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, 1995
[ ] 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 54-01701843
(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)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of Common Stock held by non-affiliates (based
upon the closing sales price) was approximately $286,184,622 as of March 5,
1996. 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 5, 1996 was 30,872,293 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Owens & Minor, Inc. Annual Report to Shareholders for the year
ended December 31, 1995 (the "1995 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 1996 Annual Meeting of Shareholders (the
"1996 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 and 8 hereof with respect to the 1995 Annual Report and Items 10, 11, 12 and
13 hereof with respect to the 1996 Proxy Statement, the 1995 Annual Report and
the 1996 Proxy Statement are not deemed to be filed as a part of this report.
TABLE OF CONTENTS
and
CROSS REFERENCE SHEET
Page Number(s)/Sections
Form Annual Proxy
10-K Report Statement
PART I
Item 1 Business 2-10
Item 2 Properties 10
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a
Vote of Security Holders 11
PART II
* Item 5 Market for Registrant's Common
Equity and Related Stockholder
Matters 15 35
* Item 6 Selected Financial Data 15 12-13
* Item 7 Management's Discussion and
Analysis of Financial
Condition and Results
of Operation 15 14-17
* Item 8 Financial Statements and
Supplementary Data 15 18-33
Item 9 Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure 15
PART III
** Item 10 Directors and Executive Officers Proposal 1:
of the Registrant Election of
16 Directors
** Item 11 Executive Compensation 16 Proposal 1:
Election of
Directors-
Executive
Compensation
** Item 12 Security Ownership of Certain Proposal 1:
Beneficial Owners and Election of
Management 16 Directors-
Capital Stock
Owned by
Principal
Shareholders
and Management
** Item 13 Certain Relationships and
Related Transactions 16 None
PART IV
Item 14 Exhibits, Financial Statement
Schedules, and Reports on 17-20
Form 8-K
___________________________________________________________________________
* Information related to this item is hereby incorporated by reference to the
1995 Annual Report.
** Information related to this item is hereby incorporated by reference to the
1996 Proxy Statement.
OWENS & MINOR, INC.
PART I
Item 1.Business
Owens & Minor, Inc. (the "Company" or "O&M") is one of the two largest
distributors of medical/surgical supplies in the United States. The Company
distributes approximately 300,000 finished medical/surgical products produced by
approximately 3,000 manufacturers to over 4,000 customers from 49 distribution
centers nationwide. The Company's customers are primarily hospitals and also
include alternate care facilities such as physicians' offices, clinics, nursing
homes and surgery centers. The majority of the Company's sales consists of
dressings, endoscopic products, intravenous products, needles and syringes,
sterile procedure trays, surgical products and gowns, sutures and urological
products. The Company was incorporated in Virginia on December 7, 1926 as a
successor to a partnership founded in Richmond, Virginia in 1882.
The Company has significantly expanded its national presence over the last
five years. This expansion resulted from both internal growth and acquisitions,
including the May 1994 acquisition of Stuart Medical, Inc. ("Stuart"), then the
third largest distributor of medical/surgical supplies in the United States with
1993 net sales of approximately $890.5 million. Since 1991, the Company has
grown from 27 medical distribution centers serving 37 states to 49 distribution
centers serving 50 states currently. Over the same period, the Company's net
sales increased at a 30.7% compound annual rate, almost tripling from
approximately $1.0 billion in 1991 to approximately $3.0 billion in 1995.
The Company believes that in 1995 sales of medical/surgical supplies in the
United States approximated $30.0 billion and that approximately half of these
sales were made through distributors, with the balance having been sold directly
by manufacturers. In recent years, the medical/surgical supply distribution
industry has grown due to the rising consumption of medical supplies and the
increasing reliance by manufacturers and customers on distributors. This
increasing reliance is driven by customers seeking to take advantage of cost
savings achievable through the use of distributors. In addition, the healthcare
industry has been characterized by the consolidation of healthcare providers
into larger and more sophisticated entities that are increasingly seeking lower
delivered product costs and incremental services through a broad distribution
network capable of supplying their inventory management needs. These pressures
have in turn driven significant and continuing consolidation within the
medical/surgical supply distribution industry.
The Company is committed to providing its customers and suppliers with the
most responsive, efficient and cost effective distribution system for the
delivery of medical/surgical supplies and services. In order to meet this
commitment, the Company has implemented the following strategy: (i) maintain
market leadership and leverage the benefits of its national distribution
capabilities; (ii) continue to be a low-cost provider of distribution services;
(iii) increase sales to existing customers and obtain new customers by providing
responsive customer service and offering a broad range of inventory management
services; and (iv) enhance relationships with major medical/surgical supply
manufacturers.
Industry Overview
Distributors of medical/surgical supplies provide a wide variety of
disposable medical and surgical products to healthcare providers, including
hospitals, integrated healthcare systems ("IHSs") and alternate care providers.
Medical/surgical supplies do not include pharmaceuticals. In 1995, hospital and
alternate care facilities purchased approximately $23.0 billion and $7.0
billion, respectively, of medical/surgical supplies. Sales of medical/surgical
supplies are estimated to have grown at a compound annual growth rate of
approximately 7% over the last three years. Factors contributing to this growth
include an aging population, the availability of new healthcare procedures and
new product introductions.
The healthcare industry has been characterized by the consolidation of
healthcare providers into larger and more sophisticated entities that are
increasingly seeking lower delivered product costs and incremental services
through a broad distribution network capable of supplying their inventory
management needs. The economies of scale that a distributor can generate by
servicing a number of facilities should allow it to perform this service at a
lower cost than an individual healthcare provider or manufacturer. Customers
also benefit from a complete range of enhanced inventory management services
developed by medical/surgical supply distributors that include continuous
inventory replenishment process ("CRP"), asset management consulting and
stockless and just-in-time inventory programs.
The above trends have driven significant and continuing consolidation in
the medical/surgical supply distribution industry since the mid-1980s. The
Company believes that large distributors with national geographic capabilities
and broad product offerings are capturing market share from regional and local
distributors. As the industry continues to consolidate, large distributors are
selectively acquiring regional and local distributors whose facilities can
provide access to new metropolitan areas or expand geographic coverage to serve
existing national accounts more effectively.
The traditional role of a distributor involves warehousing and delivering
medical/surgical supplies to a customer's loading dock. Increasingly,
distributors have assumed the additional roles of asset managers and information
managers. Larger distributors are offering a wide array of customized asset
management services that many smaller distributors are unable to provide. In
addition, as the ability of medical/surgical supply distributors to manage
information becomes an increasingly important factor, the larger, national
distributors will have a distinct advantage. The quality of information
generated by a national distributor, in terms of its ability to discern
utilization patterns across a broad spectrum of products, customers and
locations, will be more useful to both manufacturers and customers than that of
a local or regional distributor.
Customers
The Company currently markets its distribution services to several types of
healthcare providers, including hospitals, IHSs and alternate care providers.
O&M contracts with these providers directly and through national healthcare
networks ("Networks") and group purchasing organizations ("GPOs").
National Healthcare Networks and Group Purchasing Organizations. Networks
and GPOs are entities that act on behalf of a group of healthcare providers to
obtain pricing and other benefits that the individual members may not be able to
obtain. Hospitals, physicians and other types of healthcare providers have
joined Networks and GPOs to obtain services from medical/surgical supply
distributors ranging from discounted product pricing to logistical and clinical
support in exchange for a fee. Networks and GPOs negotiate directly with both
medical/surgical supply manufacturers and distributors on behalf of their
members, establishing exclusive or multi-vendor relationships.
Because the combined purchasing volumes of their member institutions are
very large, Networks and GPOs have the buying power to negotiate price discounts
for the most commonly used medical/surgical products and logistical services.
Accordingly, O&M believes that successful relationships with Networks and GPOs
are central to the Company's ability to maintain market share. Sales to the
Company's top ten Network or GPO customers represented approximately 70% of its
net sales in 1995.
Networks and GPOs do not issue purchase orders or collect funds on behalf
of their members and they cannot ensure that members will purchase their
supplies from a given vendor. However, the buying power of Networks and GPOs is
such that they are able to negotiate price discounts without having to guarantee
minimum purchasing volumes. Members may belong to more than one Network or GPO,
and they are also free to negotiate directly with distributors and
manufacturers. As a result, healthcare providers often select the best pricing
and other benefits from among those offered through several Networks and GPOs.
Despite the inability of most Networks and GPOs to compel members to use O&M
when it is the Network's or the GPO's primary distributor, O&M believes that, in
such circumstances, the incentives for Network or GPO members to buy supplies
through the Network's or GPO's contract with the Company are strong, and that
these contracts yield significant sales volumes. The Company plans to continue
to maintain and strengthen its relationships with selected Networks and GPOs as
a means of securing its leading market position. The Company's Network or GPO
customers include VHA Inc. ("VHA"), AmeriNet, Inc. ("AmeriNet"),
AmHS/Premier/Sun Health ("Premier") and University Health System Consortium
("UHC").
Since 1985, the Company has been a distributor for VHA, the nation's second
largest network for not-for-profit hospitals, representing over 1,200 healthcare
organizations. In November 1994, VHA added Baxter International Inc. ("Baxter")
as its fourth authorized VHA distributor and initiated a policy permitting the
other three authorized VHA distributors, including the Company, to distribute
certain Baxter-manufactured products. During 1995, members of VHA were given the
opportunity to select one of four medical/surgical supply distributors as their
authorized VHA distributor. The Company retained over 85% of its previous sales
volume to VHA members. The loss of volume to VHA members has been partially
offset by the gain in distributing Baxter's self-manufactured products to VHA
members and by increasing market share within VHA facilities. Sales through VHA
and AmeriNet represented approximately 39.6% and 5.6%, respectively, of the
Company's net sales in 1995.
Integrated Healthcare Systems. An IHS is an organization which is composed
of several healthcare facilities that jointly offer a variety of healthcare
services in a given market. These providers may be individual not-for-profit or
investor-owned entities that are joined by a formal business arrangement, or
they may all be part of the same legal entity. An IHS is distinguished by the
fact that it is typically a network of different types of healthcare providers
that are strategically located within a defined service area, and seek to offer
a broad spectrum of healthcare services and comprehensive geographic coverage to
a particular local market. Although an IHS may include alternate care
facilities, hospitals remain the key component of any IHS.
O&M believes that IHSs will become increasingly important because of their
expanding role in healthcare delivery and cost containment and their reliance
upon the hospital, O&M's traditional customer, as a key component of their
organizations. Individual healthcare providers within a multiple-entity IHS
may be able to contract individually for distribution services; however, O&M
believes that the providers' shared economic interests create strong incentives
for participation in distribution contracts which are established at the system
level. Additionally, single-entity IHSs are usually committed to using the
primary distributor designated at the corporate level because they are all part
of the same legal entity. Because the IHSs frequently rely on cost containment
as a competitive advantage, IHSs have become an important source of demand for
O&M's enhanced inventory management and other value-added services.
In February 1994, the Company was selected by Columbia/HCA Healthcare
Corporation ("Columbia/HCA"), an investor-owned system of hospitals and
alternate care facilities, as its primary distributor of medical/surgical
supplies. Pursuant to its agreement with Columbia/HCA, the Company provides
distribution and other inventory management process services to Columbia/HCA
hospitals and other healthcare facilities. Columbia/HCA is the Company's
largest customer owning over 300 hospitals and IHSs throughout the United
States. Sales to Columbia/HCA represented approximately 8.4% of the Company's
net sales in 1995. Other than VHA, AmeriNet and Columbia/HCA, no Network, GPO
or individual customer accounted for as much as 5% of the Company's net sales
during such year.
Individual Providers. In addition to contracting with healthcare providers
at the IHS level and indirectly through Networks and GPOs, O&M contracts
directly with healthcare providers. In 1995, hospitals represented
approximately 90% of the Company's net sales. Not-for-profit hospitals
represented a majority of these facilities. The Company targets high-volume
independent hospitals and those which are part of larger healthcare systems such
as IHSs. The Company also markets to alternate care providers that are
primarily owned by, or members of, an IHS. Sales to such alternate care
customers comprised the balance of the Company's net sales in 1995. The
Company's hospital customers include Brigham & Women's Hospital, The Hospital of
the University of Pennsylvania, Johns Hopkins Health System, Massachusetts
General Hospital, Ohio State University Hospital, Shands Hospital at the
University of Florida, Stanford Health Services, University of California, Los
Angeles Medical Center ("UCLA"), University of Nebraska Medical Center,
University of Texas-M.D. Anderson Cancer Center and Yale-New Haven Hospital.
Contracts and Pricing
Industry practice is for the healthcare providers to negotiate product
pricing directly with manufacturers and then negotiate distribution pricing
terms with distributors. Contracts in the medical/surgical supply distribution
industry set forth the price at which products will be distributed, but
generally do not require minimum volume purchases by customers and are
terminable by the customer upon short notice. Accordingly, most of the Company's
contracts with customers do not guarantee minimum sales volumes.
The majority of the Company's contracts compensate the Company on a fixed
cost-plus percentage basis under which a negotiated percentage distributor fee
is added to the product cost agreed to by the customer and the manufacturer. In
April 1994, however, the Company began to sell products to VHA-member hospitals
and affiliates on a variable cost-plus percentage basis that varies according to
the services rendered, the dollar volume of purchases and the percentage of the
institution's total purchase volume that is directed to the Company. The
Company has since entered into this type of pricing arrangement with other
Networks and GPOs. As the Company's sales to a Network or GPO member
institution grow, the cost-plus pricing charged to such customers decreases.
The Company has recently negotiated contracts that charge incremental fees for
additional distribution and enhanced inventory management services, such as
frequent deliveries and distribution of products in small units of measure.
Although the Company's marketing and sales personnel based in the distribution
centers negotiate local contracts and pricing levels with customers, management
has established minimum pricing levels.
Services
The Company's core competency is the timely and accurate delivery of bulk
medical/surgical supplies at low cost. In addition to these core distribution
services, the Company offers flexible delivery alternatives supported by
inventory management services to meet the varying needs of its customers.
Electronic data interchange ("EDI") is an integral component of the
Company's business strategy. EDI includes computer-to-computer electronic data
interchange for business transactions, such as purchasing, invoicing, funds
transfer and contract pricing. The Company encourages all customers to use EDI
for product orders and, in some cases, imposes additional charges on customers
who do not use EDI for purchasing. Approximately 75% of items ordered by the
Company's customers are made through EDI. By expediting communication between
the Company and its customers and manufacturers and reducing the use of paper
for purchasing and invoicing, EDI enhances efficiencies and generates cost
savings.
EDI and the Company's information technology ("IT") systems enable the
Company to offer its customers the following services to minimize their
inventory holding requirements:
(BULLET) PANDAC(R) Since 1968, the Company has offered the PANDAC(R) wound
closure management system that provides customers with an accurate
evaluation of their current wound closure inventories and usage
levels in order to reduce costs for wound closure products. The
Company guarantees that PANDAC(R) will generate a minimum of 5%
savings in total wound closure inventory expenditures during its
first year of use.
(BULLET) Interactive Value Model(TM) The Interactive Value Model(TM) is a
software program that uses an interactive question and answer
format to calculate potential cost savings achievable through the
use of O&M's distribution services.
(BULLET) Stockpoint(TM) Stockpoint(TM) is a just-in-time inventory
management program designed to provide customers with delivery of
products in a cost-efficient combination of bulk and lowest unit
of measure.
(BULLET) Pallet Architecture Location System. The Pallet Architecture
Location System provides a customized approach to the delivery of
products by expediting the "put-away" functions at customer's
stockrooms.
(BULLET) TracePak(TM) The Company, in partnership with DeRoyal Industries,
Inc., packages medical/surgical supplies under the TracePak(TM)
name for use by healthcare providers for specific medical/surgical
procedures. TracePak(TM) reduces the time spent by healthcare
personnel assembling medical/surgical supplies for such
procedures.
(BULLET) Net/GAIN(SM) The Company and Henry Schein, Inc. are developing a
program called Net/GAIN(SM) to permit physician practices
associated with an IHS to order medical and other supplies from
the customized Net/GAIN(SM) product selection or from Henry
Schein, Inc.'s extensive catalogue of products.
(BULLET) Cost Trak(SM) Cost Trak(SM) is an activity-based costing program
utilized to price value-added services accurately. By identifying
costs associated with activities, Cost Trak(SM) enables customers
to select the most cost-effective services.
Sales and Marketing
The Company's sales and marketing force is organized on a decentralized
basis in order to provide individualized services to customers by giving the
local sales force at each distribution center the discretion to respond to
customers' needs quickly and efficiently. The sales and marketing force, which
is divided into three tiers, consists of approximately 300 locally based sales
personnel. In order to ensure that all of the Company's customers receive high
levels of customer service, each tier of the sales force is dedicated to
specific functions, including: developing relationships with large hospitals and
IHS customers; targeting increased penetration of existing accounts; and
providing daily support services. Corporate personnel and IT employees work
closely with the local sales force to support the marketing of O&M's inventory
management capabilities and the strengthening of customer relationships.
All sales and marketing personnel receive performance based compensation
aligned with customer satisfaction and O&M's expectations. In addition, the
Company, with the support of its suppliers, emphasizes quality and IT in
comprehensive training programs for its sales and marketing force to sharpen
customer service skills. In order to respond rapidly to its customers needs,
all marketing and sales personnel are equipped with laptop computers that
provide access to (i) order, inventory and payment status, (ii) customized
reporting and data analysis and (iii) computer programs, such as the Interactive
Value Model(TM) and PANDAC(R).
Suppliers
The Company is the only national distributor that does not manufacture or
sell products under its own label, and believes that this independence has
enabled it to develop strong and mutually beneficial relationships with its
suppliers. The Company believes that its size, strong, long-standing
relationships and independence enable it to obtain attractive terms from
manufacturers, including discounts for prompt payment, volume incentives and
fees for customer sales information. These terms contribute significantly to
the Company's gross margin.
The Company has relationships with virtually all major manufacturers of
medical/surgical supplies and has long-standing relationships with
manufacturers, such as C.R. Bard, Inc., Becton Dickinson and Company ("Becton
Dickinson"), Johnson & Johnson Hospital Services, Inc. ("Johnson & Johnson"),
Kendall Healthcare Products ("Kendall"), Kimberly Clark Professional Health Care
("Kimberly Clark"), and 3M Health Care ("3M"). O&M is the largest distributor of
these manufacturers' medical/surgical products. Approximately 18.3% and 5.3% of
the Company's net sales in 1995 were sales of Johnson & Johnson and Becton
Dickinson products, respectively. In 1995, no other manufacturer accounted for
more than 5% of the Company's net sales.
Asset Management
Inventory
Due to the Company's significant investment in inventory to meet the rapid
delivery requirements of its customers, efficient asset management is essential
to the Company's profitability. O&M maintains inventories of approximately
300,000 finished medical/surgical products (up from less than 100,000 in 1992)
produced by approximately 3,000 manufacturers. The significant increase in the
number of stock keeping units ("SKUs") has challenged distributors and
healthcare providers to create more efficient inventory management systems.
The Company has responded to the significant increase in the number of SKUs
by improving warehousing techniques, including the use of radio-frequency
hand-held computers and bar-coded labels that identify location, routing and
inventory picking and replacement, which allow the Company to monitor inventory
throughout its distribution systems. The Company is implementing additional
programs to manage inventory including a state-of-the-art inventory forecasting
system, warehouse slotting and reconfiguration techniques, CRP, FOCUS(SM) and
vendor certification programs. The forecasting system uses historical
information for the three prior years to predict the future demand for
particular items thereby reducing the cost of carrying unnecessary inventory and
increasing inventory turnover. As of December 31, 1995, 20 of the Company's
distribution centers utilized the inventory forecasting system and the remaining
distribution centers are expected to be utilizing it by mid-1996. CRP, which
utilizes computer-to-computer interfaces, allows manufacturers to monitor daily
sales and inventory levels so that they can automatically and accurately
replenish the Company's inventory. The Company has initiated a vendor
certification program that will require "preferred manufacturers" to satisfy
minimum requirements, such as purchasing by EDI, exceeding minimum fill rates
and offering a flexible returned goods policy. O&M believes the increased
efficiency resulting from vendor certification will reduce SG&A expenses.
Accounts Receivable
The Company's average days sales outstanding have been significantly less
than the industry average as determined by the National Health Care Credit
Group. The Company actively manages its accounts receivable to minimize credit
risk and does not believe that credit risk associated with accounts receivable
poses a risk to its results from operations.
Competition
The medical/surgical supply distribution industry in the United States is
highly competitive and consists of (i) three major, nationwide distributors, the
Company, Baxter and General Medical Corporation ("General Medical"), (ii) a few
smaller, nationwide distributors and (iii) a number of regional and local
distributors. Competition within the medical/surgical supply distribution
industry exists with respect to total delivered product cost, product
availability and the ability to fill orders accurately, delivery time, efficient
computer communication capabilities, services provided, breadth of product line
and the ability to meet special requirements of customers.
Regional and local distributors often provide high levels of customer
service but are constrained by relatively high operating costs which are passed
on to customers. The Company believes that the higher costs associated with
purchasing through regional and local distributors will result in opportunities
for the Company to augment its market share as customers continue to seek to
lower costs.
Baxter manufactures medical/surgical supplies and distributes its own
products as well as the products of other manufacturers primarily to the
hospital and IHS market. General Medical distributes medical/surgical products
under its own label as well as the products of other manufacturers. General
Medical services alternate care facilities, such as physicians' offices,
clinics, nursing homes and surgery centers, in addition to serving hospital
customers and the wholesale hospital market.
In November 1995, Baxter announced its intention to distribute to its
shareholders the stock of its subsidiary that conducts cost management, United
States distribution and surgical products operations. The Company does not
believe the Baxter restructuring will have a significant effect on the Company's
competitive position in the industry.
Distribution
The Company employs a decentralized approach to sales and customer service,
operating 49 distribution centers throughout the United States. The Company's
distribution centers currently provide products and services to customers in 50
states and the District of Columbia. The range of products and customer and
administrative services provided by a particular distribution facility are
determined by the characteristics of the market it serves. Most distribution
centers are managed as separate profit centers. Most functions, including
purchasing, customer service, warehousing, sales, delivery and basic financial
tasks, are conducted at the distribution center and are monitored by corporate
personnel. The Company believes that the decentralized nature of its
distribution system provides customers with flexible and individualized service
and contributes to overall cost reductions.
The Company delivers most medical/surgical supplies with a leased fleet of
trucks. Parcel services are used to transport all other medical/surgical
supplies. Distribution centers generally service hospitals and other customers
within a 100 to 150 mile radius. The frequency of deliveries from distribution
centers to principal accounts varies by customer account.
Information Technology
O&M continuously invests in advanced IT, which includes automated
warehousing technology and EDI, to increase efficiencies and facilitate the
exchange of information with its customers and suppliers and thereby reduce
costs to the Company, its suppliers and customers. Following its acquisition of
Stuart, the Company expended significant resources to integrate Stuart's systems
with those of the Company, including incorporating certain aspects of Stuart's
IT, and to outsource the operation of the Company's mainframe computer system to
Integrated Systems Solutions Corporation, an affiliate of International Business
Machines Corporation. In 1994, the Company began a major initiative to convert
its mainframe computer system to a client/server, local area network system.
The conversion to client/server technology will be completed over the next
several years. The client/server technology will have several applications,
including inventory forecasting, procurement, warehousing, order processing,
accounts receivable, accounts payable and contract management. The Company
began to implement the first of these applications, the inventory forecasting
application, in the fourth quarter of 1995 and 20 distribution centers utilized
this application as of December 31, 1995. The remaining distribution centers
are expected to be utilizing this inventory forecasting application by mid-1996.
Through client/server technology, the Company expects to improve significantly
the efficiency of each distribution center. The Company's commitment to IT will
enable it to serve profitably larger volumes of business and more complex
contracts.
Regulation
The medical/surgical supply distribution industry is subject to regulation
by federal, state and local governmental agencies. Each of the Company's
distribution centers is licensed to distribute medical/surgical supply products
as well as certain pharmaceutical and related products. The Company must comply
with regulations, including operating and security standards for each of its
distribution centers, of the Food and Drug Administration, the Drug Enforcement
Agency, the Occupational Safety and Health Administration, state boards of
pharmacy and, in certain areas, state boards of health. The Company believes
that it is in material compliance with all statutes and regulations applicable
to distributors of medical/surgical supply products and pharmaceutical and
related products, as well as other general employee health and safety laws and
regulations.
The current government focus on healthcare reform and the escalating cost
of medical care has increased pressures on all participants in the healthcare
industry to reduce the costs of products and services. The Company does not
believe that the continuation of these trends will have a significant effect on
the Company's results of operations or financial condition.
Employees
As of December 31, 1995, the Company employed approximately 3,200 full and
150 part-time employees. Approximately 40 employees are currently covered by a
collective bargaining agreement at one of the Company's distribution centers.
The Company believes that its relations with its employees are good.
O&M believes that on-going employee training is critical to employee
performance. The Company emphasizes quality and technology in training programs
designed to increase employee efficiency by sharpening overall customer service
skills and by focusing on functional best practices.
Item 2. Properties
The corporate headquarters of the Company is located in western Henrico
County, a suburb of Richmond, Virginia, in leased facilities. The Company owns
two undeveloped parcels of land which are adjacent to the Company's corporate
headquarters. In addition, the Company owns its warehouse facilities in
Youngstown, Ohio and Greensburg, Pennsylvania as well as a former
office/warehouse facility in Sanford, Florida which is fully leased. All three
of these facilities are currently being offered for sale. Greensburg is under
contract. In 1995, the Company sold its La Mirada, California facility and has
leased it back for a one year period.
O&M continuously reevaluates the efficiency of its distribution system.
Over the past two years, the Company has realigned its distribution operations
through the closure or consolidation of 12 distribution centers and the opening
or expansion of 22 distribution centers. The Company anticipates further
reduction of distribution center costs through the closure of two and the
downsizing of five distribution centers in 1996. Also in 1996 and early 1997,
new facilities are planned for five locations including Houston, Boston, Los
Angeles, Baltimore and Cincinnati and expansions are planned for three more
facilities.
