiatives, its
working capital growth and its initiatives to increase gross margin by
decreasing payment terms with its manufacturing partners. The Company
believes its financing resources more than adequately meet its needs.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA)
OWENS & MINOR, INC. AND SUBSIDIARIES
<TABLE>
Year ended December 31, 1994 1993 1992
<S> <C> <C> <C>
Continuing operations:
Net sales $2,395,803 $1,396,971 $1,177,298
Cost of sales 2,163,459 1,249,660 1,052,998
Gross margin 232,344 147,311 124,300
Selling, general and administrative expenses 163,621 106,362 90,027
Depreciation and amortization 13,034 7,593 5,861
Interest expense, net 12,098 2,939 2,472
Nonrecurring restructuring expenses 29,594 - -
Total expenses 218,347 116,894 98,360
Income before income taxes 13,997 30,417 25,940
Provision for income taxes 6,078 11,900 10,505
Income from continuing operations 7,919 18,517 15,435
Discontinued operations:
Income from discontinued operations, net of taxes - - 77
Gain on disposals, net of other provisions and taxes - 911 5,610
Cumulative effect of change in accounting principles - 706 (730)
Net income 7,919 20,134 20,392
Dividends on preferred stock 3,309 - -
Net income attributable to common stock $ 4,610 $ 20,134 $ 20,392
Net income per common share:
Continuing operations $ .15 $ .60 $ .52
Discontinued operations - .03 .20
Cumulative effect of change in accounting principles - .02 (.03)
Net income per common share $ .15 $ .65 $ .69
Cash dividends per common share $ .17 $ .14 $ .11
Weighted average common shares and common
share equivalents 31,108 31,013 29,682
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
OWENS & MINOR, INC. AND SUBSIDIARIES
<TABLE>
December 31, 1994 1993
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 513 $ 2,048
Accounts and notes receivable, net of allowance of $
5,340 in 1994
and $4,678 in 1993 290,240 144,629
Merchandise inventories 323,851 124,848
Other current assets 26,222 10,638
TOTAL CURRENT ASSETS 640,826 282,163
Property and equipment, net 38,620 23,863
Excess of purchase price over net assets acquired, net 175,956 17,316
Other assets 13,158 10,980
TOTAL ASSETS $868,560 $334,322
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 236 $ 1,494
Accounts payable 296,878 120,699
Accrued payroll and related liabilities 11,294 5,768
Other accrued liabilities 50,630 15,111
TOTAL CURRENT LIABILITIES 359,038 143,072
Long-term debt 248,427 50,768
Accrued pension and retirement plan 4,919 3,539
TOTAL LIABILITIES 612,384 197,379
SHAREHOLDERS' EQUITY
Preferred stock, par value $100 per share; authorized
- 10,000 shares
Series A; Participating Cumulative Preferred
Stock; none issued - -
Series B; Cumulative Preferred Stock; 4.5%,
convertible; issued - 1,150 shares in 1994 115,000 -
Common stock, par value $2 per share; authorized -
200,000 shares;
issued - 30,764 shares in 1994 and 20,285 shares
in 1993 61,528 40,569
Paid-in capital 1,207 9,258
Retained earnings 78,441 87,116
TOTAL SHAREHOLDERS' EQUITY 256,176 136,943
Commitments and contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $868,560 $334,322
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
OWENS & MINOR, INC. AND SUBSIDIARIES
<TABLE>
Year ended December 31, 1994 1993 1992
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,919 $ 20,134 $ 20,392
Noncash charges (credits) to income
Depreciation and amortization 13,034 7,593 5,861
Provision for losses on accounts and notes receivable 1,149 497 1,351
Provision for LIFO reserve 671 661 1,056
Gain on disposals of business segments, net - (911) (5,610)
Cumulative effect of change in accounting principles - (706) 730
Other, net 1,093 897 1,135
Cash provided by net income and noncash charges 23,866 28,165 24,915
Changes in assets and liabilities, net of effects from
acquisitions
Accounts and notes receivable (144,917) (23,424) 5
Merchandise inventories (81,318) (28,232) 359
Accounts payable 22,375 13,307 (8,885)
Net change in other current assets and current
liabilities 25,323 (258) (10,591)
Other, net 790 431 (2,112)
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (153,881) (10,011) 3,691
INVESTING ACTIVITIES
Business acquisitions, net of cash acquired (40,608) (2,416) -
Proceeds from disposals of business segments - - 50,920
Additions to property and equipment (6,634) (6,288) (4,955)
Other, net (1,513) (3,377) (2,535)
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES (48,755) (12,081) 43,430
FINANCING ACTIVITIES
Additions to long-term debt 197,088 37,000 -
Reductions of long-term debt (55,032) (17,471) (44,619)
Other short-term financing 65,426 765 6,599
Cash dividends paid (7,664) (4,222) (3,224)
Exercise of options 1,283 1,000 436
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 201,101 17,072 (40,808)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,535) (5,020) 6,313
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,048 7,068 755
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 513 $ 2,048 $ 7,068
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT RATIOS AND PER
SHARE DATA)
OWENS & MINOR, INC. AND SUBSIDIARIES
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Owens &
Minor, Inc. 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 approximately 64% of the Company's inventories
determined on a last-in, first-out (LIFO) basis and the remainder on a
first-in, first-out (FIFO) basis.