O&M believes that its facilities are adequate to carry on its business as
currently conducted. Except for the Greensburg, Pennsylvania and Youngstown,
Ohio facilities, which are owned by the Company and held for sale and leaseback,
all of the Company's distribution centers are leased from unaffiliated third
parties. A number of the leases relating to the above properties are scheduled
to terminate within the next several years. The Company believes that, if
necessary, it could find facilities to replace such leased premises without
suffering a material adverse effect on its business.
Item 3. Legal Proceedings
Stuart has been named as a defendant along with manufacturers, healthcare
providers and others in a number of lawsuits based on alleged injuries
attributable to the implantation of internal spinal fixation devices distributed
by a specialty products division of Stuart from the early 1980s to December 1992
and prior to O&M's acquisition of Stuart in 1994. Stuart did not manufacture
the devices. The Company believes that Stuart is entitled to indemnification by
the manufacturers of the devices with respect to claims alleging defects in the
products. The Company and Stuart are also entitled to indemnification by the
former shareholders of Stuart for any liabilities and related expenses incurred
by the Company or Stuart in connection with the foregoing litigation. Although
the Company believes it is unlikely that Stuart will be held liable as a result
of such lawsuits, the Company believes that Stuart's available insurance
coverage together with the indemnification rights discussed above are adequate
to cover any losses should they occur. The Company is not aware of any
uncertainty as to the availability and adequacy of such insurance or
indemnification.
The Company is party to various other legal actions that are ordinary and
incidental to its business. While the outcome of legal actions cannot be
predicted with certainty, management believes the outcome of these proceedings
will not have a material adverse effect on the Company's financial condition or
results of operations.
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 1995.
Executive and Other Officers of the Registrant
Identification of Executive and Other Officers
Following are the names and ages, as of December 31, 1995, of the executive
and other officers of Owens & Minor, their positions and summaries of their
backgrounds and business experience. During 1995, new officers were elected at
the Board of Directors meetings including Charlie C. Colpo, elected and
effective February 27, 1995, Wayne B. Luck, elected and effective on May 2,
1995, Paul J. Julian and Bruce J. MacAllister elected on July 24, 1995,
effective August 10, 1995, and Ann Greer Rector elected and effective August 7,
1995. All of the other officers were elected at the annual meeting of the Board
of Directors held May 2, 1995. All officers are elected to serve until the 1996
Annual Meeting of Shareholders, or such time as their successors are elected.
G. Gilmer Minor, III, age 55, has been employed by the Company for 33 years
since 1963 and has served as President since 1981 and Chief Executive Officer
since 1984. In May 1994, he was elected Chairman of the Board. Mr. Minor also
serves as a member of the Boards of Directors of Crestar Financial Corporation
and Richfood Holdings, Inc.
Craig R. Smith, age 44, has been employed by the Company and National
Healthcare and Hospital Supply Corporation, which was acquired by the Company in
1989, for 13 years. From 1990 to 1992, Mr. Smith served as Group Vice President
for the western region. In January 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.
Robert E. Anderson, III, age 61, has been employed by the Company for 29
years since 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 and Development. In May 1995, Mr. Anderson was elected
Executive Vice President, Planning and Business Development.
Henry A. Berling, age 53, has been employed by the Company for 30 years
since 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, in 1987. In 1989, he was elected Senior Vice President and Chief
Operating Officer. In 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. In May 1995, Mr. Berling was
elected Executive Vice President, Partnership Development.
Drew St. J. Carneal, age 57, has been employed by the Company for seven
years since 1989 when he joined the Company 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 in the law firm of Cabell, Moncure and Carneal.
In 1989, he was elected Secretary, and in March 1990, Senior Vice President,
Corporate Counsel and Secretary. In May 1995, the title Corporate Counsel was
changed to General Counsel.
Glenn J. Dozier, age 45, has been employed by the Company for six years
since 1990 in the position of Senior Vice President, Finance, Chief Financial
Officer. 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, Mr. Dozier had
been Chief Financial Officer and Vice President of Administration and Control
since 1987 for AMF Bowling, Inc.
Dick F. Bozard, age 49, has been employed by the Company for eight years
since 1988. In 1991, Mr. Bozard was elected Vice President, Treasurer. 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.
Charles C. Colpo, age 38, has been employed by the Company for 15 years
since 1981 when he joined the Company as Manager, Internal Audit. In April
1984, Mr. Colpo was promoted to Division Vice President (DVP) and served as DVP
for three divisions from 1987 to 1994. In 1994, he served as Director, Business
Process Redesign. In 1995, Mr. Colpo was promoted to Vice President, Inventory
Management.
Hugh F. Gouldthorpe, age 57, has been employed by the Company for ten years
since 1986 when he joined the Company as Director of Hospital Sales for the
Wholesale Drug Division. In 1987, Mr. Gouldthorpe was promoted to Vice
President and in 1989, he was promoted to Vice President, General Manager. In
1991, he was elected Vice President, Corporate Communications and in 1993, Vice
President, Quality and Communications. Prior to joining the Company, Mr.
Gouldthorpe was employed by E.R. Squibb and Sons serving in a variety of
positions.
Paul C. Julian, age 40, has been employed by the Company and Stuart, which
was acquired by the Company, for ten years since 1986. With the Company's
acquisition of Stuart in 1994, he became Group Vice President. From 1986 to
1994, Mr. Julian had been employed by Stuart and Eastern Hospital Supply, which
was acquired by Stuart, serving in various positions and most recently,
Executive Vice President, Chief Operating Officer. In 1995, he was elected to
Corporate Vice President, Group Vice President, Northern and Central Regions.
Wayne B. Luck, age 39, has been employed by the Company for four years
since 1992. Prior to joining the Company, Mr. Luck had been employed by Best
Products Co. Inc. working on various management systems. In 1992, he served as
Manager of Electronic Data Interchange (EDI) and subsequently Manager,
Applications and Director, Application Services. In 1995, he was elected Vice
President, Information Technology.
Bruce J. MacAllister, age 44, has been employed by the Company for three
years since 1993 when he joined the Company as Division Vice President. Prior
to joining the Company, Mr. MacAllister was employed by Proctor & Gamble in a
variety of sales and marketing positions. In 1995, he was elected Corporate
Vice President, Group Vice President, Southern and Western Regions.
Ann Greer Rector, age 38, joined the Company in August 1995 as Vice
President, Controller. Prior to joining the Company, Ms. Rector was employed by
USAir Group, Inc. from 1983 to 1995 serving in various financial positions and
from 1992 through July 1995, Vice President and Controller.
Michael L. Roane, age 41, has been employed by the Company for four years
since 1992 when he joined the Company as Vice President, Human Resources. Prior
to joining the Company, 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.
Thomas J. Sherry, age 47, has been employed by the Company and Stuart,
which was acquired by the Company, for 20 years. With the Company's acquisition
of Stuart in 1994, he became Vice President, Sales and Marketing. From 1976 to
1994, Mr. Sherry had been employed by Stuart, serving in various sales and
management positions and most recently, Executive Vice President.
F. Thomas Smiley, age 40, has been employed by the Company for 17 years
since 1979 when he joined the Company as Manager of Internal Audit. In 1981, he
became Assistant Controller and in 1985, he became Controller. In 1986, Mr.
Smiley was elected Assistant Vice President, Controller and from 1989 to 1995,
he served as Vice President, Controller. In 1995, he was elected Vice
President, Operations and Cost Management.
Hue Thomas, III, 57, has been employed by the Company for 26 years since
1970. In 1984, Mr. Thomas served as Assistant General Manager,
Medical/Surgical Division. In 1985, he served as Assistant Corporate Vice
President, and in 1987 he was elected Vice President. In 1989, he was elected
Vice President, General Manager, Medical/Surgical Division. In 1991, he was
elected Vice President, Corporate Relations.
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 1995 Annual Report under the
heading "Stock Market and Dividend Information" on page 35 and is incorporated
by reference herein.
Item 6. Selected Financial Data
The information required under this item is contained in the 1995 Annual
Report under the heading "Selected Financial Data" on pages 12 and 13 and is
incorporated by reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is contained in the 1995 Annual
Report under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 14 through 17 and is incorporated
by reference herein.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes as of December 31, 1995 and
1994 and for each of the years in the three-year period ended December 31, 1995,
together with the independent auditors' report of KPMG Peat Marwick LLP dated
February 2, 1996 except as to Note 7, which is as of March 1, 1996, appearing on
pages 18 through 33 of the 1995 Annual Report are incorporated by reference
herein.
The information required under Item 302 of Regulation S-K is set forth in
the 1995 Annual Report in Note 13 - "Quarterly Financial Data (Unaudited)" in
the Notes to Consolidated Financial Statements on page 32 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, 1995.
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 1996 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 1996 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 1996 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
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Page Numbers
1995 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 33
Consolidated Balance Sheets at
December 31, 1995 and 1994 19
Consolidated Statements of Operations for the years
ended December 31, 1995, 1994 and 1993 18
Consolidated Statements of Cash Flows for the
years ended December 31, 1995, 1994 and 1993 20
Notes to Consolidated Financial Statements 21-32
2. Financial Statement Schedules:
Independent Auditors' Report of KPMG
Peat Marwick LLP 22
Schedule - Valuation and Qualifying Accounts 23
* Incorporated by reference from the indicated
pages of the 1995 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
(incorporated herein by reference to the Company's Annual Report on
Form 10-K, Exhibit 3(a), for the year ended December 31, 1994)
(b) Amended and Restated Bylaws of the Company (incorporated herein by
reference to the Company's Annual Report on Form 10-K, Exhibit 3(b),
for the year ended December 31, 1994)
(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
(incorporated herein by reference to the Company's Annual Report on
Form 10-K, Exhibit 4(b), for the year ended December 31, 1994)
(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. (incorporated herein by reference to the Company's Annual Report
on Form 10-K, Exhibit 4(c), for the year ended December 31, 1994)
(d) Amended and Restated Rights Agreement dated as of May 10, 1994 between
the Company and Wachovia Bank of North Carolina, N.A., Rights Agent
(incorporated herein by reference to the Company's Quarterly Report on
Form 10-Q, Exhibit 4, for the quarter ended June 30, 1995)
(e) 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") (incorporated herein by reference to the Company's Annual
Report on Form 10-K, Exhibit 4(d), for the year ended December 31,
1994)
(f) First Amendment to Credit Agreement dated February 28, 1995
(incorporated herein by reference to the Company's Annual Report on
Form 10-K, Exhibit 4(e), for the year ended December 31, 1994)
(g) Second Amendment to Credit Agreement dated October 20, 1995
(incorporated herein by reference to the Company's Quarterly Report on
Form 10-Q, Exhibit (4), for the quarter ended September 30, 1995)
(h) Third Amendment to Credit Agreement dated March 1, 1996
(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) 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)*
(d) 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)*
(e) 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)*
(f) 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)*
(g) 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(1), for the year ended December
31, 1992)*
(h) 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)*
(i) 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)*
(j) Owens & Minor, Inc. Directors' Compensation Plan (incorporated herein
by reference to the Company's Annual Report on Form 10-K, exhibit
10(1), for the year ended December 31, 1993)*
(k) Form of Enhanced Authorized Distribution Agency Agreement ("ADA
Agreement") dated as of November 16, 1993 by and between VHA, Inc.
(formerly Voluntary Hospitals of America, Inc.) and Owens & Minor,
Inc. (incorporated herein by reference to Form 10-K/A to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993)***
(l) Form of Amendments to ADA Agreement dated as of August 9, 1994,
September 15, 1994 and November 15, 1994, respectively (incorporated
herein by reference to the Company's Annual Report on Form 10-K,
exhibit 10(n), for the year ended December 31, 1994)
(m) Form of Amendment to ADA Agreement dated as of November 10, 1995***
(n) Purchase and Sale Agreement dated as of December 28, 1995 among Owens
& Minor Medical, Inc. ("O&M Medical"), the Company and O&M Funding
Corp. ("O&M Funding")
(o) Receivables Purchase Agreement dated as of December 28, 1995 among O&M
Funding, O&M Medical, the Company, Receivables Capital Corporation and
Bank of America National Trust and Savings Association, as
Administrator
(p) Parallel Asset Purchase Agreement dated as of December 28, 1995 among
O&M Funding, O&M Medical, the Company, the Parallel Purchasers from
time to time party thereto and Bank of America National Trust and
Savings Association, as Administrative Agent
(11) Calculation of Net Income (Loss) Per Common Share
(13) Owens & Minor, Inc. 1995 Annual Report to Shareholders
(21) Subsidiaries of Registrant
(23) Consent of KPMG Peat Marwick LLP, independent auditors
* A management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K.
** The schedules to this Agreement have been omitted pursuant to Item
601(b)(2) of Regulation S-K. The Company hereby undertakes to file
supplementally with the Commission upon request a copy of the omitted
schedules.
*** The Company has requested confidential treatment by the Commission of
certain portions of this Agreement, which portions have been omitted and
filed separately with the Commission.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the fourth quarter of 1995.
Note 1. With the exception of the information incorporated in this Form 10-K by
reference thereto, the 1995 Annual Report shall not be deemed "filed" as a part
of this Form 10-K.
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, President and
Chief Executive Officer
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 dated indicated:
/s/ G. Gilmer Minor, III /s/ C. G. Grefenstette
G. Gilmer Minor, III C. G. Grefenstette
Chairman, President and Chief Executive Director
Officer and Director (Principal Executive
Officer)
/s/ Glenn J. Dozier /s/ Vernard W. Henley
Glenn J. Dozier Vernard W. Henley
Senior Vice President, Finance and Chief Director
Finance Officer (Principal Financial
Officer)
/s/ Ann Greer Rector /s/ E. Morgan Massey
Ann Greer Rector E. Morgan Massey
Vice President, Controller Director
(Principal Accounting Officer)
/s/ Josiah Bunting, III /s/ James E. Rogers
Josiah Bunting, III James E. Rogers
Director Director
/s/ R. E. Cabell, Jr. /s/ James E. Ukrop
R. E. Cabell, Jr. James E. Ukrop
Director Director
/s/ James B. Farinholt, Jr. /s/ Anne Marie Whittemore
James B. Farinholt, Jr. Anne Marie Whittemore
Director Director
/s/ William F. Fife
William F. Fife
Director
Each of the above signatures is affixed as of March 13, 1996.
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULE
The Board of Directors
Owens & Minor, Inc.:
Over date of February 2, 1996, except as to Note 7, which is as of March 1,
1996, we reported on the consolidated balance sheets of Owens & Minor, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations and cash flows for each of the years in the three-year
period ended December 31, 1995, as contained in the 1995 annual report to
shareholders. These consolidated financial statements and our report thereon
are incorporated by reference in the December 31, 1995 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 23 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.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Richmond, Virginia
February 2, 1996
Schedule
OWENS & MINOR, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands)
Additions
Balance at Charged to
Beginning Costs Additions Balance
Year-End of and Charged to at End
Description Year Expenses Other** Deductions* of Year
Allowance for doubtful accounts deducted from accounts and notes receivable in
the Consolidated Balance Sheets
1995 $5,340 $ 827 - $157 $6,010
1994 $4,678 $1,149 $40 $527 $5,340
1993 $4,442 $ 497 - $261 $4,678
* Uncollectible accounts written off.
** Adjusted for the allowance reserve acquired with the Emery acquisition.
Form 10-k
Exhibit Index
Exhibit #
4 (h) Third Amendment to Credit Agreement dated March 1, 1996
10 (m) Form of Amendment to ADA Agreement dated as of November 10, 1995
10 (n) Purchase and Sale Agreement dated as of December 28, 1995 among Owens
& Minor Medical, Inc ("O&M Medical"), the Company and O&M Funding
Corp. ("O&M Funding")
10 (o) Receivables Purchase Agreement dated as of December 28, 1995 among
O&M Funding, O&M Medical, the Company, Receivables Capital
Corporation and Bank of America National Trust and Savings
Association, as Administrator
10 (p) Parallel Asset Purchase Agreement dated as of December 28, 1995 among
O&M Funding, O&M Medical, the Company, the Parallel Purchasers from
time to time party thereto and Bank of America National Trust and
Savings Association, as Administrative Agent
11 Calculation of Net Income (Loss) per Common Share
13 Owens & Minor, Inc. 1995 Annual Report to Shareholders
21 Subsidiaries of Registrant
23 Consent of KPMG Peat Marwick LLP, independent auditors
Exhibit 4 (h)
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT (the "Third Amendment") dated as of March 1, 1996
is to that Credit Agreement dated as of April 29, 1994 as amended by those
First and Second Amendments dated as of February 28, 1995 and October 20,
1995, respectively, (as amended and modified thereby and 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., a national banking association 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., a national banking association
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 established a $425,000,000 credit facility for
the benefit of the Borrower pursuant to the terms of the Credit Agreement;
WHEREAS, the Borrower has requested modification of certain covenants
contained in the Credit Agreement; and
WHEREAS, the Required Banks have agreed to the requested modifications
for and on behalf of the Banks on the terms and conditions set forth
herein;
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. The Credit Agreement is amended in the following respects:
1. The last five sentences of Section 2.05 regarding the
definition and determination of the "Applicable Margin" are amended to read
as follows:
"As used herein, "Applicable Margin" means one and three-fourths
percent (1 %) for the period from March 1, 1996 (being the date of the
Third Amendment) through June 30, 1996, and two and one-fourth percent
(2 1/4%) for the period from July 1, 1996 and thereafter."
2. The first sentence of Section 2.11(b) regarding the
Commitment Fee is amended and modified to read as follows:
"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 of the month 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 twenty-five basis points (.25%) per annum for the
period from March 1, 1996 (being the date of the Third Amendment) through
June 30, 1996, and thirty-seven and one-half basis points (.375%) per
annum for the period from July 1, 1996 and thereafter, on the average
daily unused amount of the Revolving Committed Amount for the prior
quarter."
3. A new subsection (e) is added to Section 2.11 to read as
follows:
(e) Amendment Fee. The Borrower agrees to pay to the Administrative
Agent for the benefit of the Banks in connection with the Third Amendment
fees consisting of (i) $531,250 (representing 12.5 b.p. on the aggregate
amount of the Revolving Commitments) payable on the effective date of the
Third Amendment, and (ii) $1,062,500 (representing 25 b.p. on the
aggregate amount of the Revolving Commitments) payable on July 1, 1996.
Such fees shall be non-refundable when paid.
4. The financial covenants in Section 6.11 are 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 1.4 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 an amount equal to 85% of Consolidated Tangible Net Worth
as of December 31, 1995; 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, 1996,
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 an amount equal to 85% of Consolidated Net Worth as of December
31, 1995; 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, 1996, 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 (specifically including for purposes hereof,
without limitation, the aggregate amount of financing outstanding as of
the Determination Date relating to accounts receivable subject at such
time to a sale of receivables (or other similar transaction) regardless of
whether such transaction is effected without recourse or in a manner which
would not be reflected on a balance sheet in accordance with GAAP) to
Consolidated Total Capitalization will not exceed:
Leverage Ratio
From the Closing Date through
February 28, 1998 .65 to 1.0
Thereafter .60 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
For the fiscal quarter ending
on March 31, 1996 .70 to 1.0
For the fiscal quarter ending
on June 30, 1996 .80 to 1.0
For the fiscal quarter ending
on September 30, 1996 .90 to 1.0
For the fiscal quarter ending
on December 31, 1996 1.0 to 1.0
For the fiscal quarter ending
on March 31, 1997 through
and including the fiscal
quarter ending on June 30, 1997 1.1 to 1.0
For the fiscal quarter ending
on September 30, 1997 through
and including the fiscal quarter
ending on December 31, 1997 1.2 to 1.0
For the fiscal quarter ending
on March 31, 1998 and
thereafter 1.3 to 1.0
The Applicable Period for which the Fixed Charge Coverage Ratio shall be
determined shall be for the 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 period shown beginning on
the applicable Determination Date:
Duration of
Determination Date Applicable Period
For the fiscal quarter ending
on March 31, 1996 One Quarter
For the fiscal quarter ending
on June 30, 1996 Two Quarters
For the fiscal quarter ending
on September 30, 1996 Three Quarters
For the fiscal quarter ending
on December 31, 1996 and thereafter Four Quarters
(f) Consolidated Operating EBITDA. As of each Determination Date
to occur during the period from October 20, 1995 (being the date of the
Second Amendment to Credit Agreement) through December 31, 1996 (being the
last day of the Borrower's fiscal year 1996), Consolidated Operating
EBITDA for the fiscal quarter then ending will not be less than:
For the Fiscal Quarter
Ending
March 31, 1996 $10,500,000
June 30, 1996 $13,000,000
September 30, 1996 $15,000,000
December 31, 1996 $16,000,000
5. A new Section 6.14 is added to read as follows:
6.14 Grant of Security Interests. The Borrower will at its own
expense provide, and will cause its Subsidiaries (other than O&M Funding
Corp. ("OMFC")) to provide, mortgages (including title insurance relating
thereto), liens and security interests on all of their material assets
(including blanket liens on accounts, inventory, equipment, contract
rights and general intangibles and other real and personal property), as
determined by and in form and substance acceptable to the Administrative
Agent and the Required Banks in their sole discretion, on July 1, 1996;
provided, however, there shall be specifically excluded from the liens and
security interests to be provided pursuant to this provision any lien or
security interest on (1) any of the assets of OMFC and (2) any "Pool
Receivable" (as used herein, "Pool Receivable" shall have the meaning
assigned to it in the Receivables Purchase Agreement, dated December 28,
1995, among OMFC, Owens & Minor Medical, Inc., Owens & Minor, Inc.,
Receivables Capital Corporation and Bank of America National Trust and
Savings Association). The Borrower will, and will cause its Subsidiaries
(other than OMFC) to, cooperate with and assist the Administrative Agent
and the Required Banks in the preparation, execution and filing of such
documents and instruments as the Administrative Agent or the Required
Banks may request in furtherance of the provisions hereof. Failure by the
Borrower and its Subsidiaries (other than OMFC) to provide such mortgages,
liens and security interests in accordance with this Section by the date
set out herein shall constitute an Event of Default hereunder.
Notwithstanding anything contained herein to the contrary, including the
provisions of Section 10.06, the provisions of this Section 6.14 may not
be waived, amended or otherwise modified without the prior written consent
of each of the Banks affected thereby.
6. The reference in the next-to-last sentence of Section 7.05(b)
to "40% of Consolidated Tangible Net Worth" is amended and modified to
refer instead to "40% of Consolidated Tangible Net Worth prior to July 1,
1996 and 20% of Consolidated Tangible Net Worth on and after July 1, 1996".
7. A new Section 7.12 is added to read as follows:
7.12 Dividends. On and after July 1, 1996, the Borrower will not
make or pay, nor will it permit any non-wholly owned Subsidiary to make or
pay, any Dividend, unless (i) no Default or Event of Default shall exist
either immediately prior to or immediately after giving effect thereto,
and (ii) the Borrower shall have demonstrated compliance with the
financial covenants set out in Section 6.11 on a Pro Forma Basis after
giving effect thereto. As used herein:
"Dividend" means any payment by the Borrower or any of its
non-wholly owned Subsidiaries of a payment, distribution, or
dividend (other than a dividend or distribution payable solely in
stock of the Person making such payment, distribution or dividend)
on, or any payment on account of the purchase, redemption or
retirement of, or any other distribution, any shares of any class of
stock or other ownership interest in the Borrower or any of its
Subsidiaries (including any such payment or distribution in cash or
in property or obligations of the Borrower or any of its
Subsidiaries).
"Pro Forma Basis" means, with respect to any transaction, that
such transaction shall be deemed to have occurred as of the first
day of the four- fiscal quarter period ending as of the end of the
fiscal quarter most recently ended prior to the date of such
transaction with respect to which the Administrative Agent has
received the financial information required under Section 6.01. As
used herein, "transaction" means any Dividend as referred in Section
7.12.
8. Section 10.06 is amended and modified in the following
respects:
(a) subsection (iii) thereof shall be modified to include a
reference also to Section 6.14; and
(b) and a new subsection (vi) shall be added to the end of the
first sentence to read as follows:
"and (vi) release of all or substantially all of the collateral
pledged to secure the Loans and Obligations hereunder"
B. The Required Banks, for and on behalf of the Banks under the
Credit Agreement, hereby waive compliance by the Borrower with the
provisions of Sections 6.11(c) regarding Consolidated Net Worth, 6.11(e)
regarding Fixed Charge Coverage Ratio and 6.11(f) regarding Consolidated
Operating EBITDA in each such case as of the Determination Date occurring
December 31, 1995 or for the period ending as of such Determination Date,
as appropriate, but only as of such Determination Date or for the period
then ending.
C. The Borrower agrees to pay in connection with this Third
Amendment a non-refundable fee of $531,250 (representing 12.5 b.p. on the
aggregate amount of the Revolving Commitments) to the Administrative Agent
for the ratable benefit of the Banks.
D. 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 Third Amendment; and
(ii) No Default or Event of Default currently exists and is
continuing under the Credit Agreement as of the date of (after giving
effect to) this Third Amendment.
E. This Third 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 Third Amendment
and related documentation by the Borrower, the Guarantors and the
Required Banks.
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. Amendment Fee. Payment to the Administrative Agent of the
fee referenced in paragraph C of this Third Amendment.
4. Other Information. Such other information and documents as
the Administrative Agent may reasonably request.
F. The Borrower will execute such additional documents as are
reasonably requested by the Administrative Agent to reflect the terms and
conditions of this Third Amendment.
G. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and Schedules) remain in full force and effect.
H. The Borrower agrees to pay all reasonable costs and expenses in
connection with the preparation, execution and delivery of this Third
Amendment, including without limitation the reasonable fees and expenses of
Moore & Van Allen, PLLC, special counsel to the Administrative Agent.
I. This Third 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 Third
Amendment to produce or account for more than one such counterpart.