PROPERTY AND EQUIPMENT
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 20-40 years
Furniture, fixtures and equipment 3-10 years
Transportation equipment 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. Based upon management's assessment of future cash flows of
acquired businesses, the carrying value of goodwill at December 31,
1994, has not been impaired.
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 COMMON SHARE
Net income per common share is computed using the weighted average
number of shares of common stock and common stock equivalents
outstanding during the year. The convertible preferred stock is
considered a common stock equivalent; however, it has been excluded
from the number of weighted average shares due to the dilutive effect
of the preferred dividend. The assumed conversion of all convertible
debentures has not been included in the computation because the
resulting dilution is not material.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into interest rate swap and cap agreements to
manage interest rate risk of variable debt and not for trading purposes.
The differences to be paid or received on the interest rate swaps and
the amortization of the cap fees are included in interest expense.
NOTE 2 - BUSINESS ACQUISITIONS AND DIVESTITURES
On May 10, 1994, the Company paid $40,200 and exchanged 1,150 shares
of 4.5%, $100 par value, Series B Cumulative Preferred Stock for all the
capital stock of Stuart Medical, Inc. (Stuart), a distributor of
medical/surgical supplies. The Series B Cumulative Preferred Stock is
convertible into approximately 7,000 shares of common stock. The
transaction was accounted for as a purchase and, accordingly, the
operating results of Stuart have been included in the Company's
consolidated operating results since May 1, 1994. The purchase price
exceeded the net assets acquired by approximately $159,000 which is
being amortized on a straight-line basis over 40 years.
The following unaudited pro forma results of operations for the years
ended December 31,1994, and 1993 assume the Stuart combination occurred
January 1, 1993. The amounts reflect adjustments, such as increased
interest expense on acquisition debt, amortization of the excess of
purchase price over net assets acquired, reversal of nonrecurring
restructuring expenses and related income tax effects.
Year Ended December 31, 1994 1993
Net sales $2,718,000 $2,331,000
Net income $ 28,100 $ 24,200
Net income per common share $ .74 $ .62
The pro forma results are not necessarily indicative of what actually
would have occurred if the combination had been in effect for the
entire years presented. In addition, they are not intended to be a
projection of future results.
On October 1, 1994, the Company acquired substantially all of the
assets of Emery Medical Supply, Inc. (Emery) of Denver, Colorado for
cash. The acquisition was accounted for as a purchase with results of
Emery included from the acquisition date. 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 May 28, 1993, the Company issued 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 1993 consolidated 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) of Detroit, Michigan. The
acquisition was accounted for as a purchase with the results of Kuhlman
included from the acquisition date. The cost of the acquisition was
approximately $2,900 and exceeded the net book value of the tangible
assets acquired and liabilities assumed by approximately $1,700. 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
classi- fied as discontinued operations for all years presented in the
accompanying Consolidated Statements of Income. The proceeds from the
sale of approximately $49,552 resulted in a gain of $9,783, net of
applicable income tax expense of $6,408, for the year ended December 31,
1992.
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 resulted in a loss of
$2,858, net of applicable income tax benefit of $1,257, for the year
ended December 31, 1992.
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 based on
settlement of established liabilities and changes in prior estimates of
expenses. In 1992, the loss provision was increased by $1,315 for such
changes in prior estimates.
NOTE 3 - NONRECURRING RESTRUCTURING EXPENSES
During 1994, the Company incurred $29,594 of nonrecurring
restructuring expenses in connection with the Company's combination with
Stuart and the Company's related decision to contract out the management
and operation of its mainframe computer system. These expenses are
comprised primarily of duplicate facility costs (approximately $15,200),
costs associated with redesigning and implementing operating processes
to increase efficiencies within the combined company (approximately
$7,100) and costs associated with the contracting out of the Company's
mainframe computer operations (approximately $7,300). The nonrecurring
expenses include non-cash asset write downs of approximately $3,200 and
accrued liabilities of $2,100 at December 31, 1994. The restructuring
plan is anticipated to be completed during 1995 with expected charges to
income of approximately $9,000 in 1995.
NOTE 4 - MERCHANDISE INVENTORIES
Approximately 64% of the Company's 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:
DECEMBER 31, 1994 $18,291
December 31, 1993 $17,620
December 31, 1992 $16,959
NOTE 5 - PROPERTY AND EQUIPMENT
The Company's investment in property and equipment consists of the
following:
December 31, 1994 1993
Land and buildings $13,589 $ 4,617
Furniture, fixtures and equipment 39,566 27,042
Transportation equipment 1,264 1,093
Capitalized leases 835 7,776
Leasehold improvements 6,891 5,898
62,145 46,426
Less: Accumulated depreciation 22,930 17,304
Less: Accumulated amortization of capitalized leases 595 5,259
Property and equipment, net $38,620 $23,863
For continuing operations, depreciation expense for property and
equipment for 1994, 1993, and 1992 was $8,417, $6,368 and $5,129,
respectively.
NOTE 6 - ACCOUNTS PAYABLE
The Company's accounts payable consists of the following:
December 31, 1994 1993
Trade accounts payable $209,849 $ 99,096
Drafts payable 87,029 21,603
Total accounts payable $296,878 $120,699
NOTE 7 - LONG-TERM DEBT
The Company's long-term debt consists of the following:
December 31, 1994 1993
Revolving credit notes $235,300 $ 37,000
0% Subordinated Note 9,067 8,214
Convertible Subordinated Debenture 3,333 3,500
Other 963 3,548
248,663 52,262
Current maturities (236) (1,494)
Long-term debt $248,427 $ 50,768
Simultaneous with the Stuart combination, the Company entered into a
$350,000 Senior Credit Agreement with interest based on, at the
Company's discretion, the London Interbank Borrowing Offering Rate
(LIBOR) or the Prime Rate. The Agreement expires in April 1999. Under
certain provisions of the Agreement, 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 proceeds were
used to fund the $40,200 cash paid in the combination, repay certain of
the long-term debt of Stuart and the Company and fund the working
capital requirements associated with the accounts receivable of Stuart.
Stuart sold its accounts receivable at a discount to a related funding
company, thus no receivables were acquired by the Company in the
combination.
The Company entered into interest rate swap and cap agreements to
reduce the potential impact of increases in interest rates on the
$350,000 Senior Credit Agreement. Under the swap agreements the Company
pays the counterparties a fixed interest rate, ranging from 6.35%-6.71%,
and the counterparties pay the Company interest at a variable rate based
on the 3-month LIBOR. The total notional amount of the interest rate
swaps was $55,000 at December 31, 1994 and the term of the agreements
ranged from 2-3 years. Under the interest rate cap agreements, the
Company receives from the counterparties amounts by which the 3-month
LIBOR rate exceeds 6.5% based on the notional amounts of the cap
agreements which total $20,000. The term of these agreements is 2 years.
The Company is exposed to certain losses in the event of nonperformance
bythe counterparties to these agreements, however, the Company's
exposure is not significant and nonperformance is not anticipated. Based
on estimates obtained from a dealer at which the interest rate swap and
cap agreements could be settled, the Company had unrealized gains of
approximately $1,547 and $266, respectively, as of December 31, 1994.