J. This Third 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 Third 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. Third 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.,
individually in its capacity as a
Bank and in its capacity as Agent and
Administrative Agent (formerly known as
NationsBank, N.A. (Carolinas) which was
formerly known as NationsBank of North
Carolina, N.A.)
By_____________________________
Michael B. Andry,
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. Third 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. Third 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 (m)
November 10, 1995
Mr. Hue Thomas III
Vice President
Owens & Minor, Inc.
The Innsbrook Corporate Center
4800 Cox Road
Glen Allen, VA 23060
Dear Hue,
Attached are the amendments to the Enhanced Authorized Distribution Agency
Agreement, dated as of November 16, 1993, which will be effective as on
November 1, 1995. In addition the affected Schedules will be replaced
and/or added effective November 1, 1995:
1) Schedule 1 Reflecting assigned health care organizations
2) Schedule 6 Base Cost + Plus Matrix
6A Payment Terms Outline
6B System Definition and Pricing
6BI System Definition Blended Worksheet
6C EOE/EDI Requirements
6D Initial Implementation Process
3) Schedule 7 ADA Utilization Acknowledgement Form
7A ADA Notification Form Changes to the Services
Menu
4) Schedule 8 Payment Terms Options
5) Schedule 12A Distribution and Pricing of Non-Traditional
Products
12B List of Non-Traditional Manufacturers and Products
6) Schedule 15 Service Menu
15A Service Menu Definitions
7) Schedule 20 ADA Responsibilities
8) Schedule 22A Service Requirements
22B Service Requirements Notification
In the past, VHA has developed action plans with ADA's to address issues of
non performance or breach of the ADA Agreement terms. VHA no longer
intends to utilize such an action plan process and will simply provide
notice of breach in accordance with Section 12 of the ADA Agreement.
<PAGE>
Please sign the original of this letter to acknowledge your agreement and
acceptance of these
amendments and return the originals to my attention. If you have any
questions or need additional information please do not hesitate in
contacting me at your convenience.
Sincerely,
Larry Dooley
Senior Director, Distribution Services
cc: Bill Elliott
Richard Heard
AGREED and ACCEPTED as of this ______ day of November _______, 1995
Owens and Minor, Inc.
By:
Title:
Date:
<PAGE>
NOVEMBER 1, 1995
AMENDMENT TO
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
DATED AS OF NOVEMBER 16, 1993
Replace Section 1 (7) in its entirety as follows:
(7) "Cost" refers to the lowest of (a) (in the case of a
Contract Product) the amount provided in the applicable
Purchasing Agreement as the price to be billed to the
Designated VHA Member and Affiliates without subtraction for
cash discounts allowed by Vendors for prompt payment and
prior to the addition of the Base Price Matrix, (b) ADA's
[this confidential information has been omitted and filed
separately with the Commission] in obtaining the products,
including actual inbound freight charges not paid or
credited by manufacturer and actually paid by ADA not
reflected on invoices from manufacturers, distributors or
others (such [this confidential information has been omitted
and filed separately with the Commission] shall be reduced
to reflect proportionately: [this confidential information
has been omitted and filed separately with the Commission]
and, except for (i) [this confidential information has been
omitted and filed separately with the Commission] allowed
and rebates paid or credited by vendors for prompt payment
and (ii) [this confidential information has been omitted and
filed separately with the Commission] provided by ADA to
Vendors, any and all value received by ADA or from which ADA
derives any direct or indirect benefit related in any way to
the product where ADA's cost affected), or (c) the net
distributor cost of any product pursuant to any agreement
between the Designated VHA Member or Affiliate and the
Vendor of such products. In addition to the foregoing,
after October 31, 1995, Cost for any product may be
increased by the amount equal to the decrease in prompt
payment or cash payment discount terms offered by a
manufacturer and actually taken on a consistent basis by
ADA.
In Section (6) (A) in the last sentence in Section (A) change
[this confidential information has been
omitted and filed separately with the
Commission] to [this confidential information
has been omitted and filed separately with
the Commission]
Delete Section (6) (A) (1) Initial Implementation: in its entirety
and replace with the following:
(1) Initial Implementation: See Schedule
6D for implementation process for new
Designated VHA Members or Affiliates
In Section (6) (A) (2) Annual Price Matrix Slotting; replace
"On or before April 1 of each year after 1994 during
the term of this Agreement"
with
<PAGE>
"On or before July 1 of each year after 1995 during
the term of this Agreement"
NOVEMBER 1, 1995
AMENDMENT TO
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
DATED AS OF NOVEMBER 16, 1993
Delete Section (6) (A) (3) Quarterly Performance Bonus: in its
entirety with the following:
(3) Semiannual Performance Bonus:
Commencing with June 30, 1996, and for each six month
period thereafter, each Designated VHA Member or
Affiliate whose performance qualifies for a lower cost +
plus in the Price Matrix than its current Annual Slotting
will receive a Semiannual Performance Bonus from the ADA
within thirty (30) days after final sales figures are
available from the prior semiannual period in the form of
either a check or a credit to the account, at the
Designated VHA Member or Affiliate's election. The
amount of Semiannual Performance Bonus shall be
calculated by taking the difference between the cost +
plus percentage of the Designated VHA Member or
Affiliate's current Annual Slotting and the cost + plus
percentage applicable to the Designated VHA Member or
Affiliate's actual performance for the semiannual period
multiplied by the total amount of purchases through ADA
for that quarter. Semiannual Performance Bonus will not
be available for Hospitals who are on a fixed-fee-for-
service basis. In these cases, the Pricing Matrix will
be used for the purpose of determination of the VHA fee
only.
Replace Section 6 (A) (4) "Failure to Maintain Slotting: in its
entirety with the following:
(4) Failure to Maintain Slotting"
Any Designated VHA Member or Affiliate which fails to
maintain actual semiannual performance at least equal to
its current Annual Slotting for any semiannual period
shall have its Price Matrix location adjusted immediately
to reflect actual performance for the most recently
completed semiannual period.
<PAGE>
NOVEMBER 1, 1995
AMENDMENT TO
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
DATED AS OF NOVEMBER 16, 1993
Replace Section 6 (E) Fill Rate, in its entirety with the
following:
(E) Fill Rate, ADA shall maintain for each Designated VHA
Member or Affiliate an unadjusted fill rate of 96% for
all "A" items. "A" items are defined as those items
that are stock items and are ordered by the Designated
VHA Member or Affiliate not less than two times per
month in accordance with the usage guidelines provided
in Schedule 22A.
ADA will provide to VHA Member or Affiliate by 2/1 of
each year commencing with 2/1/96 and each year after the
VHA Members or Affiliate's "A" items list and the ADA and
VHA Member or Affiliate will mutually agree to the "A"
list by 3/15 of same year.
ADA shall maintain for such Designated VHA Member or
Affiliate an unadjusted fill rate of 92% on all
"Formulary Items." "Formulary Items" are defined as
mutually agreed upon stock items ordered by Designated
VHA Members or Affiliates at least once per month (other
than "A" Items" and in accordance with usage guidelines
provided in Schedule 22A. needs to be provided to the
VHA Member or Affiliate by the ADA by 2/1/96 and each
year after and agreed to by the ADA and VHA Member of
Affiliate by 3/15 of same year.
Unadjusted fill rate shall be calculated by total number
of lines ordered fully delivered, divided by total number
of lines ordered.
<PAGE>
NOVEMBER 1, 1995
AMENDMENT TO
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
DATED AS OF NOVEMBER 16, 1993
Replace Section 6 (J) Delivery of Non-Traditional Products, in its
entirety with the following:
(J) Delivery of Non-Traditional Products, See Schedule 12,
12A and 12B for additional terms of including Non-
Traditional Products. "The inclusion of Non-
Traditional Products if agreed to be distributed by
the ADA to a Designated VHA Member or Affiliate the
volume is mandatory and the price is determined as
follows:
- VHA Members or Affiliate's base cost + plus
+
- Mandatory Non-Traditional Service Fee of [this
confidential information has been omitted and filed
separately with the Commission]
+
- Service Matrix Fees (if applicable)
=
- Effected Cost + Plus
+
- Actual inbound freight if not paid by manufacturer
The Non-Traditional Product List is in Schedule 12B, Each
ADA must provide a list of Non-Traditional Manufacturer's
and their products.
Each month a separate line item report due on the 10th
with all other reports, ADA shall provide to VHA and VHA
Member or Affiliate with the following detail:
- Manufacturer Name
- Product Name and Description
- Price Charged to VHA Member or Affiliate
- How price was derived to VHA Member or
Affiliate
See Schedule 12, 12A and 12B for Delivery of Non-
Traditional Products
<PAGE>
NOVEMBER 1, 1995
AMENDMENT TO
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
DATED AS OF NOVEMBER 16, 1993
Add a new Section 6 (M) as follows:
(M) ADA Service Responsibilities as set forth in Schedule
22, lists the responsibilities of the ADA and the
requirements of the Designated VHA Member of
Affiliate, with Penalties and rewards for the ADA upon
failure to perform or for exceeding service
responsibilities expectation.
Replace Section (7) (B) Patient Charge-Item Labelling, in its
entirety with the following:
(B) Patient Charge Labelling ADA shall charge [this
confidential information has been omitted and filed
separately with the Commission] per label regardless
who supplies the label.
In Section 7 (E) Emergency Deliveries, at the end of the
paragraph add the following:
"ADA may charge [this confidential information has
been omitted and filed separately with the Commission]
for providing product for emergency deliveries"
In Section 7 (F) Barcoding, at the end of the paragraph add
the following:
"ADA may charge [this confidential information has
been omitted and filed separately with the Commission]
it occurs in providing Barcoding labels"
In Section 11 (R) Favored Customer Pricing, at the end of the
paragraph add the following:
"Upon written request by VHA, each ADA shall provide
written verification that the terms and conditions of
the ADA Agreement, and in particular the cost + plus
and service matrix pricing, provides value to VHA
Members of Affiliates no less than the lowest price
and greatest value offered by ADA to any other
customer other than the government. As competitive
situations arise during the term of this Agreement, it
will be necessary for VHA and ADA to mutually agree on
meeting specific competitive situations that are
strategically important to VHA and ADA, in particular
with regards to Designated VHA Members or Affiliates
request for proposal (RFP), VHA and ADA mutually agree
to notify each other within five (5) business days
upon receipt of RFP from Designated VHA Member or
Affiliate and ADA agrees that any response to the RFP
shall be in the context of and pursuant to the terms
of this Agreement.
<PAGE>
SCHEDULE 1
DESIGNATED VHA MEMBERS AND AFFILIATES
[List of Members and Affiliates assigned to ADA]
<PAGE>
SCHEDULE 6
COST-PLUS MATRIX
(Medical/Surgical Distribution)
Monthly $ Volume of Purchases
Utilization 0- 150,001- 400,001- 750,001-
150,000 400,000 750,000 And >
31- [*] [*] [*] [*]
84%
85-
100% [*] [*] [*] [*]
All Health Care Organizations participating at or below 30%
utilization will be charged cost + [this confidential information has
been omitted and filed separately with the Commission] notwithstanding
performance for monthly volume.
* [This confidential information has been omitted and filed separately
with the Commission.]
<PAGE>
SCHEDULE 6A
PAYMENT TERMS OUTLINE
Payment Terms
[*]-Day Prepay: [*] Credit
Net [*] Days: [*] Credit
Standard Terms: [*] purchases due [*]
[*] purchases due [*]
Net [*] Days: Add [*]
Net [*] Days: Add [*]
Net [*] Days: Add [*]
Over [*] Days: Add additional [*] for
each 15 days beyond
[*] days
No Designated VHA Member or Affiliate can be put on credit hold by
their ADA without the ADA notifying in writing the Designated VHA
Member or Affiliate and VHA fifteen (15) days prior to credit hold.
VHA and ADA will work collectively to remedy the issue with the
Designated VHA Member or Affiliate prior to loss of credit privileges.
If credit privileges are rescinded to the Designated VHA Member or
Affiliate, the Designated Member or Affiliate may be entitled to a
C.O.D. relationship with their ADA.
Days Sales Outstanding ("DSO") is reviewed quarterly and all
adjustments to the base cost+plus will be made prospectively on a
quarterly basis. DSO is based on the previous quarter's actual
quarterly DSO average. No Designated VHA Member or Affiliate will be
assessed to a higher DSO charge if the disputed portion of an invoice
is not paid due to invoice discrepancies. All invoice discrepancies
noted by the Designated VHA Member or Affiliate must be brought to the
attention of the ADA by the Designated VHA Member or Affiliate within
three (3) business days of receipt of invoice.
A service charge is due at a monthly rate of the lesser of 1.5% (18%
annual) or the maximum legally allowable rate by state/local law on
all invoices not paid within the agreed upon payment terms.
<PAGE>
* [This confidential information has been omitted and filed separately
with the Commission.]
SCHEDULE 6B
SYSTEM DEFINITION PRICING
The following system definitions and pricing scenarios are for acute-
care systems. Systems cannot add their other health-care provider sites'
utilization and volume into the pricing equation. Designated VHA Members
or Affiliates that are not part of a system as defined below will otherwise
be slotted pursuant to the Agreement.
(1) If a VHA Shareholder/Partner controls (owns, manages or leases)
the related VHA institutions in its system and the system has a
minimum utilization of [this confidential information has been
omitted and filed separately with the Commission] , and if the
system offers centralized ordering and billing, the system may
combine its utilization and dollar volume as long as it meets the
minimum stated above and may be slotted according to its actual
combined utilization and volume.
The system will be entitled to [this confidential information has
been omitted and filed separately with the Commission] deliveries
per week to each institution up to a maximum of [this
confidential information has been omitted and filed separately
with the Commission] per week per system. All other deliveries
will be charged as per the service menu. All other service fees
will be charged according to the system's actual combined
utilization and volume slot. Delivery sites of the system that
are further than one hundred (100) miles from the ADA branch will
pay a [this confidential information has been omitted and filed
separately with the Commission] per-mile, one-way surcharge on
all deliveries.
(2) If a VHA Shareholder/Partner controls (owns, manages or leases)
the related VHA institutions in its system and the system has a
combined minimum utilization of [this confidential information
has been omitted and filed separately with the Commission], and
if the system does not offer centralized ordering and billing,
then the system may be slotted by its combined utilization and
dollar volume; however, the system will add a [this confidential
information has been omitted and filed separately with the
Commission] charge to its combined base matrix slot if it does
not have centralized ordering and [this confidential information
has been omitted and filed separately with the Commission] if it
does not have centralized billing, for all institutions in the
system.
The system will be entitled to [this confidential information has
been omitted and filed separately with the Commission] deliveries
<PAGE>
per week to each institution up to a maximum of [this
confidential information has been omitted and filed separately
with the Commission] per week per system. All other deliveries
will be charged according to the service menu. All other service
fees will be charged according to the system's combined actual
slotted position. Delivery sites of the system that are further
than one hundred (100) miles from the ADA branch will pay a [this
confidential information has been omitted and filed separately
with the Commission] per-mile, one-way surcharge on all
deliveries.
(3) If a VHA Shareholder/Partner does not control (own, manage or
lease) the related VHA institutions, then the system cannot
combine its utilization and dollar volume to be slotted.
However, it may blend its utilization and volume to be slotted.
Blended slotting occurs by each VHA health-care organization
("HCO") in the system being slotted by its own utilization and
dollar volume. Then the base matrix mark up for each VHA HCO is
averaged together on a weighted basis to give the system its
actual slot. If the system does not offer centralized ordering,
it must add [this confidential information has been omitted and
filed separately with the Commission] to its base cost+plus slot;
and if it does not have centralized billing, then the system will
add a [this confidential information has been omitted and filed
separately with the Commission] onto its base cost+plus slot.
The system will receive [this confidential information has been
omitted and filed separately with the Commission] deliveries per
week to each organization up to a maximum of [this confidential
information has been omitted and filed separately with the
Commission] per week per system. All other deliveries will be
charged according to the service menu. All other service
charges will be based on the individual organization's pre-
blended base matrix mark up. All Delivery sites that are further
than one hundred (100) miles from the ADA branch will pay a [this
confidential information has been omitted and filed separately
with the Commission] per-mile, one-way surcharge on all
deliveries.
(4) For free-standing VHA HCOs or systems that need to develop a
different type of relationship with their ADA partners, the VHA
HCO, ADA and VHA will work together to develop the relationship
outside of the existing matrix concept. This process will be in
lieu of the "Distribution Supply Chain Containment Program" that
was on the base matrix. Examples of this are Fee-For-Service
Programs and Activity-Based Costing Programs. No ADA can enter
into an off-matrix program without prior approval from VHA.
<PAGE>
SCHEDULE 6B1
MED/SURG ADA SYSTEM BLENDING FEE WORKSHEET
SYSTEM NAME:______________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
(1) (2) (3) (4) (5) (6) (7) (8)
MONTHLY
MONTHLY BASE DISTRIBUTION
FACILITY NAME CITY VOLUME DSO EOE UTILIZATION COST PLUS CHARGE [*]
</TABLE>
CENTRALIZED ORDERING? IF NO, ADD [*]. CENTRALIZED BILLING? IF NO, ADD [*]
DIVIDE TOTAL FOR COLUMN (7) ________________________ BY TOTAL FOR COLUMN (3)
____________________________. THE RESULT IS THE BLENDED COST+PLUS
__________________ PLUS ADDED CHARGES FOR CENTRALIZED ORDERING AND BILLING
__________________. THE RESULT IS THE SYSTEM MONTHLY BLENDED COST+PLUS OF
___________________.
Affiliates which are located further than 100 miles from the ADA branch will
incur a [*] per-mile surcharge on all deliveries. Monthly volume, DSO, EOE and
utilization will be reviewed quarterly.
* [This confidential information has been omitted and filed separately with
the Commission.]
<PAGE>
SCHEDULE 6C
EOE/EDI REQUIREMENTS
EOE: All Designated VHA Members or Affiliates must be at [this
confidential information has been omitted and filed separately
with the Commission] electronic order entry ("EOE") for all their
orders. EOE is calculated as number of lines ordered by EOE,
divided by number of lines ordered. If the Designated VHA Member
or Affiliate is not at [this confidential information has been
omitted and filed separately with the Commission], the following
charges will be added to the Designated VHA Member or Affiliate's
base cost+plus:
- EOE [*] [*] add-on to base
cost+plus
- EOE [*] [*] add-on to base
cost+plus
EOE is reviewed quarterly and is determined by the previous
quarterly average.
EDI: Effective July 1, 1996, all Designated VHA Members and Affiliates
will be required to use the following EDI transaction sets:
- Electronic Invoices (810)
- Electronic Fund Transfer (820 and 823)
- Electronic Price Catalog (832)
For each of the above three EDI transaction sets that the
Designated VHA Member or Affiliate does not perform, a [this
confidential information has been omitted and filed separately
with the Commission] charge will be added to the base cost+plus
for each of the EDI transaction sets up to a total of [this
confidential information has been omitted and filed separately
with the Commission]. This will be measured on a quarterly basis
and calculated based on the previous quarterly averages for the
three transaction sets. A 95% quarterly average must be
maintained on all three transaction sets.
<PAGE>
*[This confidential information has been omitted and filed separately with
the Commission].
<PAGE>
SCHEDULE 6D
REVISED INITIAL IMPLEMENTATION
Each Designated VHA Member or Affiliate will go through a revised
initial implementation process, outlined as follows:
1) Each ADA will report the following information to VHA for each
Designated VHA Member or Affiliate:
a) hospital name/LIC #
b) complete address
c) utilization based on Distributor Profile Form on file with
VHA (1995)
d) volume
e) current slot from original base cost+plus matrix
f) current EOE (Electronic Order Entry)
g) current DSO (Days Sales Outstanding) exclusive of invoices
that are in discrepancy
h) number of deliveries and current charge if over two per week
i) complete list of other distribution services and the current
charges for those services
j) current total cost+plus price inclusive of base, EOE, DSO
and additional services
k) new base cost+plus matrix price as determined by revised
base cost+plus matrix in Schedule 6
l) total new cost+plus inclusive of all add-on fees
2) VHA, upon receipt of Designated VHA Member or Affiliate
information, will verify information for accuracy and make any
necessary changes per the revised Enhanced ADA Agreement.
3) VHA, upon completion of each Designated VHA Member or Affiliate's
information, will send out a re-launch package that will provide
each Designated VHA Member or Affiliate with all the details on
how the Designated VHA Member or Affiliate's distribution service
costs were determined.
4) VHA will, upon revision of Designated VHA Member or Affiliate's
distribution cost structure, notify the Designated VHA Member or
Affiliate's ADA, who will immediately load the revised Designated
VHA Member or Affiliate's distribution cost structure into the
ADA's systems and prepare revised price books that will be
inclusive of all changes that the revised Enhanced ADA Agreement
contains.
5) Revised distribution cost structure for each Designated VHA
Member and Affiliate will go into effect on December 1, 1995.
6) Any new Designated VHA Member or Affiliate that joins VHA or the
medical-surgical ADA program after the completion of the roll out
<PAGE>
of the revised Enhanced ADA Agreement will follow the steps as
outlined here:
a) If the Designated VHA Member or Affiliate is currently using
its declared ADA partner, the Designated VHA Member or
Affiliate will follow steps 1-5 as outlined in the revised
initial implementation process.
b) If the Designated VHA Member or Affiliate is not currently
using its declared ADA partner, then it must follow these
steps:
(1) declare an ADA partner from the ADAs that serve the
Designated VHA Member or Affiliate's marketplace
(2) complete a Distributor Profile Form and return it to VHA
(3) complete a Utilization Acknowledgment Form
(4) follow steps 2-5 of the revised initial implementation
process
c) Any requests for variation to the steps outlined in the
revised initial implementation need to be reviewed and
approved by VHA.
<PAGE>
SCHEDULE 7
MED/SURG ADA UTILIZATION ACKNOWLEDGMENT FORM
HOSPITAL:
LIC #
City: ST
Declared ADA:
Branch/DC:
HCO PURCHASING INFORMATION
Annualized Total Distribution:
Annualized 3rd Quarter through ADA:
Monthly Volume:
HCO Base Cost Plus: Utilization Percentage:
3rd QTR DSO: Days 3rd QTR DSO Charge:
3rd QTR EOE: 3rd QTR EOE Charge:
HCO SERVICE MENU INFORMATION
Service Menu Fee Charge
Customized Invoices:
Customized Packing Slip:
Combined Packing Slip and Invoice:
Custom Pallet Architecture-Basic:
Custom Pallet Architecture-Expanded:
Extra Weekly Deliveries (each):
Bulk Picked by Department, Delivered to Dock:
LUM Picked by Department, Delivered to Dock*:
LUM Picked by Department, Delivered to Dept*:
LUM Picked by Department, Put Away*:
Total Service Menu Fees:
TOTAL HCO COST PLUS FEE: *cumulative services, applied to affected sale
<PAGE>
SCHEDULE 7A
ADA NOTIFICATION FORM: CHANGES TO THE SERVICE MENU
<TABLE>
<CAPTION>
HCO COST PLUS FEE INFORMATION Current Slotting Information New Slotting Information
ACTUAL COST PLUS FEE ACTUAL COST PLUS FEE
<S> <C> <C> <C> <C> <C>
Cost Plus Customized YES or NO [*] YES or NO [*]
Service Menu Invoices
Options:
Customized YES or NO [*] YES or NO [*]
Packing Slips
Combined YES or NO [*] YES or NO [*]
Packing/Invoice
Custom Pallet YES or NO [*] YES or NO [*]
Architecture-
Basic
Custom Pallet YES or NO [*] YES or NO [*]
Architecture-
Expanded
Extra Weekly YES or NO YES or NO
Deliveries (.25%)
Bulk pick/dept., YES or NO [*] YES or NO [*]
dlvr/dock
*cumulative LUM pick/dept., YES or NO [*] YES or NO [*]
(applies to dlvr/dock*
affected sales)
LUM pick/dept., YES or NO [*] YES or NO [*]
dlvr/dock*
LUM pick/dept., YES or NO [*] YES or NO [*]
put away*
% %
TOTAL SERVICE MENU
COST PLUS FEES
</TABLE>
ADDITIONAL SERVICES BILLED SEPARATELY BY ADA
Affix Patient Charge Labels @ [*] per label
Bar Coded Shelf Labels @ [*]
Emergency Delivery @ [*]
Line Charge of [*] per line, if average order is less than [*] per line
<PAGE>
Note: All of the above charges are in addition to the base pricing matrix
charges.
Health Care Organization VHA - System Services
ADA VHA - Distribution Services
* [This confidential information has been omitted and filed separately with
the Commission.]
SCHEDULE 8
PAYMENT TERMS OPTIONS
ADA shall invoice each Designated VHA Member and Affiliate once each
month, unless more frequent invoices are requested by Designated VHA Member
or Affiliate. Each Designated VHA Member or Affiliate shall select from the
following payment options (all deductions or additions are made to the
annual slotting locations on the price matrix for that Designated VHA
Member or Affiliate):
_______ [*]-day prepay: [*] credit
_______ Net [*] days: [*] credit
_______ Standard terms: [*] purchases due [*]
[*] purchases due [*]
_______ Net [*] days: Add [*]
_______ Net [*] days: Add [*]
_______ Net [*] days: Add [*]
_______ Over [*] days: Add additional [*] for each 15 days
beyond [*] days
All invoice terms run from the date of invoice. Credit for prepay
shall be no more than the percent of the amount on deposit with ADA, not
the percent of the total monthly/quarterly purchases.
Taxes, where applicable, will be added to the invoice price of
products.
No Designated VHA Member or Affiliate can be put on credit hold by
their ADA without the ADA notifying the Designated VHA Member or Affiliate
and VHA in writing fifteen (15) days prior to credit hold. VHA and the ADA
will work collectively to remedy the issue with the Designated VHA Member
or Affiliate prior to loss of credit privileges. If credit privileges are
rescinded to the Designated VHA Member or Affiliate, then the Designated
VHA Member or Affiliate is entitled to continue to purchase their products
and services from the ADA on a C.O.D. basis.