On May 31, 1989, the Company issued an $11,500, 0% Subordinated Note
and a $3,500, 6.5% Convertible Subordinated Debenture to partially
finance the National Healthcare acquisition. The 0% SubordinatedNote due
May 31, 1997 was discounted for financial reporting purposes at an
effective rate of 10.4% to $5,215on the date of issuance. In 1994, the
6.5% Convertible Subordinated Debenture was exchanged for a $3,333, 9.1%
Convertible Subordinated Debenture which is convertible into
approximately 867 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.
Based on the borrowing rates currently available to the Company for
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 $248,980 as of December 31, 1994.
Cash payments for interest during 1994, 1993 and 1992 were $9,831,
$2,341 and $2,126, respectively.
Maturities of long-term debt for the five years subsequent to 1994
are: 1995 - $236; 1996 - $3,491;1997 - $9,143; 1998 - $78; and 1999 -
$235,381.
NOTE 8 - 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 34 shares as of December 31,
1994 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, 1994 and 1993:
<TABLE>
Pension Plan Retirement Plan
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations
Vested $ (12,302) $ (10,984) $ (1,195) $ (1,225)
Non-vested (939) (528) (1,018) (780)
Total accumulated benefit obligations (13,241) (11,512) (2,213) (2,005)
Additional amounts related to projected salary increases (1,446) (2,110) (1,366) (1,226)
Projected benefit obligations for service rendered to date (14,687) (13,622) (3,579) (3,231)
Plan assets at fair market value 12,696 13,603 - -
Plan assets under projected benefit obligations (1,991) (19) (3,579) (3,231)
Unrecognized net (gain) loss from past experience 1,058 (42) 1,108 1,080
Unrecognized prior service cost (benefit) 407 479 (22) (23)
Unrecognized net (asset) obligation being recognized
over 11 and 17 years, respectively (214) (321) 328 369
Adjustment required to recognize minimum liability
under SFAS 87 - - (49) (200)
Accrued pension asset (liability) $ (740) $ 97 $ (2,214) $ (2,005)
</TABLE>
The components of net periodic pension cost for both plans are as follows:
Year ended December 31, 1994 1993 1992
Service cost-benefits earned during the year $ 1,314 $ 1,146 $ 944
Interest cost on projected benefit obligations 1,232 1,056 994
Actual return on plan assets 436 (1,450) (748)
Net amortization and deferral (1,462) 453 (145)
Net periodic pension cost $ 1,520 $ 1,205 $1,045
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 was assumed to be 8.0% and 5.5% for
1994, respectively, and 7.5% and 5.5% for 1993, respectively. The
expected long-term rate of return on plan assets was 8.5% for 1994 and
9.0% for 1993.
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 adopted the accounting provisions of the Statement of
Financial Accounting Standards No. 106, EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS as of January 1, 1992. This
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 before taxes and $730 after taxes, or $.03
per share. The cumulative 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, 1994 and 1993:
Accumulated postretirement benefit obligation: 1994 1993
Retirees $ (246) $ (251)
Fully eligible active plan participants (590) (464)
Other active plan participants (1,391) (980)
Accumulated postretirement benefit obligation (2,227) (1,695)
Unrecognized loss from past experience 262 64
Accrued postretirement benefit liability $ (1,965) $ (1,631)
The components of net periodic postretirement benefit cost are as follows:
<TABLE>
Year Ended December 31, 1994 1993 1992
<S> <C> <C> <C>
Service cost-benefits earned during the year $206 $142 $137
Interest cost on accumulated postretirement benefit
obligation 160 122 105
Net amortization 6 - -
Net periodic postretirement benefit cost $372 $264 $242
</TABLE>
For measurement purposes, a 13% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1994 and
1993; 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 rate by 1
percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1994 by $179 and
the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year then ended by $49. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8.0% for 1994 and 7.5% for 1993.
NOTE 9 - SHAREHOLDERS' EQUITY
On May 10, 1994, the Company issued 1,150 shares of Series B preferred
stock as part of its combination with Stuart. Each share of preferred
stock has an annual dividend of $4.50, payable quarterly, has voting
rights on items submitted to a vote of the holders of common stock, is
convertible into approximately 6.1 shares of com- mon stock at the
shareholders' option and is redeemable by the Company after April 1997
at a price of $100.
The changes in common stock, paid-in capital and retained earnings are
shown as follows:
<TABLE>
COMMON
SHARES COMMON PAID-IN RETAINED
OUTSTANDING STOCK CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
Balance December 31, 1991 12,924 $25,848 $ 19,319 $51,924 $ 97,091
Net income - - - 20,392 20,392
Cash dividends of $.11 per common 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 of $.14 per common 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
Acquisition related payout 63 126 797 - 923
Balance December 31, 1993 20,285 40,569 9,258 87,116 136,943
NET INCOME - - - 7,919 7,919
CASH DIVIDENDS OF $.17 PER COMMON SHARE - - - (5,221) (5,221)
CASH DIVIDENDS OF $4.50 PER PREFERRED SHARE - - - (3,309) (3,309)
PROCEEDS FROM EXERCISED STOCK OPTIONS,
INCLUDING TAX BENEFITS REALIZED OF $761 189 379 1,665 - 2,044
COMMON STOCK ISSUED FOR INCENTIVE PLAN 24 48 515 - 563
ACQUISITION RELATED PAYOUT 63 125 2,112 - 2,237
STOCK SPLIT (THREE-FOR-TWO) 10,203 20,407 (12,343) (8,064) -
BALANCE DECEMBER 31, 1994 30,764 $61,528 $ 1,207 $78,441 $141,176
</TABLE>
A 3-for-2 stock split was distributed on June 8, 1994 to shareholders
of record as of May 24, 1994. All applicable share and per common share
information has been restated to reflect this transaction.
The Company has a shareholder rights agreement under which 8/27ths of
a Right is attendant to each outstanding share of common stock of the
Company. Each full Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series A Participating
Cumulative Preferred Stock (the "Series A Preferred Stock"), at an
exercise price of $75 (the "Purchase Price"). The Rights will become
exercisable, if not earlier redeemed, only if a person or group
acquires 20% or more of the outstanding shares of the common stock or
announces a tender offer, the consummation of which would result in
ownership by a person or group of 20% or more of such outstanding
shares. Each holder of a Right, upon the occurrence of certain events,
will become entitled to receive, upon exercise and payment of the
Purchase Price, Series A Preferred Stock (or in certain circumstances,
cash, property or other securities of the Company or a potential
acquirer) having a value equal to twice the amount of the Purchase
Price. The Rights will expire on May 10, 2004, if not earlier redeemed.
NOTE 10 - STOCK OPTION PLANS
Under the terms of the Company's stock option plans, 3,347 shares of
common stock have been reserved for future issuance at December 31,
1994. 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, 1994, there were 1,742 non-qualified and no ISO stock
options issued and outstanding under the plans.
The changes in shares under outstanding options for each of the years
in the three year period ended December 31, 1994 are as follows:
SHARES GRANT PRICE
YEAR ENDED DECEMBER 31, 1994
OUTSTANDING AT BEGINNING OF YEAR 1,031 $ 3.55- 9.83
GRANTED 953 14.92-16.50
EXERCISED (227) 3.55- 9.83
EXPIRED/CANCELLED (15) 8.33-15.42
OUTSTANDING AT END OF YEAR 1,742 $ 3.55-16.50
EXERCISABLE 545
SHARES AVAILABLE FOR ADDITIONAL GRANTS 1,605
Year ended December 31, 1993
Outstanding at beginning of year 855 $ 3.53-9.33
Granted 425 8.59-9.83
Exercised (181) 3.53-9.33
Expired/cancelled (68) 3.55-9.33
Outstanding at end of year 1,031 $ 3.55-9.83
Exercisable 443
Shares available for additional grants 2,545
Year ended December 31, 1992
Outstanding at beginning of year 856 $ 2.37-9.33
Granted 235 8.00-8.72
Exercised (207) 2.37-5.59
Expired/cancelled (29) 3.74-9.33
Outstanding at end of year 855 $ 3.53-9.33
Exercisable 499
Shares available for additional grants 426
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, 1994, there were no SARs issued and outstanding.