DSO is reviewed quarterly, and all adjustments to the base cost+plus
will be made only on a quarterly basis. The DSO will be determined by the
previous quarter's average DSO, excluding any disputed portions of invoices
noted by the Designated VHA Member or Affiliate as in discrepancy. No
Designated VHA Member or Affiliate will be charged a higher cost+plus for
DSO due to invoices that are in discrepancy. All invoice discrepancies need
to be reported to the ADA by the Designated VHA Member or Affiliate within
three (3) business days of receipt of the invoice.
<PAGE>
A service charge may be added by the ADA to the Designated VHA Member
or Affiliate's monthly outstanding balance of the lesser of 1.5% (18%
annually) or the maximum legally allowable rate by local law, on all
invoices not paid within the agreed-upon payment terms.
*[This confidential information has been omitted and filed separately with
the Commission.]
<PAGE>
SCHEDULE 12A
DISTRIBUTION OF NON-TRADITIONAL PRODUCTS
When ADAs are requested to distribute Non-traditional Products for the
Designated VHA Member or Affiliate, the process for distributing these
Products is as follows:
1) The Designated VHA Member or Affiliate requests the ADA to
distribute a Non-traditional Product.
2) The ADA and Non-traditional Product manufacturer agree to put the
Non-traditional Product through distribution.
3) If the ADA agrees to distribute the Non-traditional Product, the
process for pricing the Non-traditional Product will be as
follows:
a) Non-traditional Product volume is added to Price Matrix.
b) Non-traditional Product assumes the Designated VHA Member or
Affiliate's base cost+plus.
c) A Non-traditional Product service charge of [this
confidential information has been omitted and filed
separately with the Commission] is added to the base
cost+plus.
d) All applicable service fees are added.
e) Actual inbound freight is added, if not prepaid by
manufacturer.
4) The ADA must provide a list of Non-traditional Product
manufacturers and their products, product descriptions and prices
charged to each Designated VHA Member or Affiliate and how the
prices were determined.
5) Each month, the ADA must provide VHA with a line-item-detail
report on all Non-traditional Products sold and prices charged to
each Designated VHA Member or Affiliate.
6) A list of Non-traditional Product manufacturers and Products is
in Schedule 12B.
7) VHA determines that Non-traditional Products are those products
of which sixty percent (60) of the products are sold on a direct
basis from the manufacturer to the Designated VHA Member or
Affiliate.
<PAGE>
SCHEDULE 12B
NON-TRADITIONAL PRODUCT MANUFACTURERS AND PRODUCTS
[This list will be sent to each VHA organization at a later date.]
<PAGE>
SCHEDULE 15
SERVICE MENU
SERVICE CHARGE
Customized Invoices [*]
Customized Packing Slip [*]
Combined Packing Slip and Invoice [*]
Custom Pallet Architecture, Basic [*]
Custom Pallet Architecture, Expanded [*]
Extra Weekly Deliveries [*] per extra delivery
Bulk Picked by Department, Delivered to [*]
Dock
LUM Picked by Department, Delivered to [*]
Dock*
LUM Picked by Department, Delivered to [*]
Dept*
LUM Picked by Department, Put Away* [*]
Affix Patient Charge Labels [*] per label
Bar Coded Shelf Labels [*]
Emergency Delivery [*]
Line Charge [*] per line, if average line
order is less than [*] per line
NOTE: Service charges can be included in the HCO's base cost+plus or billed as
a separate line item or invoice.
*[This confidential information has been omitted and filed separately with the
Commission.]
<PAGE>
SCHEDULE 15A
CUSTOM PALLET ARCHITECTURE
Custom pallet architecture is separated into two types of services:
basic and expanded. The defined activities included under these two
services are:
CUSTOM PALLET ARCHITECTURE BASIC
- items separated on pallet by department or purchase order
- items arranged in purchase order input sequence
CUSTOM PALLET ARCHITECTURE EXPANDED
- items palletized in reverse storeroom location
- separate pallet for each department
- separate pallet for non-stock items
- separate pallet for stock items
- pallet clearly marked with description and internal routing
information
The following services are provided free of charge and are not
included in custom pallet architecture:
- box/case labels facing out on pallet
- shrink-wrapped pallets
- pallets arranged to meet HCO weight and/or dimension
requirements
<PAGE>
SCHEDULE 20
PRODUCTS ON WHICH NO VHA FEE IS DUE
1. All VHA PLUS(R) products
2. Abbott I.V. solutions and sets, if distributed by the ADA
<PAGE>
SCHEDULE 22A
ADA SERVICE LEVELS AND RESPONSIBILITIES
<TABLE>
<CAPTION>
SERVICE ADA PERFORMANCE VHA HCO ADA PENALTY FOR ADA REWARD FOR
RESPONSIBILITY REQUIREMENTS PERFORMANCE FAILURE TO MEET EXCEEDING
REQUIREMENTS PERFORMANCE PERFORMANCE
REQUIREMENTS REQUIREMENTS
<S> <C> <C> <C> <C>
1) FILL RATES 1) "A" LIST 96% FILL 1) "A" LIST 96% FILL 1) "A" LIST 96% FILL 1) "A" LIST FILL 96% FILL
a) ADA needs to a) Needs to be a) 1 point 94.0 - 95.5% a) 1 point 96.1 - 97.5%
provide "A" approved by
list by 2/1 of Designated VHA b) 2 points 92.0 - 93.5% b) 2 points
each year. Member or Affiliate (greater than) 98.0%
by 3/15 of each year. c) 3 points (less than)91.5%
b) ADA needs to b) All usage for new d) ADA will reimburse
provide Designated products or changes Designated VHA member
VHA Member or to current products or Affiliate for every
Affiliate with fill must be provided to product from "A" List
report by 15th of ADA 30 days in that the Designated
each month. advance. VHA Member or Affiliate
needs to purchase from
c) ADA is responsible c) All usage provided alternative sources, to
for keeping the must be within 10%(+-) include product price and
List current. of actual usage. distribution service costs
of different than purchased
d) "A" Items are those d) If "A" List is not from ADA.
that Designated VHA provided to ADA by
Member or Affiliate 3/15, Designated VHA
and ADA mutually agree Member or Affiliate
upon; "A" items are needs to notify VHA.
defined as those items
that are stock items e) All product numbers
and are ordered by the must be provided to
Designated VHA Member ADA at time of order.
or Affiliate not less
than two times per f) All orders need to
month. include correct
product numbers.
e) Measured lines ordered
vs. lines filled g) All orders must be placed
(unadjusted). prior to normal orde
cutoff time as communicated
f) Measured on a monthly by local ADA branch to the
average. Designated VHA Member or
Affiliate.
</TABLE>
<TABLE>
<CAPTION>
ADA PERFORMANCE VHA HCO PERFORMANCE ADA PENALTY FOR FAILURE ADA REWARD FOR
SERVICE RESPONSIBILITY REQUIREMENTS REQUIREMENTS TO MEET PERFORMANCE EXCEEDING
REQUIREMENTS PERFORMANCE
REQUIREMENTS
<S> <C> <C> <C> <C>
2) FORMULARY ITEM FILL 2) FORMULARY ITEM FILL 2) FORMULARY ITEM FILL 2) FORMULARY ITEM FILL 2) FORMULARY ITEM FILL
a) 92% Fill on a) Needs to be a) 1 point 90 - 91.5% a) 1 point 92.5 -
Formulary Items approved by 94.0%
Designated VHA b) 2 points 88 - 89.5%
b) Fill will be Member or Affiliate b) 2 points
measured monthly by 3/15 of each c) 3 points (greater than)
based on lines year. (less than) 87.5% 94.0%
ordered vs. lines
fill (unadjusted) b) All usage for new
products, additional
c) ADA responsible products or changes
for keeping the to existing products
Formulary Items must be submitted
current. 30 days in advance
with usage 10%(+-).
d) Formulary Items
are defined as c) Designated VHA Member
mutually agreed or Affiliate must notify
upon stock items VHA by 3/15 if list has
that the Designated not been received to
VHA Member or accepted.
Affiliate orders
at least once per d) All product numbers
month (other than must be provided to
"A" Items). ADA at the time of
order.
e) All orders need to
include correct product
numbers.
f) All orders need to be
placed prior to normal
ADA branch cutoff times
as provided to Designated
VHA Member or Affiliate by
ADA branch.
</TABLE>
<TABLE>
<CAPTION>
SERVICE ADA PERFORMANCE VHA HCO ADA PENALTY FOR ADA REWARD FOR
RESPONSIBILITY REQUIREMENTS PERFORMANCE FAILURE TO MEET EXCEEDING
REQUIREMENTS PERFORMANCE PERFORMANCE
REQUIREMENTS REQUIREMENTS
<S> <C> <C> <C> <C>
3) INVOICE ACCURACY 3) INVOICE ACCURACY 3) INVOICE ACCURACY 3) INVOICE ACCURACY 3) INVOICE ACCURACY
a) 98% of all a) Designated VHA a) 1 point 96 - 97.5% a) 1 point 98.5 -
invoices (100% Member or Affiliate 99.0%
after 810 and 832 needs to provide b) 2 points 94.5 - 96.0%
go into effect). to ADA with correct b) 2 points 99.1 -
information 30 days c) 3 points (less than) 100%
b) Measured on a in advance on all 94.0%
monthly average non-contract product
of line items pricing.
ordered versus
line items invoiced b) All product numbers
correctly. must be provided to
ADA at time of order.
c) All orders need to
include the correct
product numbers.
d) All orders need to be
placed prior to normal
ADA branch cutoff time.
Normal ADA branch cutoff
time needs to be provided
to Designated VHA Member
or Affiliate by ADA branch.
</TABLE>
<TABLE>
<CAPTION>
SERVICE ADA PERFORMANCE VHA HCO ADA PENALTY FOR ADA REWARD FOR
RESPONSIBILITY REQUIREMENTS PERFORMANCE FAILURE TO MEET EXCEEDING
REQUIREMENTS PERFORMANCE PERFORMANCE
REQUIREMENTS REQUIREMENTS
<S> <C> <C> <C> <C>
4) PICKING ERRORS 4) PICKING ERRORS 4) PICKING ERRORS 4) PICKING ERRORS 4) PICKING ERRORS
a) 98% of all orders a) Designated VHA a) 1 point 96 - 97.5% a) 1 point 98.1
received. Member or Affiliate - 99.0%
needs to provide b) 2 points 94.5 - 95.5%
b) Measured monthly product numbers at b) 2 points 99.1
based on line items time of order. c) 3 points (less than) - 100%
ordered versus line 94.4%
items picked b) All orders need to
correctly. provide correct
product numbers.
c) Designated VHA Member
or Affiliate needs to
report to ADA by end
of same business day
order errors, and ADA
cannot take orders into
system prior to product
numbers being received.
d) All orders must be placed
prior to normal ADA branch
cutoff time. ADA branch needs
to provide to Designated
VHA Member or Affiliate the
order cutoff time.
</TABLE>
The point system works as follows:
1) Each point is worth [this confidential information has been omitted and
filed separately withthe Commission]; points are not rolled from month
to month.
2) Measurement is as follows:
a) "A" Fill Rate is measured on monthly average.
b) "Formulary Fill Rate" is measured on monthly average.
c) Invoice Accuracy is measured as a monthly average of line items
ordered versus line items invoiced correctly.
d) Picking Errors are measured as a monthly average of line items ordered
versus line items picked correctly.
3) Each Category is measured on its own merit.
4) Invoice Accuracy and Picking Errors measurements begin on 12/1/95.
5) "A" and Formulary Item Fill Rate measurement will begin based on time
line established in Schedule 22A.
SCHEDULE 22B
ADA Service Responsibilities
Penalty Notification
HEALTH CARE ORGANIZATION ________________________________________________
CITY, STATE ________________________________________________
ADA PARTNER ________________________________________________
ADA BRANCH/DC ________________________________________________
This serves as official 30-day notification that the HCO intends to monitor the
ADA under Schedule 22 of the VHA ADA agreement for service responsibilities.
Specifically, the HCO is concerned with the following service responsibility
criteria (check all that apply):
__________ "A" Item Fill Rate
__________ Formulary Fill Rate
__________ Invoice Accuracy
__________ Picking Errors
The ADA partner will be accountable to the HCO for the service penalties
outlined in Schedule 22A beginning the first month after the 30-day
notification.
__________________________________________________________ ________________
Health Care Organization Date
________________________________
Effective Date
PURCHASE AND SALE AGREEMENT
among
OWENS & MINOR MEDICAL, INC.,
as an Originator and as Servicer,
the other Originators
that may become parties hereto
from time to time,
OWENS & MINOR, INC.,
as Parent and Guarantor
and
O&M FUNDING CORP.,
as the Initial Purchaser
Dated as of December 28, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
<S> <C> <C>
SECTION 1.1. Agreement to Purchase and Sell...................................... 2
SECTION 1.2. Timing of Purchases................................................. 2
SECTION 1.3. Calculation of Purchase Price....................................... 2
SECTION 1.4. Definitions and Calculations Related to
Purchase Discount................................................... 4
SECTION 1.5. Purchase Price Payments............................................. 6
SECTION 1.6. The Initial Purchaser Note.......................................... 7
SECTION 1.7. Initial Purchaser Agreement to Make
Demand Loans........................................................ 8
SECTION 1.8. Deemed Collections, Etc............................................. 8
SECTION 1.9. No Recourse......................................................... 9
SECTION 1.10. True Sales.......................................................... 9
SECTION 1.11. Payments and Computations, Etc...................................... 10
<CAPTION>
ARTICLE II
CONDITIONS TO PURCHASES; REPRESENTATIONS AND
WARRANTIES; COVENANTS; PURCHASE AND SALE TERMINATION EVENTS
SECTION 2.1. Conditions to Purchases............................................. 11
SECTION 2.2. Representations and Warranties; Covenants........................... 11
SECTION 2.3. Purchase and Sale Termination Events................................ 11
<CAPTION>
ARTICLE III
INDEMNIFICATION
SECTION 3.1. (a) Indemnities by the Originator................................... 12
SECTION 3.2. Contribution........................................................ 18
<CAPTION>
ARTICLE IV
ADMINISTRATION AND COLLECTIONS; ADDITIONAL RIGHTS
AND OBLIGATIONS IN RESPECT OF THE POOL RECEIVABLES
SECTION 4.1. Servicing of Pool Receivables and Related Assets.................... 18
SECTION 4.2. Rights of the Initial Purchaser; Enforcement Rights................. 19
SECTION 4.3. Responsibilities of the Originators................................. 20
SECTION 4.4. Further Action Evidencing Purchases................................. 21
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
GUARANTEE
<S> <C> <C>
SECTION 5.1. Guarantee...................................................... 22
SECTION 5.2. Representation and Warranty.................................... 24
SECTION 5.3. Subrogation.................................................... 24
<CAPTION>
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Additional Originators.............................................. 25
SECTION 6.2. Amendments, Etc..................................................... 25
SECTION 6.3. Notices, Etc........................................................ 25
SECTION 6.4. Acknowledgment and Consent.......................................... 26
SECTION 6.5. Binding Effect; Assignability....................................... 27
SECTION 6.6. Costs and Expenses.................................................. 27
SECTION 6.7. No Proceedings; Limitation on Payments.............................. 27
SECTION 6.8. GOVERNING LAW AND JURISDICTION...................................... 28
SECTION 6.9. Execution in Counterparts........................................... 28
SECTION 6.10. Survival of Termination............................................. 28
SECTION 6.11. WAIVER OF JURY TRIAL................................................ 28
SECTION 6.12. Entire Agreement.................................................... 29
SECTION 6.13. Headings............................................................ 29
</TABLE>
EXHIBIT I CONDITIONS OF PURCHASES
EXHIBIT II REPRESENTATIONS AND WARRANTIES
EXHIBIT III COVENANTS
EXHIBIT IV PURCHASE AND SALE TERMINATION EVENTS
SCHEDULE I TRADE NAMES AND LOCATIONS
SCHEDULE II LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
ANNEX A FORM OF INITIAL PURCHASER NOTE
ANNEX B FORM OF ORIGINATOR NOTE
ANNEX C OPINION CERTIFICATE
ii
<PAGE>
This PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into as
of December 28, 1995 among OWENS & MINOR MEDICAL, INC. ("O&M Medical"), a
Virginia corporation, as an Originator and as initial Servicer, the other
Originators which may from time to time become parties hereto pursuant to
Section 6.1 hereof (each individually an "Originator" and collectively the
"Originators"), OWENS & MINOR, INC., as Parent and Guarantor (the "Parent") and
O&M FUNDING CORP., a Virginia corporation, as Initial Purchaser (the "Initial
Purchaser").
PRELIMINARY STATEMENTS
A. Unless otherwise defined herein or the context otherwise requires,
certain terms that are used throughout this Agreement (including the Exhibits
hereto) are defined in Exhibit I to the Receivables Purchase Agreement, dated of
even date herewith, among the Initial Purchaser, the Servicer, Receivables
Capital Corporation, as Issuer, and Bank of America National Trust and Savings
Association, as Administrator (as the same may be amended, modified or
supplemented from time to time, the "Receivables Purchase Agreement"). Any
reference to "this Agreement" or "the Purchase and Sale Agreement", including
any such reference in any Exhibit hereto, shall mean this Agreement in its
entirety, including the Exhibits and other attachments hereto, as amended,
modified or supplemented from time to time in accordance with the terms hereof.
B. The Originators wish to sell Pool Receivables that each now owns and
from time to time hereafter will own to the Initial Purchaser, and the Initial
Purchaser is willing, on the terms and subject to the conditions contained in
this Agreement, to purchase such Pool Receivables from each of the Originators
at such time.
C. The Initial Purchaser has entered into the Receivables Purchase
Agreement, pursuant to which, among other things, the Initial Purchaser may sell
to the Issuer undivided ownership interests in the Pool Receivables and Related
Assets.
D. It is a condition precedent for Issuer and the Originators to enter
into this Agreement that Parent guaranty the performance of each Originator
hereunder, and Parent is willing to guaranty such performance.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
1
<PAGE>
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.1. Agreement to Purchase and Sell.
On the terms and conditions hereinafter set forth, each Originator agrees to
sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from
each of the Originators, at the times set forth in Section 1.2, but prior to the
Purchase and Sale Termination Date, such Originator's right, title, and interest
in, to and under (a) all Pool Receivables of each of the Originators, (b) all
Related Security with respect to such Pool Receivables and (c) all Collections
with respect to, and other proceeds of, such Pool Receivables and Related
Security. The items listed in clauses (b) and (c) of the preceding sentence in
relation to any Pool Receivables are herein collectively called the "Related
Assets" or, with respect to any such Pool Receivable, the "Related Asset".
SECTION 1.2. Timing of Purchases.
(a) Initial Purchase. All of the Pool Receivables and the Related
Assets of each of the Originators that exist at the close of each of the
Originators' businesses on the date of the initial purchase (other than Pool
Receivables contributed by O&M Medical to the Initial Purchaser pursuant to the
Subscription Agreement) shall be deemed to have been sold to the Initial
Purchaser on the date of the initial purchase without any formal or other
instrument of assignment and without further action by any Person.
(b) Regular Purchases. After the date of the initial purchase hereunder
until the Purchase and Sale Termination Date, each Pool Receivable and Related
Asset of an Originator shall be deemed to have been sold to the Initial
Purchaser pursuant hereto immediately (and without any formal or other
instrument of assignment and without further action by any Person) upon the
creation of such Pool Receivable.
(c) Lock-Box Accounts. Each of the Originators hereby sells to the
Initial Purchaser, and the Initial Purchaser hereby purchases from each
Originator, all of such Originator's right, title and interest in (but not such
Originator's obligations with respect to) the Lock-Box Accounts, all amounts on
deposit therein, all certificates and instruments, if any, from time to time
evidencing such Lock-Box Accounts and amounts on deposit therein, and all
related agreements between any Originator and the Lock-Box Banks.
SECTION 1.3. Calculation of Purchase Price. On the tenth
day of each calendar month, or, if such day is not a Business
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Day, the next succeeding Business Day (a "Payment Date"), the Servicer shall
deliver to the Initial Purchaser, the Administrator and each of the Originators
a monthly Seller Report with respect to the Initial Purchaser's purchases of
Pool Receivables and Related Assets from each such Originator during the
Purchase Period immediately preceding such Reporting Date. "Purchase Period"
means, with respect to the Receivables, each calendar month. The Initial
Purchaser shall pay for the Pool Receivables and Related Assets purchased by it
during any Purchase Period on the Payment Date for such Purchase Period, or, in
the case of the initial purchase hereunder, on the date of such purchase by an
increase in the outstanding amount of each applicable Initial Purchaser Note, it
being understood that the Initial Purchaser will pay each such Initial Purchase
Note in respect of such initial purchase promptly after, and to the extent that,
cash is available to the Initial Purchaser for such purpose under the
Receivables Purchase Agreement. The "Purchase Price" to be paid to the
applicable Originator on each Payment Date (or other applicable date in the case
of the initial purchase) for the Pool Receivables and Related Assets sold by
such Originator pursuant to Section 1.2 during the Purchase Period immediately
preceding such Payment Date shall be set forth in the relevant Seller Report
(or, in the case of the initial purchase, in a calculation delivered by the
Servicer at the time of such initial purchase based on the November 30, 1995
Month End Date (or such other date agreed upon in the applicable Supplement) and
shall be determined in accordance with the following formula:
PP = AOB - PD
where:
PP = the Purchase Price to be paid to such Originator on
the relevant Payment Date (or other applicable date
in the case of the initial purchase);
AOB = the aggregate Outstanding Balance of the Pool
Receivables that were purchased from such Originator
during the Purchase Period immediately preceding such
Payment Date or on the date of the initial purchase.
(For purposes of this calculation, the Outstanding
Balance of a Pool Receivable shall be measured only
at the time of such Pool Receivable's creation and
sale (or in the case of the initial purchase, sale)
to the Initial Purchaser.)
PD = the Purchase Discount as measured on such Payment Date
pursuant to Section 1.4.
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For purposes of calculating the Purchase Price payable in connection
with the initial purchase hereunder from any Originator, the AOB shall be
estimated based on the aggregate Outstanding Balance of the Pool Receivables on
the November 30, 1995 Month End Date or such other date as is agreed upon in the
applicable Supplement. In connection with the delivery of the first Seller
Report, the actual aggregate Outstanding Balance of the Pool Receivables on the
November 30, 1995 Month End Date (or such other date agreed upon in the
applicable Supplement) will be calculated by the Servicer and appropriate
adjustments will be made to the Purchase Price payable on subsequent Payment
Dates and to the Initial Purchaser Notes, to reflect any excess or deficiency in
the Purchase Price paid on the date of the initial purchase.
SECTION 1.4. Definitions and Calculations Related to
Purchase Discount.
(a) Purchase Discount. "Purchase Discount" for the Pool Receivables and
Related Assets that were purchased from the applicable Originator during the
Purchase Period immediately preceding a Payment Date (or on the initial purchase
date for such Originator) shall be determined in accordance with the following
formula:
PD = AOB x (WALD + FD)
where:
PD = the Purchase Discount as measured on such Payment
Date (or the initial purchase date);
AOB, in respect of such Originator, has the meaning set
forth in Section 1.3;
WALD = the Weighted Average Loss Discount as measured on such
Payment Date (or the initial purchase date), as
determined pursuant to paragraph (b) below; and
FD = the Funding Discount as measured on such Payment Date
(or the initial purchase date), as determined pursuant to
paragraph (c) below.
(b) Weighted Average Loss Discount. "Weighted Average Loss Discount" as
measured on any Payment Date (or the initial purchase date) means the Weighted
Average Loss Discount over the last three Purchase Periods ending on the Month
End Date immediately preceding such Payment Date (or, if more recent, the
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initial purchase date for such Originator), calculated as the
quotient of
(i) the sum of (A) a rate equal to three times the
Loss-to-Liquidation Ratio for the most recent Purchase Period, plus (B)
a rate equal to two times the Loss-to-Liquidation Ratio for the second
most recent Purchase Period, plus (C) a rate equal to the actual
Loss-to-Liquidation Ratio for the third most recent Purchase Period,
divided by
(ii) six.
(c) Funding Discount. "Funding Discount" as measured on
any Payment Date (or the initial purchase date) means a
percentage determined in accordance with the following formula:
FD = (OTD/360) x FR
where:
FD = the Funding Discount as measured on such Payment
Date (or the initial purchase date);
OTD = the "Originator Turnover Days" for such Originator,
which shall be equal to the product of (x) the
quotient of (i) the aggregate Outstanding Balance of
Pool Receivables originated by such Originator
during the Purchase Period which occurs two months
prior to the month in which such Payment Date (or
the initial purchase date for such Originator)
occurs, divided by (ii) the aggregate amount of the
Collections received during the Purchase Period
ending on the Month End Date immediately preceding
such Payment Date (or initial purchase date for such
Originator) on Pool Receivables originated by such
Originator, multiplied by (y) the number of days in
the calendar month coinciding with such Purchase
Period; and
FR = the Funding Rate as measured on such Payment Date, as
determined pursuant to paragraph (d) below, or, in the
case of the initial purchase, a Funding Rate equal to
4.60% per annum (or such rate as is specified in the
Supplement for such Originator).
(d) Funding Rate. "Funding Rate" as measured on any
Payment Date means a per annum percentage rate determined in
accordance with the following formula:
FR = 0.02% + DRP + SFP + EXP
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where:
FR = the Funding Rate as measured on such Payment Date;
DRP = the "Discount Rate Percentage", which shall be equal
to a fraction (expressed as a percentage) (x) the
numerator of which is the sum of the products
obtained by multiplying (A) each CP Rate or Alternate
Rate applicable to each Portion of Capital
outstanding as of the first day of the calendar month
ending immediately prior to such Payment Date, times
(B) the amount of the Portion of Capital to which
such CP Rate or Alternate Rate applied on such first
day, and (y) the denominator of which is the
aggregate outstanding amount of Capital on such first
day;
SFP = the "Servicer's Fee Percentage", which shall be equal to
the per annum percentage rate contemplated by the
definition of Servicing Fee; and
EXP = the amount, which shall be equal to a fraction
(expressed as a percentage), (x) the numerator of
which is the sum of any fees, costs and expenses
incurred by the Initial Purchaser during the calendar
month preceding such Payment Date (and not accounted
for in the Discount Rate Percentage), including
without limitation reserve costs, tax payments and
indemnity obligations of the Initial Purchaser for
which the Initial Purchaser is not indemnified
pursuant to this Agreement and (y) the denominator of
which is the aggregate Outstanding Balance of the
Pool Receivables that were purchased from such
Originator during the Purchase Period immediately
preceding such Payment Date; provided, however, that,
for purposes of minimizing fluctuations in the rate
calculated as the Funding Rate, the Servicer may
allocate and spread any unscheduled or unaccruable
costs and expenses of the Initial Purchaser over
several Payment Dates at the Servicer's reasonable
discretion, subject to the requirement that such
allocation be reasonably calculated to allow the
Initial Purchaser to recover such costs and expenses
over a reasonable period of time.
SECTION 1.5. Purchase Price Payments. On the date of the initial
purchase, and on each Payment Date falling after the date of the initial
purchase pursuant to Section , on the terms and subject to the conditions of
this Agreement, the Initial Purchaser shall pay to each Originator the Purchase
Price for the Pool Receivables and Related Assets to be purchased from such
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Originator during the immediately preceding Purchase Period as follows:
(i) First, by making a cash payment to or at the direction of
each Originator to the extent that the Initial Purchaser has cash
available to make such payment subject to the terms of clause m of
Exhibit V to the Receivables Purchase Agreement;
(ii) Second, in the case of O&M Medical, to the extent any
portion of the Purchase Price payable to O&M Medical remains unpaid,
the principal amount outstanding under the Originator Note of O&M
Medical automatically shall be reduced and deemed paid in an amount
equal to such remaining Purchase Price, until such outstanding
principal amount is reduced to zero; and
(iii) Third, in the case of each Originator, to the extent any
portion of the Purchase Price payable to such Originator remains
unpaid, the principal amount outstanding under the Initial Purchaser
Note issued to such Originator automatically shall be increased in an
amount equal to such remaining Purchase Price.
In the event that there is insufficient cash available to the Initial
Purchaser to pay all Originators in full the Purchase Prices payable to such
Originators on any Payment Date, the available cash will be allocated to the
Originators pursuant to clause First above pro rata according to the respective
aggregate Outstanding Balance of the Pool Receivables sold by such Originators
hereunder during the applicable Purchase Period.
SECTION 1.6. The Initial Purchaser Note.
(a) On or prior to the date hereof with respect to O&M Medical (or at
the time of execution and delivery of the Supplement applicable to any other
Originator), the Initial Purchaser shall deliver to such Originator a promissory
note in the form of Annex to this Agreement payable to the order of such
Originator (such promissory note, as it may be amended, supplemented, endorsed
or otherwise modified from time to time, together with any promissory notes
issued from time to time in substitution therefor or renewal thereof in
accordance with the Transaction Documents, being called an "Initial Purchaser
Note"), which Initial Purchaser Note shall, in accordance with its terms, be
subordinated to all interests in Pool Receivables and Related Assets and all
obligations of the Initial Purchaser, of any nature, whether now or hereafter
arising, under or in connection with the Receivables Purchase Agreement.
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(b) The Servicer shall hold each Initial Purchaser Note for the benefit
of each of the Originators, and shall make all appropriate record-keeping
entries with respect to each of the Initial Purchaser Notes or otherwise to
reflect payments on and adjustments of each such Initial Purchaser Note. The
Servicer's books and records shall constitute rebuttable presumptive evidence of
the principal amount of and accrued interest on each Initial Purchaser Note at
any time. Each Originator hereby irrevocably authorizes the Servicer to mark its
Initial Purchaser Note "CANCELLED" and to return such Initial Purchaser Note to
the Initial Purchaser upon the full and final payment thereof after the Purchase
and Sale Termination Date.
SECTION 1.7. Initial Purchaser Agreement to Make Demand Loans. On the
terms and subject to the conditions set forth in this Agreement and in the
Receivables Purchase Agreement, the Initial Purchaser agrees to make demand
loans (each such loan being herein called an "Originator Loan") to O&M Medical
prior to the Purchase and Sale Termination Date in such amounts as O&M Medical
may request from time to time; provided, however, that: (a) the Originator Loans
made to O&M Medical shall be evidenced by a demand promissory note in the form
of Annex B to this Agreement issued by O&M Medical to the order of the Initial
Purchaser (such demand promissory note, as it may be amended, supplemented,
endorsed or otherwise modified from time to time in accordance with the
Transaction Documents, together with all promissory notes issued from time to
time in substitution therefor or renewal thereof in accordance with the
Transaction Documents, being called the "Originator Note");
(b) no Originator Loan shall be made to the extent that the making of
such Originator Loan would violate clause m of Exhibit V to the Receivables
Purchase Agreement.
SECTION 1.8. Deemed Collections, Etc.
(a) If on any day the Outstanding Balance or any portion of any Pool
Receivable is reduced or adjusted as a result of any Dilution Adjustment, the
applicable Originator shall deliver to the Servicer in same day funds an amount
equal to the portion of such Pool Receivable which constitutes such Dilution
Adjustment for application by the Servicer to the same extent as if Collections
of such amount of the Outstanding Balance of such Pool Receivable had actually
been received on such date;
(b) if on any day any of the representations or warranties in paragraph
(g) of Exhibit II hereto is not true with respect to any Pool Receivable, the
applicable Originator which sold such Pool Receivables hereunder shall deliver
to the Servicer in same day funds an amount equal to the Outstanding Balance of
such Pool Receivable for application by the Servicer to the same extent as
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if Collections of such amount of the Outstanding Balance of such
Pool Receivable had actually been received on such date;
(c) except as provided in paragraph (a) or (b) of this Section, or as
otherwise required by applicable law or the relevant Contract, all Collections
received from an Obligor of any Receivables shall be applied to the Receivables
of such Obligor in the order of the age of such Receivables, starting with the
oldest such Receivable, unless such Obligor designates in writing or otherwise
clearly indicates its payment for application to specific Receivables; and
(d) if and to the extent the Initial Purchaser shall be required for
any reason to pay over to an Obligor (or any trustee, receiver, custodian or
similar official for an Obligor in any Insolvency Proceeding) any amount
received by it hereunder, such amount shall be deemed not to have been so
received and the Pool Receivable to which such amount has been applied shall be
reinstated.
SECTION 1.9. No Recourse. Except as specifically provided in this
Agreement, the purchase and sale of Pool Receivables and Related Assets under
this Agreement shall be without recourse to the applicable Originator; provided
that each Originator shall be liable to the Initial Purchaser for all
representations, warranties, covenants and indemnities made by such Originator
pursuant to the terms of this Agreement, it being understood that such
obligation of the Originators will not arise on account of the failure of the
Obligor for credit reasons to make any payment in respect of a Pool Receivable.
SECTION 1.10. True Sales.
(a) Each of the Originators and the Initial Purchaser intend the
transactions hereunder to constitute true sales (or where the Subscription
Agreement applies, conveyances in the form of capital contributions) of Pool
Receivables, Related Assets and the Lock-Box Accounts (and the other items
described in Section 1.2(c)) by each of the Originators to the Initial Purchaser
providing the Initial Purchaser with the full benefits of ownership thereof, and
no party hereto intends the transactions contemplated hereunder to be, or for
any purpose to be characterized as, a loan from the Initial Purchaser to any
Originator.
(b) In the event (but only to the extent) that the conveyance of Pool
Receivables and Related Assets hereunder is characterized by a court or other
Governmental Authority as a loan rather than a sale, each Originator shall be
deemed hereunder to have granted to the Initial Purchaser a security interest in
all of such Originator's right, title and interest
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in, to and under all of the following, whether now or hereafter owned, existing
or arising: (A) all Pool Receivables of such Originator, (B) all Related
Security with respect to each such Pool Receivable, (C) all Collections with
respect to each such Pool Receivable, (D) the Lock-Box Accounts, all amounts on
deposit therein, all certificates and instruments, if any, from time to time
evidencing such Lock-Box Accounts and amounts on deposit therein, and all
related agreements between such Originator and the Lock-Box Banks, and (E) all
proceeds of, and all amounts received or receivable under any or all of, the
foregoing. Such security interest shall secure all of such Originator's
obligations (monetary or otherwise) under this Agreement and the other
Transaction Documents to which it is a party, whether now or hereafter existing
or arising, due or to become due, direct or indirect, absolute or contingent.
The Initial Purchaser shall have, with respect to the property described in this
Section 1.10(b), and in addition to all the other rights and remedies available
to the Initial Purchaser under this Agreement and applicable law, all the rights
and remedies of a secured party under any applicable UCC, and this Agreement
shall constitute a security agreement under applicable law.
SECTION 1.11. Payments and Computations, Etc.
(a) All amounts to be paid or deposited by an Originator or the
Servicer hereunder shall be paid or deposited no later than 1:00 p.m. (New York
City time) on the day when due in same day funds. All amounts received after
1:00 p.m. (New York City time) will be deemed to have been received on the
immediately succeeding Business Day.
(b) Each Originator shall, to the extent permitted by law, pay interest
on any amount not paid or deposited by such Originator (whether as Servicer or
otherwise) when due hereunder, at an interest rate per annum equal to 2.0% per
annum above the Base Rate, payable on demand.
(c) All computations of interest under Section 1.11(b) and all
computations of the Purchase Price, fees, and other amounts hereunder shall be
computed on the following basis: (i) in respect of the Funding Rate pursuant to
Section 1.4(d), when such computation is based on the Base Rate, and the Base
Rate is determined by BofA's "reference rate", such computations shall be made
on the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed; and (ii) all other such computations shall be made on the basis of a
360-day year and actual days elapsed. Whenever any payment or deposit to be made
hereunder shall be due on a day other than a Business Day, such payment or
deposit shall be made on the next succeeding Business Day and
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such extension of time shall be included in the computation of
such payment or deposit.
ARTICLE II
CONDITIONS TO PURCHASES; REPRESENTATIONS AND
WARRANTIES; COVENANTS; PURCHASE AND SALE TERMINATION EVENTS
SECTION 2.1. Conditions to Purchases. The obligation of the Initial
Purchaser to make any purchase of Pool Receivables and Related Assets hereunder
is subject to satisfaction of the conditions to purchase set forth in Exhibit I
hereto.
SECTION 2.2. Representations and Warranties; Covenants. Each Originator
hereby makes the representations and warranties, and hereby agrees to perform
and observe the covenants, in each case, as applicable to such Originator as set
forth in Exhibits II and III, respectively, hereto.
SECTION 2.3. Purchase and Sale Termination Events. If any of the
Purchase and Sale Termination Events set forth in Exhibit IV hereto shall occur,
the Initial Purchaser may, with the prior written consent of the Administrator,
by notice to each of the Originators (with a copy to the Administrator), declare
the Purchase and Sale Termination Date to have occurred; provided that
automatically upon the occurrence of a Termination Event described in clause (f)
of Exhibit IV hereto, the Purchase and Sale Termination Date shall occur.
The agreement of the Originators to sell Pool Receivables and Related
Assets hereunder, and the agreement of the Initial Purchaser to purchase Pool
Receivables and Related Assets from the Originators hereunder, shall terminate
automatically on the earlier to occur of (i) the Purchase and Sale Termination
Date and (ii) the Facility Termination Date. Notwithstanding the occurrence of
the Purchase and Sale Termination Date, all obligations of each Originator under
the Transaction Documents that shall have arisen prior to the Purchase and Sale
Termination Date shall survive until each such obligation has been finally and
fully paid and performed by such Originator.
Upon the occurrence of a Purchase and Sale Termination Event, the
Initial Purchaser shall have, in addition to all other rights and remedies under
this Agreement or otherwise, all other rights and remedies provided under the
UCC of each applicable jurisdiction and other applicable laws, which rights
shall be cumulative. Without limiting the foregoing, the occurrence of a
Purchase and Sale Termination Event hereunder shall not deny to the Initial
Purchaser any remedy to which the Initial Purchaser
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may be otherwise appropriately entitled, whether by statute or applicable law,
at law or in equity.
ARTICLE III
INDEMNIFICATION
SECTION 3.1. (a) Indemnities by the Originators; Taxes. Without
limiting any other rights which the Initial Purchaser or any Securitization
Party may have hereunder or under applicable law, each Originator hereby agrees
to indemnify the Initial Purchaser and each Securitization Party from and
against any and all Damages actually incurred by them arising out of or
resulting from this Agreement (whether directly or indirectly) or the use of
proceeds of purchases or the ownership of any Pool Receivable or Related Asset,
excluding, however, (a) Damages to the extent resulting from gross negligence,
willful misconduct or violation of applicable law on the part of the Initial
Purchaser or such Securitization Party, as the case may be, seeking such
indemnity (b) recourse (except as otherwise specifically provided in this
Agreement) for uncollectible Receivables, or (c) any taxes imposed on such
Indemnified Party. Without limiting or being limited by the foregoing, but
subject to the exclusions set forth in the preceding sentence, each Originator
shall pay to the Initial Purchaser and each Securitization Party (within three
Business Days after written demand for such indemnification) any and all amounts
necessary to indemnify the Initial Purchaser and such Securitization Party from
and against any and all Damages actually incurred relating to or resulting from
any of the following:
(i) the failure of any information provided by such
Originator, as Servicer or otherwise, to the Initial Purchaser, the
Issuer, the Administrator or the Servicer with respect to Pool
Receivables or this Agreement to be true and correct;
(ii) the failure of any representation or warranty or
statement made or deemed made by such Originator (or any of its
officers), as Servicer or otherwise, under or in connection with this
Agreement to have been true and correct when made;
(iii) the failure by such Originator, as Servicer or
otherwise, to comply with any applicable law, rule or regulation with
respect to any Pool Receivable or any Related Asset; or the failure of
any Pool Receivable or Related Asset to conform to any such applicable
law, rule or regulation;
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(iv) the failure to vest in the Initial Purchaser a valid
and enforceable (A) perfected ownership interest in each Pool
Receivable at any time existing and the Related Assets and Collections
with respect thereto and (B) perfected ownership interest in the items
described in Section 1.10(b), in each case free and clear of any
Adverse Claim;
(v) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Pool Receivables and the Related Assets and Collections
in respect thereof, whether at the time of any purchase or at any
subsequent time;
(vi) any dispute, claim, offset or defense of an Obligor to
the payment of any Pool Receivable (including, without limitation, a
defense based on such Pool Receivable or the related Contract not being
a legal, valid and binding obligation of each Obligor enforceable
against it in accordance with its terms but excluding a defense based
on a discharge of such obligation in the bankruptcy of the applicable
Obligor), or any other claim resulting from the sale of goods or
services related to such Pool Receivable or the furnishing or failure
to furnish such goods or services or relating to collection activities
with respect to such Pool Receivable (if such collection activities
were performed by the Originator, or any of its Affiliates, acting as
Servicer or by any agent or independent contractor retained by the
Originator or any of its Affiliates);
(vii) any failure of such Originator, as Servicer or
otherwise, to perform its duties or obligations in accordance with the
provisions hereof or to perform its duties or obligations under the
Contracts;
(viii) any products liability or other claim, investigation,
litigation or proceeding arising out of or in connection with
merchandise, services or other property or rights which are the subject
of any Contract;
(ix) the commingling of Collections of Pool
Receivables at any time with other funds;
(x) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of purchases or reinvestments or
the ownership of any Pool Receivable, Related Asset or Contract; or
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(xi) any requirement that all or a portion of the
distributions made to the Initial Purchaser pursuant to this Agreement
shall be rescinded or otherwise must be returned to such Originator for
any reason.
(b) Taxes. (i) Any and all payments made hereunder to the Initial
Purchaser or an Affected Person shall be made free and clear of and without
deduction for any and all current or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto excluding: (A)
taxes imposed on or measured by all or part of the gross or net income (but not
including any such tax in the nature of a withholding tax) of the Initial
Purchaser or such Affected Person by the jurisdiction under the laws of which
the Initial Purchaser or such Affected Person is organized or has its applicable
lending office or any political subdivision of any thereof and (B) taxes that
would not have been imposed if the only connection between the Initial Purchaser
or such Affected Person and the jurisdiction imposing such taxes was the
activities of the Initial Purchaser or such Affected Person pursuant to or in
respect of this Agreement (including entering into, lending money or extending
credit pursuant to, receiving payments under, or enforcing this Agreement) (all
such excluded taxes, levies, imposts, deductions, changes, withholding and
liabilities collectively or individually referred to herein as "Excluded Taxes"
and all such nonexcluded taxes, levies, imposts, deductions, charges,
withholdings, and liabilities collectively or individually referred to herein as
"Taxes"). If any Originator or Servicer shall be required to deduct any Taxes
from or in respect of any sum payable hereunder to the Initial Purchaser or any
Affected Person: (A) the sum payable shall be increased by the amount (an
"additional amount") necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
3.1(b)) the Initial Purchaser or such Affected Person shall receive an amount
equal to the sum it would have received had no such deductions been made, (B)
the Originator or Servicer shall make such deductions and (C) the Originator or
Servicer shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(ii) In addition, each Originator and Servicer agrees to pay
to the relevant Governmental Authority in accordance with applicable
law all taxes, levies, imposts, deductions, charges, assessments or
fees of any kind (including but not limited to any current or future
stamp or documentary taxes or any other excise or property taxes,
charges, or similar levies, but excluding any Excluded Taxes) imposed
upon the Initial Purchaser or any Affected Person as a result of the
transactions contemplated by this Agreement or that arise from any
payment made hereunder or from the execution,
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delivery, or registration of or otherwise similarly with respect to,
this Agreement ("Other Taxes").
(iii) Each Originator, Servicer and the Parent hereby jointly
and severally agree to indemnify the Initial Purchaser and each
Affected Person from and against the full amount of Taxes and Other
Taxes arising out of this Agreement or any other Transaction Document
(whether directly or indirectly) imposed upon or paid by such Person
and any liability (including penalties, interest, and expenses
(including Attorney Costs)) arising with respect thereto whether or not
such Taxes or Other Taxes were correctly or legally asserted by the
relevant Governmental Authority. A certificate as to the amount of such
amounts prepared by the Initial Purchaser or an Affected Person, absent
manifest error, shall be final, conclusive, and binding for all
purposes. Such indemnification shall be made within 30 days after the
date the Initial Purchaser or Affected Person makes a timely written
demand therefor or the time at which such amount is payable after a
timely written demand therefor has been made, whichever is earlier. A
written demand will be considered "timely" for purposes of the
preceding sentence only if it is received by the Parent no later than
180 days after the earlier of (A) the date on which the Initial
Purchaser or such Affected Person as the case may be, making such
demand, makes such payment of Taxes or Other Taxes or liability arising
therefrom or with respect thereto and (B) the date on which the
relevant Governmental Authority or other party makes written demand
upon the Initial Purchaser or such Affected Person as the case may be,
making such demand, for payment of such Taxes or Other Taxes or
liability arising therefrom or with respect thereto.
(iv) As soon as practicable after the date of any payment of
Taxes or Other Taxes by the Servicer, the Parent or any Originator to a
Governmental Authority hereunder, such Person will deliver to the
Initial Purchaser or the relevant Affected Person the original or a
certified copy of a receipt issued by such Governmental Authority
evidencing payment thereof.
(v) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this
Section 3.1(b) shall survive the termination of this Agreement.
(vi) Each Program Support Provider that is granted a
participating interest in the Purchased Interest and is organized under
the laws of a jurisdiction other than the United States, any State
thereof, or the District of
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Columbia (each a "Non-U.S. Purchaser") shall deliver to the Initial
Purchaser or the Administrator: (A) two copies of either United States
Internal Revenue Service Form 1001 or Form 4224 (whichever is
applicable), or (B) in the case of a Non-U.S. Purchaser claiming an
exemption from U.S. federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", a
Form W-8 (or any subsequent versions thereof or successors thereto) and
a certificate representing that such Non-U.S. Purchaser is not a bank
for purposes of Section 881(c) of the Code, in either case properly
completed and duly executed by such Non-U.S. Purchaser claiming
complete exemption from U.S. federal withholding tax on payments by the
Seller under this Agreement. Such forms shall be delivered by each
Non-U.S. Purchaser before the date it receives its first payment with
respect to a Purchased Interest, and before the date it receives its
first payment with respect to a Purchased Interest occurring after the
date, if any, that such Non-U.S. Purchaser changes its applicable
lending office by designating a different lending office (a "new
Landing Office"). In addition, each Non-U.S. Purchaser shall deliver
such forms promptly after (or, if reasonably practicable, prior to) the
obsolescence or invalidity of any form previously delivered by such
Non-U.S. Purchaser. Notwithstanding any other provision of this Section
3.1(b)(vi), a Non-U.S. Purchaser shall not be required to deliver any
form pursuant to this Section 3.1(b)(vi) that such Non-U.S. Purchaser
is not legally able to deliver. Each Program Support Provider (other
than any exempt person as described in applicable Treasury Regulations)
that is granted a participating interest in the Purchased Interest and
is organized under the laws of the United States or any state thereof
or the District of Columbia shall deliver to the Initial Purchaser or
the Administrator an original copy of Internal Revenue Service Form W-9
(or applicable successor form) properly completed and duly executed by
such Program Support Provider.
(vii) The Originators, the Parent and the Servicer shall not
be required to indemnify any Non-U.S. Purchaser, or to pay any
additional amounts to any Non-U.S. Purchaser, in respect of United
States federal withholding tax (or any withholding tax imposed by a
state that applies only when such United States federal withholding tax
is imposed) pursuant to this Section 3.1(b) to the extent that: (A) the
obligation to withhold amounts with respect to United States federal
withholding tax existed on the date such Non-U.S. Purchaser was granted
a participating interest in the Purchased Interest or, with respect to
payments to a New Lending Office, the date such Non-U.S. Purchaser
designated such New Lending Office; provided, however, that this clause
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(A) shall not apply to any Non-U.S. Purchaser or New Lending Office
that is granted, assigned, or transferred a participating interest in
the Purchased Interest at the request of the Initial Purchaser and
provided further, however, that this clause (A) shall not apply to any
Non- U.S. Purchaser or New Lending Office that is assigned an interest
in the Purchased Interest by a Program Support Provider to the extent
that the indemnity payment or additional amounts such Non-U.S.
Purchaser or New Lending Office would be entitled to receive (without
regard to this clause (A)) do not exceed the indemnity payment or
additional amounts that the Program Support Provider making the
assignment to such Non-U.S. Purchaser or New Lending Office would have
been entitled to receive in the absence of such assignment; or (B) the
obligation to make such indemnification or to pay such additional
amounts would not have arisen but for a failure by such Non-U.S.
Purchaser to comply with the provisions of paragraph (vi) above (it
being understood that the Non-U.S. Purchaser shall not have failed to
comply with the provisions of paragraph (vi) above if it is legally
unable to deliver the forms described therein on any date after it is
granted a participation interest in a Purchased Interest or designated
a New Lending Office).
(viii) The Initial Purchaser or any Affected Person claiming
any indemnity payment or additional amounts payable pursuant to this
Section 3.1(b) shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document reasonable
requested in writing by an Originator, the Parent, or the Servicer or
to change the jurisdiction of its applicable lending office if the
making of such a filing or change would avoid the need for or reduce
the amount of any such indemnity payment or additional amounts that may
thereafter accrue and would not, in the good faith determination of the
Initial Purchaser or such Affected Person, be otherwise disadvantageous
to the Initial Purchaser or such Affected Person.
(ix) Nothing contained in this Section 3.1(b) shall require
the Initial Purchaser or an Affected Person to make available any of
its tax returns (or any other information that it deems to be
confidential or proprietary).
(x) If the Initial Purchaser or any Affected Person receiving
an indemnification payment from any Originator, the Servicer, or the
Parent hereunder with respect to Taxes or Other Taxes or liabilities
arising therefrom shall subsequently receive a refund from any taxing
authority which is specifically attributable to such indemnification
payment, such Purchaser or Person shall promptly pay such refund to
such Originator, the Servicer, or the Parent.
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SECTION 3.2. Contribution. If for any reason the indemnification
provided above in this Article (and subject to the exceptions set forth therein)
is unavailable (other than by reason of a final adjudication by a court of
competent jurisdiction that a claim is not within the scope of such
indemnification) to the Initial Purchaser or a Securitization Party or is
insufficient to hold the Initial Purchaser or a Securitization Party harmless,
then the applicable Originator shall contribute to the maximum amount of Damages
payable or paid by the Initial Purchaser or such Securitization Party in such
proportion as is appropriate to reflect not only the relative benefits received
by the Initial Purchaser or such Securitization Party on the one hand and such
Originator on the other hand, but also the relative fault of such Securitization
Party (if any) and such Originator and any other relevant equitable
considerations. Upon the occurrence of the Final Payout Date, the applicable
Originator shall be subrogated, to the extent of such Originator's payments
pursuant to this Section 3.2, to the Initial Purchaser and a Securitization
Party's claims relating to the subject of such indemnification payment, but
neither the Initial Purchaser nor a Securitization Party shall have any duty
whatsoever to take any action to preserve such subrogated rights of any
Originator or refrain from taking any action which impairs or may impair such
subrogated rights of any Originator.
ARTICLE IV
ADMINISTRATION AND COLLECTIONS; ADDITIONAL RIGHTS
AND OBLIGATIONS IN RESPECT OF THE POOL RECEIVABLES
SECTION 4.1. Servicing of Pool Receivables and Related Assets.
Consistent with the Initial Purchaser's ownership of the Pool Receivables and
the Related Assets, the Initial Purchaser shall have the sole right to service,
administer and collect the Pool Receivables, to assign such right and to
delegate such right to others. In consideration of the Initial Purchaser's
purchase of the Pool Receivables and the Related Assets, each Originator agrees
to cooperate fully with the Initial Purchaser to facilitate the full and proper
performance of such duties and obligations for the benefit of the Initial
Purchaser, the Issuer and the Administrator. To the extent that the Initial
Purchaser, individually or through the Servicer, has granted or grants powers of
attorney to the Administrator under the Receivables Purchase Agreement, each
Originator hereby grants a corresponding power of attorney on the same terms to
the Initial Purchaser. Each Originator hereby acknowledges and agrees that the
Initial Purchaser, in all of its capacities, shall assign to the Administrator
for the benefit of the Issuer and the Administrator such powers of attorney and
other rights and interests granted by such Originator to the Initial Purchaser
hereunder, and agrees to
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cooperate fully with the Administrator in the exercise of such rights. Until the
Administrator gives notice to the Seller and the Servicer of the designation of
a new Servicer, Owens & Minor Medical, Inc. will perform the duties and
obligations of the Servicer.
SECTION 4.2. Rights of the Initial Purchaser;
Enforcement Rights.
(a) The Initial Purchaser shall have no obligation to account for, to
replace, to substitute or to return any Pool Receivable and Related Asset to any
Originator. The Initial Purchaser shall have no obligation to account for, or to
return to any Originator, Collections, or any interest or other finance charge
collected pursuant thereto, without regard to whether such Collections and
charges are in excess of the Purchase Price for such Pool Receivables and
Related Assets.
(b) The Initial Purchaser shall have the unrestricted right to further
assign, transfer, deliver, hypothecate, subdivide or otherwise deal with the
Pool Receivables and Related Assets, and all of the Initial Purchaser's right,
title and interest in, to and under this Agreement, on whatever terms the
Initial Purchaser shall determine, pursuant to the Receivables Purchase
Agreement or otherwise.
(c) The Initial Purchaser shall have the sole right to retain any gains
or profits created by buying, selling or holding the Pool Receivables and
Related Assets and shall have the sole risk of and responsibility for losses or
damages created by such buying, selling or holding.
(d) At any time following the designation of a Servicer (other than O&M
Medical or any of its Affiliates) pursuant to Section 4.1 of the Receivables
Purchase Agreement:
(i) the Administrator may direct the Obligors that
payment of all amounts payable under any Pool Receivable be
made directly to the Administrator or its designee;
(ii) the Administrator may instruct each Originator to give
notice of the Initial Purchaser's or the Issuer's interest in Pool
Receivables to each Obligor, which notice shall direct that payments be
made directly to the Administrator or its designee, and upon such
instruction from the Administrator each Originator shall give such
notice at its expense; provided, that if any Originator fails to so
notify each Obligor, the Administrator may so notify the Obligors; and
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(iii) the Administrator may request any or all of the
Originators to, and upon such request each applicable Originator shall,
(A) assemble all of the records necessary or desirable to collect the
Pool Receivables and the Related Assets, and transfer or license the
use of, to the new Servicer, all software necessary or desirable to
collect the Pool Receivables and the Related Assets, and make the same
available to the Administrator or its designee at a place selected by
the Administrator (provided that if any Originator is unable to
transfer or license the use of the appropriate software to the new
Servicer, such Originator shall pay to the new Servicer the amount
necessary for the new Servicer to purchase the use of such software),
and (B) segregate all cash, checks and other instruments received by it
from time to time constituting Collections with respect to the Pool
Receivables in a manner acceptable to the Administrator and, promptly
upon receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to the
Administrator or its designee.
(e) Each Originator hereby authorizes the Initial Purchaser, and
irrevocably appoints the Initial Purchaser as its attorney-in-fact with full
power of substitution and with full authority in the place and stead of such
Originator, which appointment is coupled with an interest, to take any and all
steps in the name of such Originator and on behalf of such Originator necessary
or desirable, in the determination of the Initial Purchaser, to collect any and
all amounts or portions thereof due under any and all Pool Receivables or
Related Assets, including, without limitation, endorsing the name of such
Originator on checks and other instruments representing Collections and
enforcing such Pool Receivables and Related Assets. Notwithstanding anything to
the contrary contained in this subsection (e), none of the powers conferred upon
such attorney-in-fact pursuant to the immediately preceding sentence shall
subject such attorney-in-fact to any liability (except for its own gross
negligence or willful misconduct) if any action taken by it shall prove to be
inadequate or invalid, nor shall they confer any obligations upon such
attorney-in-fact in any manner whatsoever.
SECTION 4.3. Responsibilities of the Originators. Anything herein to
the contrary notwithstanding:
(a) Each Originator agrees to deliver directly to the Servicer
(for the Initial Purchaser's account), within two Business Days of
receipt thereof, any Collections that it receives, in the form so
received, and agrees that all such Collections shall be deemed to be
received in trust for the Initial Purchaser and shall be maintained and
segregated
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separate and apart from all other funds and moneys of such
Originator until delivery of such Collections to the
Servicer; and
(b) Each Originator shall (i) perform all of its obligations
hereunder and under the Contracts related to the Pool Receivables and
Related Assets (and under its agreements with the Lock-Box Banks) to
the same extent as if the Receivables, Related Assets and Lock-Box
Accounts (and the other items described in Section 1.2(c)) had not been
sold hereunder, and the exercise by the Initial Purchaser or its
designee or assignee of the Initial Purchaser's rights hereunder or in
connection herewith shall not relieve any Originator from such
obligations and (ii) pay when due any taxes, including, without
limitation, any sales taxes payable in connection with the Pool
Receivables and their creation and satisfaction. Notwithstanding
anything to the contrary in this Agreement, the Initial Purchaser, the
Administrator and the Issuer shall not have any obligation or liability
with respect to any Pool Receivable, Related Asset, or Lock-Box Account
(or any other item described in Section 1.2(c)) nor shall any of them
be obligated to perform any of the obligations of any Originator under
any of the foregoing.
SECTION 4.4. Further Action Evidencing Purchases. Each Originator
agrees that from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action, in
order to perfect, protect or more fully evidence the purchase of the Pool
Receivables and the Related Assets by the Initial Purchaser hereunder, or to
enable the Initial Purchaser to exercise or enforce any of its rights hereunder
or under any other Transaction Document. Each Originator further agrees from
time to time, at its expense, promptly to take all action that the Initial
Purchaser, the Servicer or the Administrator may reasonably request in order to
perfect, protect or more fully evidence such purchase of the Pool Receivables
and the Related Assets or to enable the Initial Purchaser or the Issuer (as the
assignee of the Initial Purchaser) or any Program Support Provider to exercise
or enforce any of its or their respective rights hereunder or under any other
Transaction Document or Program Support Agreement in respect of the Pool
Receivables and the Related Assets. Without limiting the generality of the
foregoing, upon the request of the Initial Purchaser, each Originator will:
(a) execute and file such financing or continuation
statements, or amendments thereto or assignments thereof,
and such other instruments or notices, as the Initial
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Purchaser or the Administrator may reasonably determine to
be necessary or appropriate; and
(b) mark the master data processing records evidencing the
Receivables and, if requested by the Initial Purchaser or the
Administrator, legend the related Contracts, to reflect the sale of the
Pool Receivables and Related Assets pursuant to this Agreement, the
Receivables Purchase Agreement and the Parallel Asset Purchase
Agreement.
Each Originator hereby authorizes the Initial Purchaser or its designee
or assignee to file one or more financing or continuation statements, and
amendments thereto and assignments thereof, relative to all or any of the Pool
Receivables and Related Assets of such Originator, in each case whether now
existing or hereafter generated. If any Originator fails to perform any of its
agreements or obligations under this Agreement, the Initial Purchaser or its
designee or assignee may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the reasonable expenses of the
Initial Purchaser or its designee or assignee incurred in connection therewith
shall be payable by such Originator under Section 6.6.
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee. (a) Parent hereby unconditionally and
irrevocably covenants and agrees that it will cause each other Originator duly
and punctually to perform and observe all of the terms, conditions, covenants,
agreements (including, without limitation, agreements to make payments or deemed
Collections) and indemnities of each other Originator under this Agreement and
the other Transaction Documents strictly in accordance with the terms hereof and
thereof and that if for any reason whatsoever any other Originator shall fail to
so perform and observe such terms, conditions, covenants, agreements and
indemnities, Parent will duly and punctually perform and observe the same.
(b) The liabilities and obligations of Parent, in its capacity as a
guarantor under this Section 5.1, shall be absolute and unconditional under all
circumstances and shall be performed by Parent regardless of (i) whether the
Initial Purchaser, the Issuer (as assignee of the Initial Purchaser) or the
Administrator shall have taken any steps to collect from any Originator any of
the amounts payable by such Originator to the Initial Purchaser under this
Agreement or shall otherwise have exercised any of their rights or remedies
under this Agreement or
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the other Transaction Documents against such Originator or against any Obligor
under any of the Pool Receivables, (ii) the validity, legality or enforceability
of this Agreement or any other Transaction Documents, or the disaffirmance of
any thereof in any event of bankruptcy relating to such Originator, (iii) any
law, regulation or decree now or hereafter in effect which might in any manner
affect any of the terms or provisions of this Agreement or any other Transaction
Document or any of the rights of Issuer (as assignee of the Initial Purchaser)
or the Administrator as against such Originator or as against any Obligor under
any of such Pool Receivables or which might cause or permit to be invoked any
alteration in time, amount, manner of payment or performance of any amount
payable by such Originator to the Initial Purchaser, Issuer (as assignee of the
Initial Purchaser) or the Administrator under this Agreement, (iv) the merger or
consolidation of such Originator into or with any corporation or any sale or
transfer by such Originator or all or any part of its property, (v) the
existence or assertion of any Adverse Claim with respect to any Pool Receivable,
or (vi) any other circumstance whatsoever (with or without notice to or
knowledge of Parent) which may or might in any manner or to any extent vary the
risk of Parent, or might otherwise constitute a legal or equitable discharge of
a surety or guarantor, it being the purpose and intent of Parent that the
liabilities and obligations of Parent under this Section 5.1 shall be absolute
and unconditional under any and all circumstances, and shall not be discharged
except by payment and performance as in this Agreement provided. The guaranty
set forth in this Section 5.1 is a guaranty of payment and performance and not
just of collection.
(c) Without in any way affecting or impairing the liabilities and
obligations of Parent, in its capacity as a guarantor under this Section 5.1,
the Initial Purchaser, Issuer (as assignee of the Initial Purchaser) or the
Administrator may at any time and from time to time in its discretion, without
the consent of, or notice to, Parent, and without releasing or affecting
Parent's liability hereunder (i) extend or change the time, manner, place or
terms of this Agreement or any other Transaction Document, (ii) settle or
compromise any of the amounts payable by any Originator to the Initial Purchaser
or Issuer (as assignee of the Initial Purchaser) under this Agreement or
subordinate the same to the claims of others, (iii) retain or obtain a lien upon
or security interest in any property to secure any of the obligations hereunder,
(iv) retain or obtain the primary or secondary obligation of any obligor or
obligors, in addition to Parent, with respect to any of the obligations due
hereunder, or (v) release or fail to perfect any lien upon or security interest
in, or impair, surrender, release or permit any substitution in exchange for,
all or any part of any property securing any of the obligations under this
Agreement, it being
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understood that nothing contained in this Section 5.1(c) shall give the Initial
Purchaser, Issuer (as assignee of the Initial Purchaser) or the Administrator
the right to take any of the foregoing actions if not permitted by the other
provisions of this Agreement, by law or otherwise. Nothing in this Section
5.1(c) shall be deemed to waive any of the rights the Initial Purchaser may
otherwise have.
(d) The provisions of this Section 5.1 shall continue to be effective
or be reinstated, as the case may be, if at any time payment of any of the
amounts payable by any Originator, to the Initial Purchaser, Issuer (as assignee
of the Initial Purchaser) or the Administrator under this Agreement is rescinded
or must otherwise be restored or returned by any of such Persons, as the case
may be, upon any event of bankruptcy involving any Originator, or otherwise, all
as though such payment had not been made. Parent, in its capacity as a guarantor
under this Section 5.1, hereby waives (i) notices of the occurrence of any
default hereunder, (ii) any requirement of diligence or promptness on the part
of the Initial Purchaser, Issuer (as assignee of the Initial Purchaser) or the
Administrator in making demand, commencing suit or exercising any other right or
remedy under this Agreement, or otherwise, and (iii) any right to require the
Initial Purchaser, Issuer or the Administrator to exercise any right or remedy
against any Originator or the Pool Receivables prior to enforcing any of their
rights against Parent under this Section 5.1. Parent, in its capacity as a
guarantor under this Section 5.1, agrees that, in the event of an event of
bankruptcy with respect to any Originator (including Parent), and if such event
shall occur at a time when all of the indemnified amounts and other amounts due
from such Originator under this Agreement may not then be due and payable,
Parent will pay to Initial Purchaser or Issuer (as assignee of the Initial
Purchaser) forthwith the full amount which would be payable hereunder by Parent
if all such indemnified amounts and other obligations were then due and payable.
SECTION 5.2. Representation and Warranty. Parent, in its capacity as
a guarantor under this Section 5.2, represents and warrants that it now has, and
will continue to have, independent means of obtaining information concerning
each Originator's affairs, financial condition and business. Neither the
Initial Purchaser, Issuer nor the Administrator shall have any duty or
responsibility to provide Parent with any credit or other information concerning
any Originator's affairs, financial condition or business which may come into
the possession of the Initial Purchaser, Issuer or the Administrator.
SECTION 5.3. Subrogation. Parent will not exercise or assert any
rights which it may acquire by way of subrogation under this Agreement unless
and until all of the Obligations of
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each Originator shall have been paid and performed in full. If any payment shall
be made to Parent on account of any subrogation rights at any time when all of
the Obligations of each Originator shall not have been paid and performed in
full, each and every amount so paid will be held in trust for the benefit of the
Initial Purchaser and Issuer (as assignee of the Initial Purchaser) and any
other applicable Person and forthwith be paid to the Administrator to be
credited and applied to the Obligations of the applicable Originator to the
extent then unsatisfied, in accordance with the terms of the Transaction
Documents or any document delivered in connection with the Transaction
Documents, as the case may be.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Additional Originators. The Parent and any Subsidiary of
the Parent may become an Originator by executing a Supplement. Upon such
execution of the Supplement and the satisfaction of any conditions set forth
therein, such executing party will become an Originator hereunder.
SECTION 6.2. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or consent to any departure by any Originator therefrom shall
be effective unless in a writing (a) signed by the Administrator, and (b) in the
case of any amendment, signed by each Originator, the Initial Purchaser, the
Parent and the Administrator. Any such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure on the part of the Initial Purchaser or Administrator to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
SECTION 6.3. Notices, Etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and sent or delivered, to each party hereto, at
its address set forth under its name on the signature pages hereof or at such
other address as shall be designated by such party in a written notice to the
other parties hereto. Notices and communications by facsimile shall be effective
when sent (and shall be followed by hard copy sent by first class mail), and
notices and communications sent by other means shall be effective when received.
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SECTION 6.4. Acknowledgment and Consent.
(a) Each Originator, O&M Medical, as an Originator and as initial
Servicer and the Parent, acknowledge that, contemporaneously herewith or at any
time hereafter, the Initial Purchaser (i) is assigning or will assign to the
Issuer, pursuant to the Receivables Purchase Agreement, one or more undivided
interests in all of the Initial Purchaser's rights, title and interest in, to
and under the Pool Receivables and Related Assets, and (ii) is assigning
pursuant to the Receivables Purchase Agreement all of the Initial Purchaser's
right, title and interest in, to and under this Agreement, except for the
Initial Purchaser's right, title and interest in, to and under the Originator
Note, it being understood that such assignment shall not relieve any party
hereto from (or require the Issuer to undertake) the performance of any term,
covenant or agreement on the part of any party hereto to be performed or
observed under or in connection with this Agreement. Each Originator, O&M
Medical, as an Originator and as initial Servicer and the Parent, hereby consent
to such assignments, including, without limitation, the assignment by the
Initial Purchaser to the Issuer of (i) the right of the Initial Purchaser, at
any time, to enforce this Agreement against any Originator and the obligations
of any Originator hereunder, (ii) the right to appoint a successor to the
Servicer as set forth therein, (iii) the right, at any time, to give or withhold
any and all consents, requests, notices, directions, approvals, demands,
extensions or waivers under or with respect to this Agreement, any other
Transaction Document or the obligations in respect of any Originator thereunder
to the same extent as the Initial Purchaser may do, and (iv) all of the Initial
Purchaser's rights, remedies, powers and privileges, and all claims of the
Initial Purchaser against any Originator, under or with respect to this
Agreement and the other Transaction Documents (whether arising pursuant to the
terms of this Agreement or otherwise available at law or in equity). Each of the
parties hereto acknowledges and agrees that the Issuer, the Administrator and
the other Affected Persons are third party beneficiaries of the rights of the
Initial Purchaser arising hereunder and under the other Transaction Documents to
which any Originator is a party.
(b) Each of the Originators and the Parent hereby agrees to execute all
agreements, instruments and documents, and to take all other action, that the
Initial Purchaser or the Administrator determines is necessary or reasonably
desirable to evidence its consent described in Section 5.3(a).
(c) Each of the Originators and the Parent hereby acknowledges that its
obligations to the Issuer, as assignee of the Initial Purchaser, are and shall
be, to the extent permitted by applicable law or not prohibited by any order of
any court or administrative or regulatory authority, absolute and uncondi-
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tional under any and all circumstances and shall be unaffected by any claims,
offsets or other defenses any such Originator may have against the Initial
Purchaser (other than in respect of the Initial Purchaser Note), and each
Originator agrees that it shall not interpose any such claims, offsets or
defenses as a defense to its performance of its obligations under the
Transaction Documents to which it is a party.
SECTION 6.5. Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither the Parent nor any Originator may
assign any of its rights or delegate its obligations hereunder or any interest
herein without the prior written consent of the Initial Purchaser and the
Administrator. Without limiting any other rights that may be available under
applicable law, the rights of the Initial Purchaser may be enforced through it
or by its agents.
SECTION 6.6. Costs and Expenses. In addition to the rights of
indemnification granted under Section 3.1 hereof, each of the Originators and
the Parent jointly and severally agree to pay on demand all reasonable costs and
expenses in connection with the preparation, execution, delivery and
administration (including audit fees and expenses generated by an internal or
external auditor appointed by the Administrative Agent for the periodic auditing
of Pool Receivables) of this Agreement, the Liquidity Asset Purchase Agreement,
the Parallel Asset Purchase Agreement, any asset purchase agreement,
reimbursement agreement, letter of credit or similar agreement relating to the
sale or transfer of interests in Purchased Interests and the other documents and
agreements to be delivered hereunder, including, without limitation, Attorney
Costs for the Administrator, the Issuer and their respective Affiliates and
agents with respect thereto and with respect to advising the Administrator, the
Issuer and their respective Affiliates and agents as to their rights and
remedies under this Agreement and the other Transaction Documents, and all costs
and expenses, if any (including Attorney Costs), of the Administrator, the
Issuer and their respective Affiliates and agents, in connection with the
enforcement of this Agreement and the other Transaction Documents.
SECTION 6.7. No Proceedings; Limitation on Payments.
(a) Each party hereto hereby agrees that it will not institute against,
or join any other Person in instituting against, the Initial Purchaser or the
Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding, or other proceeding under any federal or state bankruptcy or similar
law, for one year and one day after the latest maturing Note is paid in full.
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(b) Notwithstanding any provisions contained in this Agreement to the
contrary, the Initial Purchaser shall not, and shall not be obligated to, pay
any amount pursuant to this Agreement unless the Initial Purchaser has excess
cash flow from operations or has received funds with respect to such obligation
which may be used to make such payment.
SECTION 6.8. GOVERNING LAW AND JURISDICTION.
(A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PRINCIPLES THEREOF), EXCEPT TO THE EXTENT THAT THE PERFECTION (OR THE
EFFECT OF PERFECTION OR NON-PERFECTION) OF THE INTERESTS OF THE INITIAL
PURCHASER IN THE POOL RECEIVABLES AND THE OTHER ITEMS DESCRIBED IN SECTION
1.10(B) IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY TRANSACTION DOCUMENT. EACH PARTY HERETO WAIVES PERSONAL SERVICE
OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY NEW YORK LAW.
SECTION 6.9. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.
SECTION 6.10. Survival of Termination. The provisions of Section 1.11,
Section 2.3, Article , Article V, Section 6.4, Section 6.6, Section 6.7, Section
6.8, Section 6.11, and of this Section 6.10, shall survive any termination of
this Agreement.
SECTION 6.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. EACH PARTY HERETO
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AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO
FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT.
SECTION 6.12. Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties hereto, and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof. The Exhibits,
Schedules and Annexes to this Agreement shall be deemed incorporated by
reference into this Agreement as if set forth herein.
SECTION 6.13. Headings. The captions and headings of this Agreement
and in any Exhibit hereto are for convenience of reference only and shall not
affect the interpretation hereof or thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
OWENS & MINOR, INC., as Guarantor
OWENS & MINOR MEDICAL, INC., as an
Originator and as Servicer
By:
Name:
Title:
4800 Cox Road
Richmond, Virginia 23261
Attention: Michael W. Lowry
Telephone: 804/747-9794
Facsimile: 804/965-5403
OWENS & MINOR, INC., as Guarantor
By:
Name:
Title:
4800 Cox Road
Richmond, Virginia 23261
Attention: Michael W. Lowry
Telephone: 804/747-9794
Facsimile: 804/965-5403
O&M FUNDING CORP., as
Initial Purchaser
By:
Name:
Title:
4800 Cox Road
Richmond, Virginia 23261
Attention: Michael W. Lowry
Telephone: 804/747-9794
Facsimile: 804/965-5403
<PAGE>
EXHIBIT I
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The initial purchase under
the Purchase and Sale Agreement is subject to the condition precedent that the
Initial Purchaser shall have received each of the following (with copies to the
Administrator), on or before the date of such purchase, each in form and
substance (including the date thereof) satisfactory to the Initial Purchaser and
the Administrator:
(a) The Receivables Purchase Agreement, duly executed by the
parties thereto, together with evidence reasonably satisfactory to the
Initial Purchaser that all conditions precedent to the initial purchase
of an undivided interest thereunder (other than any condition relating
to the effectiveness of the purchase commitment under this Agreement)
shall have been met;
(b) Duly executed copies of the Parallel Asset
Purchase Agreement;
(c) A duly executed counterpart of a subscription and
stockholder agreement (the "Subscription Agreement"), together with
evidence that a capital contribution of Pool Receivables and Related
Assets in an aggregate amount of not less than $7,500,000 shall have
been made to the Initial Purchaser thereunder by O&M Medical in
exchange for common stock of the Initial Purchaser; and
(d) Certified copies of (i) the resolutions of the respective
Board of Directors of each of the Originators and the Parent
authorizing the execution, delivery and performance by such Persons of
the Purchase and Sale Agreement and the other Transaction Documents,
(ii) all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to the Purchase and Sale
Agreement and the other Transaction Documents and (iii) the articles of
incorporation and by-laws of each of the Originators and the Parent.
(e) A certificate of the Secretary or Assistant Secretary of
each of the Originators and the Parent certifying the names and true
signatures of the officers of such Persons authorized to sign the
Purchase and Sale Agreement and the other Transaction Documents. Until
the Administrator receives a subsequent incumbency certificate from an
Originator or the Parent in form and substance satisfactory to the
Administrator, the Administrator shall
<PAGE>
be entitled to rely on the last such certificate delivered
to it by such Originator.
(f) Such other agreements, instruments, UCC financing
statements, certificates, opinions and other documents as the Initial
Purchaser or the Administrator may reasonably request.
2. Certification as to Representations and Warranties. Each Originator,
by accepting the Purchase Price paid to it for each purchase of Pool Receivables
and Related Assets on any day, shall be deemed to have certified that its
representations and warranties contained in Exhibit II to this Purchase and Sale
Agreement are true and correct on and as of such day, with the same effect as
though made on and as of such day (except for representations or warranties
expressly stated to have been made or given as of a specific date).
3. Automatic Transfer of Title on Creation of Pool Receivable. Upon the
creation of any Pool Receivable, such Pool Receivable and any Related Assets
shall be automatically sold and transferred to the Initial Purchaser without
further action, and title to such Pool Receivables and Related Assets shall vest
in the Initial Purchaser, whether or not the conditions precedent to such
purchase were in fact satisfied; provided that the Initial Purchaser shall not
be deemed to have waived any claim it may have under the Purchase and Sale
Agreement for the failure by any applicable Originator in fact to satisfy any
such condition precedent and no Originator shall be deemed to have waived any
claim it may have under the Purchase and Sale Agreement for payment of the
Purchase Price of any Pool Receivables.
4. Conditions Precedent to All Purchases. Each purchase under the
Purchase and Sale Agreement is subject to the condition precedent that the
agreement of the Originators to sell Pool Receivables and Related Assets, and
the agreement of the Initial Purchaser to purchase Pool Receivables and Related
Assets, shall not have terminated pursuant to Section 2.3 of the Purchase and
Sale Agreement.
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EXHIBIT II
REPRESENTATIONS AND WARRANTIES
In order to induce the Initial Purchaser to enter into the Purchase and
Sale Agreement and to make purchases thereunder, each Originator, as to matters
relating to it or its Pool Receivables or other property, hereby represents and
warrants as follows and the Parent makes all of the following representations
and warranties except those set forth in clauses (g), (i), (j), (l), (n), (o)
and (r) herein:
(a) Organization and Good Standing. It is a corporation duly
incorporated, validly existing and in good standing under the laws of
the jurisdiction of its organization, and is duly qualified to do
business, and is in good standing, as a foreign corporation in every
jurisdiction where the nature of its business requires it to be so
qualified.
(b) Due Qualification; No Conflicts. The execution, delivery
and performance by it of this Agreement and the other Transaction
Documents to which it is a party, including, without limitation, its
use of the proceeds of purchases, (i) are within its corporate powers,
(ii) have been duly authorized by all necessary corporate action, (iii)
do not contravene or result in a default under or conflict with (1) its
articles of incorporation or by-laws, (2) any law, rule or regulation
applicable to it, (3) any contractual restriction binding on or
affecting it or its property or (4) any order, writ, judgment, award,
injunction or decree binding on or affecting it or its property and
(iv) do not result in or require the creation of any Adverse Claim upon
or with respect to any of its properties. The Purchase and Sale
Agreement and the other Transaction Documents to which it is a party
have been duly executed and delivered by it.
(c) Consents. No authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority or any
other Person is required for the due execution, delivery and
performance by it of the Purchase and Sale Agreement or any other
Transaction Document to which it is a party other than (a) the filing
of financing statements against O&M Medical in the State Corporation
Commission of Virginia and (b) comparable filings with respect to all
other Originators in the jurisdiction provided in their respective
Supplement to perfect the Initial Purchaser's interest in the Pool
Receivables under the Receivables Purchase Agreement.
<PAGE>
(d) Binding Obligations. Each of the Purchase and Sale
Agreement and any other Transaction Document to which it is a party
constitutes the legal, valid and binding obligation of it enforceable
against it in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditor's rights generally and by
general principles of equity regardless of whether such enforceability
is considered in a proceeding in equity or at law.
(e) Financial Statements.
(i) The consolidated and consolidating balance sheet
of the Parent and its Subsidiaries as of December 31, 1994,
and the related consolidated and consolidating statements of
income and retained earnings of the Parent and its
Subsidiaries for the fiscal year then ended, copies of which
have been furnished to the Administrator, fairly present the
financial condition of the Parent and its Subsidiaries as at
such date and the results of the operations of the Originators
and their Subsidiaries for the period ended on such date, all
in accordance with generally accepted accounting principles
consistently applied, and since December 31, 1994 there has
been no material adverse change in the business, operations,
property or financial or other condition or operations of the
Originators or the Parent or any of their Subsidiaries taken
as a whole (except as reflected in the unaudited financial
statements of Parent as of September 30, 1995), the ability of
any Originator or the Parent to perform its obligations under
the Purchase and Sale Agreement or the other Transaction
Documents or the collectibility of the Pool Receivables, or
which affects the legality, validity or enforceability of the
Purchase and Sale Agreement or the other Transaction
Documents.
(ii) The unaudited condensed balance sheet of the
Originators as of December 31, 1994, and the related condensed
statements of income of the Originators for the fiscal year
ended December 31, 1994, heretofore furnished to the
Administrator, are the financial statements of the Originators
routinely prepared for internal use.
(f) No Proceedings. There is no pending or threatened
action or proceeding affecting either (x) any Originator and
its Subsidiaries taken as a whole or (y) the Parent and its
Subsidiaries taken as a whole, which is before any Govern-
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<PAGE>
mental Authority or arbitrator and which would reasonably be expected
to materially adversely affect the business, operations, property,
financial or other condition or operations of either (x) any Originator
and its Subsidiaries taken as a whole or (y) the Parent and its
Subsidiaries taken as a whole, or their ability to perform their
obligations under the Purchase and Sale Agreement or the other
Transaction Documents or the collectibility of the Pool Receivables, or
which affects or purports to affect the legality, validity or
enforceability of the Purchase and Sale Agreement or the other
Transaction Documents.
(g) Quality of Title; Valid Sale; Etc. Upon its creation and
prior to its sale to the Initial Purchaser under this Agreement, it is
the legal and beneficial owner of each of the Pool Receivables and
Related Assets free and clear of any Adverse Claim; and upon each
purchase the Initial Purchaser shall acquire a valid and enforceable
ownership interest in each Pool Receivable then existing or thereafter
arising, in the Related Assets with respect thereto, and the items
described in Section 1.2(c) of the Purchase and Sale Agreement, free
and clear of any Adverse Claim, which interest has been duly perfected;
the Purchase and Sale Agreement creates a valid ownership interest in
favor of the Initial Purchaser in the items described in Section
1.10(b) of this Purchase and Sale Agreement, free and clear of any
Adverse Claims, which interest has, to the extent required, been duly
perfected. No effective financing statement or other instrument similar
in effect naming Initial Purchaser or any Originator as debtor and
covering any Pool Receivable or Related Asset with respect thereto or
any Lock-Box Account or any other item described in Section 1.10(b) of
this Purchase and Sale Agreement is on file in any recording office,
except those filed in favor of the Initial Purchaser pursuant to the
Purchase and Sale Agreement and in favor of the Issuer pursuant to the
Receivables Purchase Agreement.
(h) Accuracy of Information. Each report (if prepared by an
Originator or the Initial Purchaser or one of its Affiliates, or to the
extent that information contained therein is supplied by an Originator
or the Initial Purchaser or one of its Affiliates), information,
exhibit, financial statement, document, book or record furnished or to
be furnished at any time by or on behalf of it to the Initial
Purchaser, the Issuer or the Administrator in connection with this
Agreement is or will be accurate in all material respects as of its
date or (except as otherwise disclosed to the Administrator at such
time) as of the date so furnished, and no such item contains or will
contain any untrue statement of a material fact or omits or will omit
to
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<PAGE>
state a material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they
were made, not misleading.
(i) Principal Place of Business. The principal place of
business and chief executive office (as such terms are used in the UCC)
of each Originator and the office where each Originator keeps its
records concerning the Receivables are located at the addresses
referred to on Schedule I of this Purchase and Sale Agreement (or in
such Originator's Supplement) (or at such other addresses designated in
accordance with paragraph (b) of Exhibit III), and during the six years
prior to the initial purchase under the Purchase and Sale Agreement
such principal place of business, chief executive office and office
were located in the Commonwealth of Virginia.
(j) Lock-Box Banks, Accounts. The names and addresses of all
the Lock-Box Banks, together with the account numbers of the Lock-Box
Accounts of each Originator at such Lock-Box Banks, are specified in
Schedule II to the Purchase and Sale Agreement (except as permitted by
paragraph (i) of Exhibit III to the Purchase and Sale Agreement), and
all Lock-Box Accounts are subject to Lock-Box Agreements.
(k) No Violation. It is not in violation of any order of any
arbitrator or Governmental Authority which violation would reasonably
be expected to have a material adverse effect on its business,
operations, property or financial or other condition of the Originator.
(l) Proceeds. No proceeds of any purchase will be used for any
purpose that violates any applicable law, rule or regulation,
including, without limitation, Regulations G or U of the Federal
Reserve Board.
(m) No Purchase and Sale Termination Events. No event has
occurred and is continuing, or would result from a purchase, in respect
of the Pool Receivables or Related Assets or from the application of
the proceeds therefrom, which constitutes a Purchase and Sale
Termination Event.
(n) Maintenance of Books and Records. It has accounted for
each sale of Pool Receivables and Related Assets in its books and
financial statements as sales, consistent with Generally Accepted
Accounting Principles.
(o) Credit and Collection Policy. It has complied in
all material respects with the Credit and Collection Policy
with regard to each Pool Receivable.
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<PAGE>
(p) Solvency. It is Solvent; and at the time of (and
immediately after) each purchase pursuant to the Purchase and Sale
Agreement, such Originator shall have been Solvent.
(q) Compliance with Transaction Documents. It, as Servicer or
Originator or guarantor, has complied in all material aspects with all
of the terms, covenants and agreements contained in the Purchase and
Sale Agreement and the other Transaction Documents and applicable to
it.
(r) Corporate Name. Its complete corporate name is set forth
in the preamble to the Purchase and Sale Agreement, and it does not use
and has not during the last six years used any other corporate name,
trade name, doing business name or fictitious name, except for those
names set forth in Schedule I and except for names first used after the
date of the Purchase and Sale Agreement and set forth in a notice
delivered to the Administrator pursuant to clause (b) of Exhibit III to
the Purchase and Sale Agreement.
(s) No Labor Disputes. There are no strikes, lockouts or other
labor disputes against it or any of its subsidiaries, or, to the best
of its knowledge, threatened against or affecting it or any of its
subsidiaries, and no significant unfair labor practice complaint is
pending against it or any of its subsidiaries or, to the best knowledge
of it, threatened against any of them by or before any Governmental
Authority that would have a material adverse effect on its business,
operations, property or financial or other condition.
(t) Pension Plans. During the preceding twelve months, no
steps have been taken to terminate any Pension Plan which was not fully
funded, unless adequate reserves have been set aside for the funding
thereof, and no contribution failure has occurred with respect to any
Pension Plan sufficient to give rise to a lien under section 302(f) of
ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which could result in the incurrence by the
applicable Originator of any material liability, fine or penalty.
(u) Investment Company Act. It is not, and is not
controlled by, an "investment company" registered or
required to be registered under the Investment Company Act
of 1940, as amended.
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<PAGE>
EXHIBIT III
COVENANTS
Until the later of the Purchase and Sale Termination Date and the Final
Payout Date and as to matters relating to it or its Pool Receivables or other
property, each Originator covenants as follows; and the Parent only covenants as
set forth in clauses (a), (l) and (m) herein:
(a) Compliance with Laws, Etc. It shall comply in all material
respects with all applicable laws, rules, regulations and orders, and
preserve and maintain its corporate existence, rights, franchises,
qualifications, and privileges except to the extent that the failure so
to comply with such laws, rules and regulations or the failure so to
preserve and maintain such existence, rights, franchises,
qualifications, and privileges would not materially adversely affect
the collectibility of the Pool Receivables or the enforceability of any
related Contract or the ability of the Originator to perform its
obligations under any related Contract or under the Agreement.
(b) Location of Offices, Records and Books of Account; Change
of Name, Mergers, etc.; Maintenance of Records, etc. Each Originator
(i) shall keep its principal place of business and chief executive
office (as such terms are used in the UCC) and the office where it
keeps its records concerning the Pool Receivables at the address of the
Initial Purchaser set forth on Schedule I attached hereto or, upon at
least 60 days' prior written notice of a proposed change to the
Administrator, at any other locations in jurisdictions where all
actions reasonably requested by the Administrator to protect and
perfect the interest of the Issuer in the Pool Receivables and related
items (including without limitation the items described in Section
1.10(b) of this Purchase and Sale Agreement) have been taken and
completed and (ii) shall provide the Administrator with at least 60
days' written notice prior to making any change in the Initial
Purchaser's name or making any other change in the Initial Purchaser's
identity or corporate structure (including a merger) which could render
any UCC financing statement filed in connection with this Agreement
"seriously misleading" as such term is used in the UCC; each notice to
the Administrator pursuant to this sentence shall set forth the
applicable change and the effective date thereof. The Initial Purchaser
also will maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate
records evidencing Pool Receivables and related Contracts in the event
of the destruction of the originals thereof), and keep and maintain all
documents, books, records, computer tapes and disks and other
information reasonably necessary or advisable for the
<PAGE>
collection of all Pool Receivables (including, without limitation,
records adequate to permit the daily identification of each Pool
Receivable and all Collections of and adjustments to each existing Pool
Receivable).
(c) Performance and Compliance with Contracts and Credit and
Collection Policy. Each Originator shall, at its expense, timely and
fully perform and comply with all material provisions, covenants and
other promises required to be observed by it under the Contracts
related to the Pool Receivables, and timely and fully comply in all
material respects with the Credit and Collection Policy with regard to
each Pool Receivable and the related Contract.
(d) Ownership Interest, Etc. Each Originator shall, at its
expense, take all action necessary or desirable to establish and
maintain a valid and enforceable perfected ownership interest in the
Pool Receivables, the Related Assets, and the items described in
Section 1.2(c) of the Purchase and Sale Agreement, and an ownership
interest in the items described in Section 1.10(b) of this Purchase and
Sale Agreement, in each case fully perfected and free and clear of any
Adverse Claim, in favor of the Initial Purchaser, including, without
limitation, taking such action to perfect, protect or more fully
evidence the interest of the Initial Purchaser under the Purchase and
Sale Agreement as the Administrator may request.
(e) Sales, Liens, Etc. Other than a sale to the Initial
Purchaser as contemplated by the Purchase and Sale Agreement, no
Originator shall sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Adverse Claim
upon or with respect to, any or all of its right, title or interest in,
to or under, (i) any item described in Section 1.10(b) of this Purchase
and Sale Agreement, (ii) any Originator Note or the Initial Purchaser
Note or (iii) any post office box to which any payments in respect of
any Receivable are sent, including, without limitation, any assignment
of any right to receive income in respect of items contemplated by
clause (i) or (ii) of this paragraph (e).
(f) Extension or Amendment of Pool Receivables. The
applicable Originator shall not (i) extend the maturity or adjust the
Outstanding Balance or otherwise modify the terms of any Pool
Receivable, or (ii) amend, modify or waive any term or condition of any
related Contract in a way which would adversely affect the
collectibility of any Receivable; provided that this clause (f) shall
not limit the ability of the Servicer to extend the maturity, adjust
the Outstanding Balance or otherwise modify the terms of any Pool
Receivable in accordance with Section 4.2(a) of the Receivables
Purchase Agreement.
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<PAGE>
(g) Change in Business or Credit and Collection Policy.
Without the written consent of the Administrator, no Originator shall
make (i) any material change in the character of its business or in the
Credit and Collection Policy, or (ii) any change at all in the Credit
and Collection Policy that would adversely affect the collectibility of
the Pool Receivables or the enforceability of any related Contract or
the ability of the Originator to perform its obligations under any
related Contract or under the Purchase and Sale Agreement.
(h) Audits. Each Originator shall, from time to time during
regular business hours as requested by the Administrator, permit the
Administrator, or its agents or representatives, (i) to examine and
make copies of and make abstracts from all books, records and documents
(including, without limitation, computer tapes and disks) in the
possession or under the control of such Originator relating to Pool
Receivables and the Related Assets, provided that copies of the related
Contracts may only be made if the Servicer is not such Originator or if
a Termination Event has occurred and (ii) to visit the offices and
properties of such Originator for the purpose of examining such
materials described in clause (i) above, and to discuss matters
relating to Pool Receivables and the Related Assets or such
Originator's performance hereunder or under the Contracts with any of
the officers, employees, agents or contractors of such Originator
having knowledge of such matters.
(i) Lock-Box Agreements; Change in Lock-Box Banks, Lock-Box
Accounts and Payment Instructions to Obligors.
(i) By January 31, 1996, the Initial Purchaser shall
have delivered to the Administrator copies of executed
Lock-Box Agreements with the Lock-Box Banks in form and
substance satisfactory to the Administrator.
(ii) No Originator shall add or terminate any bank as
a Lock-Box Bank or any account as a Lock-Box Account from
those listed in Schedule II to the Purchase and Sale
Agreement, or make any change in its instructions to Obligors
regarding payments to be made to an Originator or payments to
be made to any Lock-Box Account (or related post office box),
unless the Administrator shall have consented thereto in
writing and the Administrator shall have received copies of
all agreements and documents (including without limitation
Lock-Box Agreements) that it may request in connection
therewith.
(j) Deposits to Lock-Box Accounts. Each Originator shall (i)
instruct all Obligors (other than Obligors which customarily make
direct payment to such Originator for deposit in one of the Lock-Box
Accounts designated on
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Schedule II as a "Deposit Account", provided that such Originator
complies with Clause (ii) of this subsection (j)) to make payments of
all Pool Receivables to one or more Lock-Box Accounts or to post office
boxes to which only Lock-Box Banks have access (and shall instruct the
Lock-Box Banks to cause all items and amounts relating to such Pool
Receivables received in such post office boxes to be removed and
deposited into a Lock-Box Account on a daily basis), and (ii) deposit,
or cause to be deposited, any Collections of Pool Receivables received
by it into Lock-Box Accounts not later than one Business Day after
receipt thereof. Each Lock-Box Account shall at all times be subject to
a Lock-Box Agreement. No Originator will deposit or otherwise credit,
or cause or permit to be so deposited or credited, to any Lock-Box
Account cash or cash proceeds other than Collections of Pool
Receivables. Notwithstanding the foregoing, Columbia Receivables may be
co-mingled except that the Company will, at the Administrator's
request, establish a separate account and cause Columbia Receivables to
be paid by the Obligors into such separate account to avoid such
co-mingling.
(k) Marking of Records. At its expense, each Originator shall
mark its master data processing records relating to Pool Receivables
and related Contracts, including with a legend evidencing that the Pool
Receivables and related Contracts (and interests therein) have been
sold in accordance with the Purchase and Sale Agreement and the
Receivables Purchase Agreement.
(l) ERISA Matters. Each of the Originators and the Parent
shall notify the Administrator as soon as is practicable and in any
event not later than two Business Days after (i) the institution of any
steps by such Originator or the Parent or any other Person to terminate
any Pension Plan which is not fully funded, unless adequate reserves
have been set aside for the funding thereof, (ii) the failure to make a
required contribution to any Pension Plan if such failure is sufficient
to give rise to a lien under section 302(f) of ERISA, (iii) the taking
of any action with respect to a Pension Plan which could result in the
requirement that such Originator furnish a bond or other security to
the PBGC or such Pension Plan or (iv) the occurrence of any other event
concerning any Pension Plan which is reasonably likely to result in a
material adverse effect.
(m) Separate Corporate Existence of the Initial Purchaser.
Each of the Originators and the Parent hereby acknowledges that the
Initial Purchaser, the Issuer and the Administrator are entering into
the transactions contemplated by the Purchase and Sale Agreement and by
the Receivables Purchase Agreement in reliance upon the Initial
Purchaser's identity as a legal entity separate from its
III-4
<PAGE>
Affiliates. Therefore, each of the Originators and the Parent shall
take all steps to continue the Initial Purchaser's identity as such a
separate legal entity and to make it apparent to third Persons that the
Initial Purchaser is an entity with assets and liabilities distinct
from those of its Affiliates and those of any other Person, and not a
division of any of its Affiliates or any other Person. Without limiting
the generality of the foregoing, each of the Originators and the Parent
will, and will cause its Affiliates to, take such actions as shall be
required in order that:
(i) The Initial Purchaser will be a limited purpose
corporation whose primary activities are restricted in its
articles of incorporation to purchasing Pool Receivables from
each Originator (or other Persons approved in writing by the
Administrator), entering into agreements for the servicing of
such Pool Receivables, selling undivided interests in the Pool
Receivables to the Issuer and conducting such other activities
as it deems necessary or appropriate to carry out its primary
activities;
(ii) At least one member of the Initial Purchaser's
Board of Directors shall be an individual who is not a direct,
indirect or beneficial stockholder, officer, director,
employee, affiliate, associate, customer or supplier of any of
its Affiliates;
(iii) No director or officer of the Initial
Purchaser shall at any time serve as a trustee in
bankruptcy for any of its Affiliates;
(iv) Any employee, consultant or agent of the Initial
Purchaser will be compensated from the Initial Purchaser's own
bank accounts for services provided to the Initial Purchaser
except as provided in the Receivables Purchase Agreement in
respect of the Servicing Fee. The Initial Purchaser will
engage no agents other than a Servicer for the Pool
Receivables, which Servicer (if an Affiliate) will be fully
compensated for its services to the Initial Purchaser by
payment of the Servicing Fee;
(v) The Initial Purchaser may incur indirect or
overhead expenses for items shared between the Initial
Purchaser and any of its Affiliates which are not reflected in
the Servicing Fee, such as legal, auditing and other
professional services, but such expenses will be allocated to
the extent practical on the basis of cost, it being understood
that each of the Originators and the Parent shall jointly and
severally pay all expenses relating to the preparation,
negotiation,
III-5
<PAGE>
execution and delivery of the Transaction Documents,
including legal and other fees;
(vi) The Initial Purchaser's operating expenses
will not be paid by any of its Affiliates;
(vii) The Initial Purchaser will have its own
separate telephone number, stationery and bank checks signed
by it and in its own name and, if it uses premises leased,
owned or occupied by any of its Affiliates, its portion of
such premises will be defined and separately identified and it
will pay such other Affiliates reasonable compensation for the
use of such premises;
(viii) The books and records of the Initial
Purchaser will be maintained separately from those of
its Affiliates;
(ix) The assets of the Initial Purchaser will be
maintained in a manner that facilitates their identification
and segregation from those of its Affiliates; and the Initial
Purchaser will strictly observe corporate formalities in its
dealings with each of its Affiliates;
(x) The Initial Purchaser shall not maintain joint
bank accounts with any of its Affiliates or other depository
accounts to which any of its Affiliates (other than O&M
Medical (or any of its Affiliates) in its capacity as the
Servicer under the Purchase and Sale Agreement or under the
Receivables Purchase Agreement) has independent access;
(xi) The Initial Purchaser shall not, directly or
indirectly, be named and shall not enter into any agreement to
be named as a direct or contingent beneficiary or loss payee
on any insurance policy covering the property of any other O&M
Party or any Affiliate of any other O&M Party unless it pays a
proportional share of the premium relating to any such
insurance policy;
(xii) The Initial Purchaser will maintain arm's-
length relationships with each other O&M Party and each
Affiliate of such other O&M Party. Any of its Affiliates that
renders or otherwise furnishes services or merchandise to the
Initial Purchaser will be compensated by the Initial Purchaser
at market rates for such services or merchandise; and
(xiii) Neither the Initial Purchaser, on the one
hand, nor any other O&M Party or any of its Affiliates, on the
other hand, will be or will hold itself out to
III-6
<PAGE>
be responsible for the debts of the other or the
decisions or actions in respect of the daily business
and affairs of the other.
(xiv) Every representation and warranty of each of
the O&M Parties contained in the Officer's Certificates (the
"Certificate") delivered in connection with the opinion of
Hunton & Williams pursuant to Section 1(j) of Exhibit II of
the Receivables Purchase Agreement, a true copy of which
Certificate is attached hereto as Annex C, is true and correct
in all material respects as of the date hereof; and each of
the O&M Parties shall comply with all of its respective
covenants and other obligations set forth in the Certificate.
III-7
<PAGE>
EXHIBIT IV
PURCHASE AND SALE TERMINATION EVENTS
Each of the following events or occurrences described in this Exhibit
IV shall constitute a "Purchase and Sale Termination Event":
(a) (i) the Servicer (if O&M Medical or any of its Affiliates)
shall fail to perform or observe any term, covenant or agreement under
any Transaction Document to which it is a party and such failure shall
continue for two Business Days or (ii) any Person which is the Servicer
shall fail to make when due any payment or deposit to be made by it
under any Transaction Document to which it is a party and such failure
shall continue for two Business Days; or
(b) Any Originator shall fail to make any payment required
under any Transaction Document to which it is a party within two
Business Days after the date on which such payment is due; or
(c) Any representation or warranty made or deemed to be made
by any Originator (or any of its officers) under or in connection with
any Transaction Document to which it is a party or any other
information or report delivered by such Originator or the Servicer
pursuant to the Purchase and Sale Agreement shall prove to have been
incorrect or untrue in any material respect when made or deemed made or
delivered; or
(d) Any Originator shall fail to perform or observe any other
term, covenant or agreement contained in any Transaction Document to
which it is a party on its part to be performed or observed and such
failure shall remain unremedied for thirty (30) days after the earlier
of (A) the date when the chief financial officer, treasurer, assistant
treasurer or chief accounting officer of the applicable Originator (an
"Originator Financial Officer") of the applicable Originator shall have
knowledge thereof or (B) notice to the applicable Originator from the
Administrator; or
(e) The Purchase and Sale Agreement shall for any reason
(other than pursuant to the terms thereof) (i) cease to create in favor
of the Initial Purchaser a valid and enforceable perfected ownership
interest in each Pool Receivable, the Related Assets, and the items
described in Section 1.2(c) of the Purchase and Sale Agreement, or (ii)
cease to create, with respect to the items described in Section 1.10(b)
of this Purchase and Sale Agreement, a valid and enforceable ownership
interest in favor of the Initial
IV-1
<PAGE>
Purchaser, in each case free and clear of any Adverse Claim;
or
(f) Parent or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against Parent or any of its Subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted
against it (but not instituted by it), either such proceeding
(including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of its property)
shall occur; or Parent or any of its Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in
this clause (f); or
(g) As of the last day of any calendar month, either (i) the
Six Month Default Ratio shall exceed 4% or (ii) the Six Month Dilution
Ratio shall exceed 5% or (iii) the Six Month Loss-to-Liquidation Ratio
shall exceed 1.0% or (iv) the average of the Delinquency Ratios for the
six consecutive Month End Dates ending with such last day shall exceed
25%; or
(h) The Purchased Interest shall exceed 100%.
(i) Any O&M Party shall contract, create, incur, assume or
permit to exist any Lien with respect to any of its property of assets
of any kind (whether real or personal, tangible or intangible), whether
now owned or after acquired, except for Permitted Liens.
(j) The Tangible Net Worth of Initial Purchaser shall at any
time be less than $5,000,000.
(k) Any Change of Control shall occur.
(l) A Termination Event of the type described in Exhibit VI to
the Receivables Purchase Agreement shall have occurred.
IV-2
<PAGE>
SCHEDULE I
TRADE NAMES AND LOCATIONS
IV-3
<PAGE>
SCHEDULE II
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
Applicable Originator Lock-Box Bank Lock-Box Account
<PAGE>
ANNEX A
FORM OF INITIAL PURCHASER NOTE
<PAGE>
NON-NEGOTIABLE PROMISSORY NOTE
____________, 199_
FOR VALUE RECEIVED, the undersigned, O&M FUNDING CORP., a Virginia
corporation (the "Initial Purchaser"), promises to pay to [NAME OF ORIGINATOR],
a ____________ corporation (the "Originator"), on the terms and subject to the
conditions set forth herein and in the Purchase and Sale Agreement referred to
below, the aggregate unpaid Purchase Price of all Receivables and Related Assets
purchased and to be purchased by the Initial Purchaser pursuant to the Purchase
and Sale Agreement (subject to adjustment pursuant to Section 1.8 of such
Purchase and Sale Agreement). Such amount as shown in the records of the
Servicer will be rebuttable presumptive evidence of the principal amount owing
under this Note.
1. Purchase and Sale Agreement. This Note is an "Initial Purchaser
Note" described in, and is subject to the terms and conditions set forth in,
that certain Purchase and Sale Agreement, dated as of December 28, 1995 (as the
same may be amended, supplemented, or otherwise modified in accordance with its
terms, the "Purchase and Sale Agreement"), between the Originators, the
Servicer, and the Initial Purchaser. Reference is hereby made to the Purchase
and Sale Agreement for a statement of certain other rights and obligations of
the Initial Purchaser and the Originator. In the case of any conflict between
the terms of this Note and the terms of the Purchase and Sale Agreement, the
terms of the Purchase and Sale Agreement shall control.
2. Definitions. Capitalized terms used (but not defined)
herein have the meanings ascribed thereto in the Purchase and
Sale Agreement. In addition, as used herein, the following terms
have the following meanings:
"Final Maturity Date" means the date that falls ninety one
(91) days after the later of (x) the Purchase and Sale Termination Date
and (y) the Final Payout Date.
"Junior Liabilities" means all obligations of the Initial
Purchaser to the Originator under this Note.
"Senior Agent" means the Administrator.
"Senior Interests" means (a) the undivided percentage
ownership interests acquired by the Issuer pursuant to the Receivables
Purchase Agreement and (b) all obligations of the Initial Purchaser to
the Senior Interest Holders, howsoever created, arising or evidenced,
whether direct or indirect, absolute or
<PAGE>
contingent, now or hereafter existing, or due or to
become due on or before the Final Maturity Date.
"Senior Interest Holders" means, collectively, the Issuer, the
Administrator, each Program Support Provider and their respective
successors and assigns.
"Subordination Provisions" means, collectively,
clauses (a) through (k) of Section 7 hereof.
3. Interest. Subject to the Subordination Provisions, the Initial
Purchaser promises to pay interest on the aggregate unpaid principal amount of
this Note outstanding on each day (a) prior to the final payment in full and in
cash of the Senior Interests, at a variable rate per annum equal to the Discount
Rate Percentage, determined as of the then most recent Payment Date, and (b)
after such final payment, at a variable rate per annum equal to the Base Rate,
as determined by the Servicer.
4. Interest Payment Dates. Subject to the Subordination Provisions, the
Initial Purchaser shall pay accrued interest on this Note on January 2 and July
1 of each calendar year and on the Final Maturity Date (or, if any such day is
not a Business Day, the next succeeding Business Day). The Initial Purchaser
also shall pay accrued interest on the principal amount of each prepayment
hereof on the date of each such prepayment.
5. Basis of Computation. Interest accrued hereunder
shall be computed for the actual number of days elapsed on
the basis of a 360-day year.
6. Principal Payment Dates. Subject to the Subordination Provisions,
any unpaid principal of this Note shall be paid on the Final Maturity Date (or,
if such date is not a Business Day, the next succeeding Business Day). Subject
to the Subordination Provisions, the principal amount of and accrued interest on
this Note may be prepaid on any Business Day without premium or penalty.
7. Subordination Provisions. The Initial Purchaser covenants and
agrees, and the Originator, by its acceptance of this Note, likewise covenants
and agrees, that the payment of all Junior Liabilities is hereby expressly
subordinated in right of payment to the payment and performance of the Senior
Interests to the extent and in the manner set forth in the following clauses of
this Section 7:
(a) No payment or other distribution of the Initial
Purchaser's assets of any kind or character, whether in cash,
securities, or other rights or property, shall be made on account of
this Note except
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<PAGE>
to the extent such payment or other distribution is made
pursuant to Sections 4 or 6 of this Note;
(b) (i) In the event of any Insolvency Proceeding, and (ii) on
and after the occurrence of the Purchase and Sale Termination Date, the
Senior Interests shall first be paid and performed in full and in cash
before the Originator shall be entitled to receive and to retain any
payment or distribution in respect of the Junior Liabilities. In order
to implement the foregoing: (x) all payments and distributions of any
kind or character in respect of the Junior Liabilities to which the
Originator would be entitled except for this subsection shall be made
directly to the Senior Agent (for the benefit of the Senior Interest
Holders); and (y) the Originator hereby irrevocably agrees that the
Issuer (or the Senior Agent acting on its behalf), in the name of the
Originator or otherwise, may demand, sue for, collect, receive and
receipt for any and all such payments or distributions, and file, prove
and vote or consent in any such Insolvency Proceeding with respect to
any and all claims of the Originator relating to the Junior
Liabilities, in each case until the Senior Interests shall have been
paid and performed in full and in cash.
(c) In the event that the Originator receives any payment or
other distribution of any kind or character from the Initial Purchaser
or from any other source whatsoever, in respect of the Junior
Liabilities, other than as expressly permitted by the terms of this
Note, such payment or other distribution shall be received in trust for
the Senior Interest Holders and shall be turned over by the Originator
to the Senior Agent (for the benefit of the Senior Interest Holders)
forthwith. All payments and distributions received by the Senior Agent
in respect of this Note, to the extent received in or converted into
cash, may be applied by the Senior Agent (for the benefit of the Senior
Interest Holders) first to the payment of any and all reasonable
expenses (including, without limitation, reasonable attorneys' fees and
other legal expenses) paid or incurred by the Senior Agent or the
Senior Interest Holders in enforcing these Subordination Provisions, or
in endeavoring to collect or realize upon the Junior Liabilities, and
any balance thereof shall, solely as between the Originator and the
Senior Interest Holders, be applied by the Senior Agent toward the
payment of the Senior Interests in a manner determined by the Senior
Agent to be in accordance with the Receivables Purchase Agreement; but
as between the Initial Purchaser and its creditors, no such payments or
distributions of any kind or character shall be deemed to be payments
or distributions in respect of the Senior Interests.
-3-
<PAGE>
(d) Upon the final payment in full and in cash of all Senior
Interests, the Originator shall be subrogated to the rights of the
Senior Interest Holders to receive payments or distributions from the
Initial Purchaser that are applicable to the Senior Interests until the
Junior Liabilities are paid in full.
(e) These Subordination Provisions are intended solely for the
purpose of defining the relative rights of the Originator, on the one
hand, and the Senior Interest Holders, on the other hand. Nothing
contained in the Subordination Provisions or elsewhere in this Note is
intended to or shall impair, as between the Initial Purchaser, its
creditors (other than the Senior Interest Holders) and the Originator,
the Initial Purchaser's obligation, which is unconditional and
absolute, to pay the Junior Liabilities as and when the same shall
become due and payable in accordance with the terms hereof and of the
Purchase and Sale Agreement or to affect the relative rights of the
Originator and creditors of the Initial Purchaser (other than the
Senior Interest Holders).
(f) The Originator shall not, until the Senior Interests have
been finally paid and performed in full and in cash, (i) cancel, waive,
forgive, transfer or assign, or commence legal proceedings to enforce
or collect, or subordinate to any obligation of the Initial Purchaser,
howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, or now or hereafter existing, or due or to
become due, other than the Senior Interests, the Junior Liabilities, or
any rights in respect thereof or (ii) convert the Junior Liabilities
into an equity interest in the Initial Purchaser, unless, in the case
of each of clauses (i) and (ii) above, the Originator shall have
received the prior written consent of the Administrator in each case.
(g) The Originator shall not, without the advance written
consent of the Administrator, commence, or join with any other Person
in commencing, any Insolvency Proceedings with respect to the Initial
Purchaser until at least one year and one day shall have passed since
the Senior Interests shall have been finally paid and performed in full
and in cash.
(h) If, at any time, any payment (in whole or in part) made
with respect to any Senior Interest is rescinded or must be restored or
returned by a Senior Interest Holder (whether in connection with any
Insolvency Proceedings or otherwise), these Subordination Provisions
shall continue to be effective
-4-
<PAGE>
or shall be reinstated, as the case may be, as though
such payment had not been made.
(i) Each of the Senior Interest Holders may, from time to
time, at its sole discretion, without notice to the Originator, and
without waiving any of its rights under these Subordination Provisions,
take any or all of the following actions: (i) retain or obtain an
interest in any property to secure any of the Senior Interests; (ii)
retain or obtain the primary or secondary obligations of any other
obligor or obligors with respect to any of the Senior Interests; (iii)
extend or renew for one or more periods (whether or not longer than the
original period), alter or exchange any of the Senior Interests, or
release or compromise any obligation of any nature with respect to any
of the Senior Interests; (iv) amend, supplement, or otherwise modify
any Transaction Document; and (v) release its security interest in, or
surrender, release or permit any substitution or exchange for all or
any part of any rights or property securing any of the Senior
Interests, or extend or renew for one or more periods (whether or not
longer than the original period), or release, compromise, alter or
exchange any obligations of any nature of any obligor with respect to
any such rights or property.
(j) The Originator hereby waives: (i) notice of acceptance of
these Subordination Provisions by any of the Senior Interest Holders;
(ii) notice of the existence, creation, non-payment or non-performance
of all or any of the Senior Interests; and (iii) all diligence in
enforcement, collection or protection of, or realization upon the
Senior Interests, or any thereof, or any security therefor.
(k) These Subordination Provisions constitute a continuing
offer from the Initial Purchaser to all Persons who become the holders
of, or who continue to hold, Senior Interests; and these Subordination
Provisions are made for the benefit of the Senior Interest Holders, and
the Administrator may proceed to enforce such provisions on behalf of
each of such Persons.
8. Amendments, Etc. No failure or delay on the part of the Originator
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Note shall in any event be effective unless (a) the same shall
be in writing and signed and delivered by the Initial Purchaser and the
Originator, and (b) all consents required for such
-5-
<PAGE>
actions under the Transaction Documents shall have been received by the
appropriate Persons.
9. Limitation on Interest. Notwithstanding anything in this Note to the
contrary, the Initial Purchaser shall never be required to pay unearned interest
on any amount outstanding hereunder, and shall never be required to pay interest
on the principal amount outstanding hereunder, at a rate in excess of the
maximum interest rate that may be contracted for, charged or received without
violating applicable federal or state law.
10. No Negotiation. This Note is not negotiable.
11. GOVERNING LAW. THIS NOTE SHALL GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF).
12. Captions. Paragraph captions used in this Note are
provided solely for convenience of reference only and shall
not affect the meaning or interpretation of any provision of
this Note.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
by its officer thereunto duly authorized on the date first above written.
O&M FUNDING CORP., a Virginia
corporation
By:
Title:
-6-
<PAGE>
ANNEX B
FORM OF ORIGINATOR NOTE
<PAGE>
DEMAND NOTE
____________, 199_
The undersigned, [NAME OF ORIGINATOR], a ____________ corporation (the
"Originator"), for value received, promise to pay to the order of O&M FUNDING
CORP., a Virginia corporation (the "Initial Purchaser"), ON DEMAND, the
aggregate unpaid principal amount of all loans made by the Initial Purchaser to
the Originator (the "Originator Loans") together with accrued interest on such
amounts from time to time outstanding hereunder at the rate provided below. Such
amounts as shown in the records of the Servicer (as such term is defined in the
Purchase and Sale Agreement referred to below) will be rebuttable presumptive
evidence of the principal amount owing under this Demand Note.
The unpaid principal amount of each Originator Loan from time to time
outstanding shall bear interest (which also shall be payable ON DEMAND) from
(and including) the date on which such Originator Loan was made to (but
excluding) the date on which such Originator Loan is paid in full (a) prior to
the final payment in full and in cash of the Senior Interests (as such term is
defined in the Initial Purchaser Note), at a variable rate per annum equal to
the Discount Rate Percentage, determined as of the then most recent Payment
Date, and (b) after such final payment, at a variable rate per annum equal to
the Base Rate, as determined by the Servicer. Interest hereunder shall be
computed for the actual number of days elapsed on the basis of a year consisting
of 365 or, where appropriate, 366 days.
This Demand Note is an Originator Note described in, and is subject to
the terms and conditions set forth in, that certain Purchase and Sale Agreement,
dated as of December 28, 1995 (as the same may at any time be amended,
supplemented, or otherwise modified from time to time in accordance with its
terms, the "Purchase and Sale Agreement"), between the Originators, the
Servicer, and the Initial Purchaser. Reference is hereby made to the Purchase
and Sale Agreement for a statement of certain other rights and obligations of
the Initial Purchaser. All capitalized terms used but not otherwise defined
herein have the meanings assigned thereto in the Purchase and Sale Agreement.
All payments of principal and interest hereunder are to be made in
lawful money of the United States of America in same day funds to the account
designated from time to time by the Servicer to the Initial Purchaser.
In addition to and not in limitation of the foregoing, the Originator
further agrees, subject to any limitation imposed by applicable law, to pay all
expenses, including
-1-
<PAGE>
without limitation reasonable Attorney Costs, incurred by the holder of this
Demand Note in seeking to collect any amounts payable hereunder which are not
paid when due.
No failure or delay on the part of the Initial Purchaser or any other
holder of this Demand Note in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the Originator
shall entitle it to any notice or demand in similar or other circumstances. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Demand Note shall in any event be effective unless (i) the same shall be
in writing and signed and delivered by the holder hereof and (ii) all consents
required for such action under the Transaction Documents shall have been given
by the appropriate Persons.
Upon the occurrence of any Insolvency Proceeding with respect to the
Originator, the principal balance hereof and all interest accrued hereon shall
be immediately due and payable, without demand, presentment, protest or notice
of dishonor.
Notwithstanding anything in this Demand Note to the contrary, the
Originator shall never be required to pay unearned interest on any amount
outstanding hereunder, and shall never be required to pay interest on the
principal amount outstanding hereunder, at a rate in excess of the maximum
nonusurious interest rate that may be contracted for, charged or received under
applicable federal or state law.
THIS DEMAND NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT
OF LAWS PRINCIPLES THEREOF).
[NAME OF ORIGINATOR]
By:
Title:
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<PAGE>
ANNEX C
OPINION CERTIFICATE
-3-
<PAGE>
EXHIBIT 10 (o)
EXECUTIVE COPY
RECEIVABLES PURCHASE AGREEMENT
among
O&M FUNDING CORP.
as Seller,
OWENS & MINOR MEDICAL, INC.,
as Servicer,
OWENS & MINOR, INC.,
as Parent and Guarantor,
RECEIVABLES CAPITAL CORPORATION,
as Issuer
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Administrator
Dated as of December 28, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION> Page
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
<S> <C> <C>
Section 1.1. Purchase Facility......................................................................2
Section 1.2. Making Purchases.......................................................................2
Section 1.3. Purchased Interest Computation.........................................................3
Section 1.4. Settlement Procedures..................................................................3
Section 1.5. Fees...................................................................................7
Section 1.6. Payments and Computations, Etc.........................................................7
Section 1.7. Dividing or Combining Portions of the Capital
of the Purchased Interest..............................................................7
Section 1.8. Increased Costs........................................................................8
Section 1.9. Additional Discount on Portions of Purchased
Interest Bearing a Eurodollar Rate.....................................................9
Section 1.10. Requirements of Law....................................................................9
Section 1.11. Inability to Determine Eurodollar Rate................................................10
ARTICLE II.
REPRESENTATIONS AND WARRANTIES;
COVENANTS; TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants.............................................11
Section 2.2. Termination Events....................................................................11
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller.............................................................11
Section 3.2. Parent's Performance Guaranty.........................................................17
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of Servicer...............................................................19
Section 4.2. Duties of Servicer....................................................................20
Section 4.3. Lock-Box Arrangements.................................................................22
Section 4.4. Enforcement Rights....................................................................23
Section 4.5. Responsibilities of Seller and Owens & Minor
Medical, Inc..........................................................................24
Section 4.6. Servicing Fee.........................................................................24
-i-
<PAGE>
ARTICLE V.
MISCELLANEOUS
Section 5.1. Amendments, Etc.......................................................................24
Section 5.2. Notices, Etc..........................................................................25
Section 5.3. Assignability; Restrictions on Assignability..........................................25
Section 5.4. Costs and Expenses....................................................................26
Section 5.5. No Proceedings; Limitation on Payments................................................26
Section 5.6. Confidentiality.......................................................................27
Section 5.7. GOVERNING LAW AND JURISDICTION........................................................27
Section 5.8. Execution in Counterparts.............................................................28
Section 5.9. Survival of Termination...............................................................28
Section 5.10. WAIVER OF JURY TRIAL..................................................................28
Section 5.11. Entire Agreement......................................................................29
Section 5.12. Headings..............................................................................29
Section 5.13. Issuer's Liabilities..................................................................29
Section 5.14. Treatment of Purchased Interest
for Tax Purposes......................................................................29
</TABLE>
EXHIBIT I DEFINITIONS
EXHIBIT II CONDITIONS OF PURCHASES
EXHIBIT III REPRESENTATIONS AND WARRANTIES OF SELLER, SERVICER
EXHIBIT IV REPRESENTATIONS AND WARRANTIES OF ISSUER
EXHIBIT V COVENANTS
EXHIBIT VI TERMINATION EVENTS
SCHEDULE I CREDIT AND COLLECTION POLICY
SCHEDULE II PERMITTED LIENS
SCHEDULE III TRADE NAMES AND LOCATIONS
ANNEX A FORM OF LOCK-BOX AGREEMENT
ANNEX B FORM OF HUNTON & WILLIAMS OPINION
ANNEX C FORM OF CORPORATE COUNSEL'S OPINION
ANNEX D OPINION CERTIFICATE
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RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT (this "Agreement") is
entered into as of December 28, 1995 among O&M FUNDING CORP., a Virginia
corporation, as seller (the "Seller"), OWENS & MINOR MEDICAL, INC., a Virginia
corporation, as initial servicer (in such capacity, together with its successors
and permitted assigns in such capacity, the "Servicer"), OWENS & MINOR, INC., a
Virginia corporation, as parent and guarantor (the "Parent"), RECEIVABLES
CAPITAL CORPORATION, a Delaware corporation (together with its successors and
permitted assigns, the "Issuer"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association, as Administrator (in such capacity,
together with its successors and assigns in such capacity, the "Administrator")
for the Issuer pursuant to an agreement between the Issuer and the
Administrator.
PRELIMINARY STATEMENTS.
1. Certain terms that are capitalized and used throughout this
Agreement are defined in Exhibit I to this Agreement. References in the Exhibits
hereto to "the Agreement" refer to this Agreement, as amended, modified or
supplemented from time to time.
2. The Seller desires to sell, transfer and assign an undivided
variable percentage interest in a pool of receivables, and the Issuer may, from
time to time, in its sole discretion, acquire such undivided variable percentage
interest, as such percentage interest shall be adjusted from time to time based
upon, in part, reinvestment payments which are made by the Issuer and additional
incremental payments made to the Seller.
3. The Issuer expects generally to fund its purchases and reinvestments
in the Receivables Pool hereinafter through the issuance of Notes. The Issuer
has also entered into one or more Program Support Agreements under which a
Program Support Provider or Providers may purchase Purchased Interests (or
portions thereof), make loans to the Issuer or otherwise provide funds to the
Issuer or for the Issuer's account (which loans or fundings may or may not be
secured by Purchased Interests (or portions thereof) in the event the Issuer
hereunder is unable to fund its purchases or reinvestments pursuant to this
Agreement by the issuance of Notes or otherwise prefers to fund such purchases
or reinvestments under any Program Support Agreement rather than by the issuance
of Notes, or is unable to pay such Notes at maturity from the proceeds of
collections from Pool Receivables in which it holds a Purchased Interest
hereunder).
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In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility. (a) On the terms and conditions
hereinafter set forth, the Issuer may, in its sole discretion, purchase and make
reinvestments in the Purchased Interest from the Seller from time to time during
the period from the date hereof to the Facility Termination Date. Under no
circumstances shall the Issuer make any such purchase or reinvestment if after
giving effect to such purchase or reinvestment the aggregate outstanding Capital
of the Purchased Interest, together with the aggregate outstanding Capital of
Purchased Interests under the Parallel Asset Purchase Agreement, would exceed
the Purchase Limit. Nothing in this Agreement shall be deemed to be or construed
as a commitment by the Issuer to purchase or reinvest in the Purchased Interest.
Issuer will notify Seller if it decides not to purchase or reinvest under this
Agreement on any day.
(b) The Seller may, upon at least 10 Business Days' notice to the
Administrator, terminate the purchase facility provided in this Section 1 in
whole or, from time to time, irrevocably reduce in part the unused portion of
the Purchase Limit; provided that each partial reduction shall be in the amount
of at least $5,000,000 or an integral multiple of $1,000,000 in excess thereof.
Termination of the purchase facility in whole shall cause the Termination Date
to occur.
Section 1.2. Making Purchases. (a) Each purchase (but not
reinvestments) of the Purchased Interest hereunder shall be made upon the
Seller's irrevocable written notice delivered to the Administrator in accordance
with Section 5.2 (which notice must be received by the Administrator prior to
noon, New York City time) (i) three Business Days prior to the requested
purchase date, in the case of a purchase to be funded at the Alternate Rate and
based on the Eurodollar Rate, (ii) one Business Day prior to the requested
purchase date, in the case of a purchase to be funded at the Alternate Rate and
based on the Base Rate and (iii) two Business Days prior to the requested
purchase date, in the case of a purchase to be funded at the CP Rate, which
notice shall specify (A) the amount requested to be paid to the Seller (such
amount, which shall not be less than $1,000,000, being the "Capital" relating to
the undivided ownership interest then being purchased), (B) the date of such
purchase (which shall be a Business Day) and (C) the desired funding basis for
such purchase (which shall be either the Alternate Rate or the CP Rate) and the
desired duration of the initial Fixed Period(s) for such purchase. The
Administrator shall promptly thereafter notify the
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Seller whether such terms are acceptable to the Issuer and whether the Issuer is
willing to make such a purchase.
(b) On the date of each purchase (but not reinvestment) of undivided
ownership interests with regard to the Purchased Interest hereunder, the Issuer
shall, if it is willing to make such purchase, upon satisfaction of the
applicable conditions set forth in Exhibit II hereto, make available to the
Seller in same day funds, at Crestar Bank, account # 201334771, ABA # 051000020
an amount equal to the Capital relating to the undivided ownership interest then
being purchased.
(c) Effective on the date of each purchase pursuant to this Section 1.2
and each reinvestment pursuant to Section 1.4, the Seller hereby sells and
assigns to the Issuer an undivided percentage ownership interest in (i) each
Pool Receivable then existing, (ii) all Related Security with respect to such
Pool Receivables, and (iii) Collections with respect to, and other proceeds of,
such Pool Receivables and Related Security.
Section 1.3. Purchased Interest Computation. The Purchased Interest
shall be initially computed on the date of the initial purchase hereunder.
Thereafter until the Termination Date, the Purchased Interest shall be
automatically recomputed (or deemed to be recomputed) on each Business Day other
than a Run-off Day. The Purchased Interest, as computed (or deemed recomputed)
as of the day immediately preceding the Termination Date, shall thereafter
remain constant. The Purchased Interest shall become zero when the Capital
thereof and Discount thereon shall have been paid in full, all the amounts owed
by the Seller hereunder to the Issuer, the Administrator, and any other
Indemnified Party or Affected Person, are paid in full and the Servicer shall
have received the accrued Servicing Fee thereon.
Section 1.4. Settlement Procedures. (a) Collection of the Pool
Receivables shall be administered by the Servicer in accordance with the terms
of this Agreement. The Seller shall provide to the Servicer on a timely basis
all information needed for such administration, including notice of the
occurrence of any Run-off Day and current computations of the Purchased
Interest.
(b) The Servicer shall, on each day on which Collections of Pool
Receivables are received (or deemed received) by the Seller or Servicer:
(i) set aside and hold in trust (and, at the request of the
Administrator, segregate) for the Issuer, out of the percentage of such
Collections represented by the Purchased Interest, first an amount
equal to the Discount accrued through such day for each Portion of
Capital and not previously set aside and second, to the extent funds
are
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available therefor, an amount equal to the Servicing Fee determined in
accordance with Section 4.6 accrued through such day for the Purchased
Interest and not previously set aside; and
(ii) subject to Section 1.4(f), if such day is not a Run-off
Day, remit to the Seller, on behalf of the Issuer, the remainder of the
percentage of such Collections, represented by the Purchased Interest,
to the extent representing a return of Capital; such Collections shall
be automatically reinvested in Pool Receivables, and in the Related
Security and Collections and other proceeds with respect thereto, and
the Purchased Interest shall be automatically recomputed pursuant to
Section 1.3;
(iii) if such day is a Run-off Day, (x) set aside, segregate
and hold in trust for the Issuer the entire remainder of the percentage
of the Collections represented by the Purchased Interest; provided that
if amounts are set aside and held in trust on any Run-off Day and
thereafter, the conditions set forth in Section 2 of Exhibit II are
satisfied or are waived by the Administrator, such previously set aside
amounts shall, to the extent representing a return of Capital, be
reinvested in accordance with the preceding paragraph (ii) on the day
of such subsequent satisfaction or waiver of conditions; and (y)
transfer the Seller's share of the Collections to the Seller;
(iv) during such times as amounts are required to be
reinvested in accordance with the foregoing paragraph (ii) or the
proviso to paragraph (iii), release to the Seller (subject to Section
1.4(f)) for its own account any Collections in excess of (x) such
amounts and (y) the amounts that are required to be set aside pursuant
to paragraph (i) above.
(c) The Servicer shall deposit into the Administration Account (or such
other account designated by the Administrator), on the last day of each
Settlement Period relating to a Portion of Capital (or at such other times as
the Administrator shall require), Collections held for the Issuer pursuant to
Section 1.4(b)(i) or Section 1.4(f) with respect to such Portion of Capital and
the lesser of (x) the amount of Collections then held for the Issuer pursuant to
Section 1.4(b)(iii) and (y) such Portion of Capital.
(d) Upon receipt of funds deposited into the Administration Account
pursuant to Section 1.4(c) with respect to any Portion of Capital, the
Administrator shall cause such funds to be distributed as follows:
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(i) if such distribution occurs on a day that is not a Run-off
Day, first to the Issuer in payment in full of all accrued