NOTE 11 - 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 was a favorable
adjustment of $706 and is reported separately in the Consolidated
Statements of Income for the year ended December 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, 1994 1993 1992
Current tax provision
Federal $ 6,663 $10,405 $ 9,386
State 1,635 2,123 2,262
Total current provision 8,298 12,528 11,648
Deferred tax benefit
Federal (1,816) (555) (916)
State (404) (73) (227)
Total deferred benefit (2,220) (628) (1,143)
Provision for income taxes $ 6,078 $11,900 $10,505
A reconciliation of the Federal statutory rate to the Company's
effective income tax rate for continuing operations follows:
<TABLE>
Year ended December 31, 1994 1993 1992
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 34.0%
Increases (reductions) in the rate resulting from:
State income taxes, net of Federal income tax
benefit 4.6 4.4 5.1
Nondeductible goodwill 2.8 .5 .5
Other, net 1.0 (.8) .9
Effective rate 43.4% 39.1% 40.5%
</TABLE>
The components of deferred income tax benefit for continuing operations
for the year ended December 31, 1992 are as follows:
Year ended December 31, 1992
Inventories $ 135
Depreciation (225)
Employee benefit plans 611
Allowance for doubtful accounts 303
Real estate sale/leaseback (88)
Reserve for property and equipment (126)
Other, net 533
Total deferred benefit $1,143
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1994 and 1993 are presented below:
1994 1993
Deferred tax assets:
Allowance for doubtful accounts $ 2,115 $ 2,702
Accrued liabilities not deductible until paid 10,912 1,998
Employee benefit plans 4,195 3,038
Leased assets - 3,512
Merchandise inventories 1,190 -
Nonrecurring restructuring expenses 5,011 -
Other 3,606 1,641
Total deferred tax assets 27,029 12,891
Deferred tax liabilities:
Property and equipment 48 4,484
Merchandise inventories - 920
Leased assets 165 -
Other 1,097 1,352
Total deferred tax liabilities 1,310 6,756
Net deferred tax asset (included in other current assets
and other assets) $25,719 $ 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 assets will be realized. Therefore, the Company has not recognized a
valuation allowance for the gross deferred tax asset recorded in the
accompanying Consolidated Balance Sheets.
Cash payments for income taxes, including taxes on discontinued
operations, for 1994, 1993 and 1992 were $8,164, $12,153 and $21,672,
respectively.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company has entered into noncancelable agreements to lease
certain office and warehouse facilities and to manage the operations of
its mainframe computer system with remaining terms ranging from one to
twelve years. Certain leases include renewal options, generally for five
year increments. At December 31, 1994, future minimum annual payments
under noncancelable agreements with original terms in excess of one year
are as follows:
Operating Mainframe
Leases Operations Total
1995 $18,981 $15,740 $34,721
1996 13,801 4,300 18,101
1997 11,723 - 11,723
1998 10,079 - 10,079
1999 7,219 - 7,219
Later years 16,976 - 16,976
Total minimum payments $78,779 $20,040 $98,819
Minimum lease payments have not been reduced by minimum sublease
rentals aggregating $2,609 due in the future under noncancelable
subleases.
Rent expense for continuing operations for the years ended December
31, 1994, 1993 and 1992 was $21,264, $12,857 and $11,329, respectively.
The Company sold transportation equipment with a net book value of
approximately $407 in a sale/leaseback agreement in 1994. The gain
realized in the sale transaction totaling $1,328 has been deferred and
is being credited to income as a rent expense adjustment over the lease
terms.
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 net sales
during 1994, except for sales under contract to member hospitals of the
VHA, which amounted to $960,000 or 40% of the Company's net sales.
NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table presents the summarized quarterly financial data
for 1994, 1993 and 1992, after restatement for a 3-for-2 stock split
distributed on June 8, 1994, to shareholders of record as of May 24,
1994:
<TABLE>
1994
QUARTER 1ST 2ND 3RD 4TH
<S> <C> <C> <C> <C>
Net sales $ 390,794 $581,763 $ 693,004 $ 730,242
Gross margin 39,126 56,809 66,234 70,175
Net income (loss) 4,756 (5,125) 1,486 6,802
Net income (loss) per common share $ .15 $ (.19) $ .01 $ .18
</TABLE>
<TABLE>
1993
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $ 317,812 $ 341,221 $ 361,959 $ 375,979
Gross margin 33,634 35,654 38,151 39,872
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 common share:
Continuing operations $ .13 $ .14 $ .15 $ .18
Discontinued operations - - - .03
Cumulative effect of change in accounting principle .02 - - -
Net income per common share $ .15 $ .14 $ .15 $ .21
</TABLE>
<TABLE>
1992
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $282,481 $289,705 $300,018 $305,094
Gross margin 28,514 29,778 31,450 34,558
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 common share:
Continuing operations $ .11 $ .12 $ .13 $ .16
Discontinued operations .34 (.10) - (.04)
Cumulative effect of change in accounting principle (.03) - - -
Net income per common share $ .42 $ .02 $ .13 $ .12
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
(KPMG PEAT MARWICK LLP LOGO)
CERTIFIED PUBLIC ACCOUNTANTS
Suite 1900
1021 East Cary Street
Richmond, VA 23219-4023
The Board of Directors and Shareholders
Owens & Minor, Inc.:
We have audited the accompanying consolidated balance sheets of
Owens & Minor, Inc. and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of income and cash flows for
each of the years in the three-year period ended December 31, 1994.
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
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the 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, 1994 and
1993, and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1994, in
conformity with generally accepted accounting principles.
February 3, 1995
(SIGNATURE OF KPMG PEAT MARWICK LLP)
Member Firm of
Klynveld Peat Marwick Goerdeler
MARKET AND DIVIDEND INFORMATION
Owens & Minor, Inc.'s common stock trades on the New York Stock Exchange
under the symbol, OMI. The following table, which reflects the 3-for-2 stock
split distributed on June 8, 1994, to shareholders of record as of May 24,
1994, 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 1994
Quarter 1st 2nd 3rd 4th
Market Price
High $18.13 $17.13 $16.75 $16.75
Low $14.63 $14.13 $13.25 $13.63
Dividends per share $ .035 $ .045 $ .045 $ .045
Year 1993
Quarter 1st 2nd 3rd 4th
Market Price
High $11.59 $14.00 $15.50 $15.59
Low $ 8.42 $ 8.42 $12.17 $12.00
Dividends per share $ .035 $ .035 $ .035 $ .035
Year 1992
Quarter 1st 2nd 3rd 4th
Market Price
High $ 9.67 $ 8.33 $ 8.89 $10.11
Low $ 7.50 $ 7.33 $ 7.55 $ 7.89
Dividends per share $ .023 $ .029 $ .029 $ .029
At December 31, 1994, there were approximately 12,000 shareholders.
<PAGE>
Exhibit 21
OWENS & MINOR, INC. AND SUBSIDIARIES
SUBSIDIARIES OF REGISTRANT
Subsidiary State of Incorporation
Owens & Minor Medical, Inc. Virginia
Stuart Medical, Inc. Pennsylvania
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
Lyons Physician Supply Company Ohio
A. Kuhlman & Co. Michigan
<PAGE>
Exhibit 23
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 3, 1995, relating to the consolidated balance sheets
of Owens & Minor, Inc. and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of income and
cash flows for each of the years in the three-year period ended
December 31, 1994, which report is incorporated by reference in
the December 31, 1994 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 3, 1995, relating to the financial statement schedule of the
Company, which report appears on page 15 of the Form 10-K.
KPMG Peat Marwick LLP
Richmond, Virginia
March 22, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000075252
<NAME> OWENS & MINOR INC/VA/
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 513
<SECURITIES> 0
<RECEIVABLES> 295,580
<ALLOWANCES> 5,340
<INVENTORY> 323,851
<CURRENT-ASSETS> 640,826
<PP&E> 62,145
<DEPRECIATION> 23,525
<TOTAL-ASSETS> 868,560
<CURRENT-LIABILITIES> 359,038
<BONDS> 0
<COMMON> 61,528
0
115,000
<OTHER-SE> 79,648
<TOTAL-LIABILITY-AND-EQUITY> 868,560
<SALES> 2,395,803
<TOTAL-REVENUES> 2,395,803
<CGS> 2,163,459
<TOTAL-COSTS> 2,338,965
<OTHER-EXPENSES> 29,594
<LOSS-PROVISION> 1,149
<INTEREST-EXPENSE> 12,098
<INCOME-PRETAX> 13,997
<INCOME-TAX> 6,078
<INCOME-CONTINUING> 7,919
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,919
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
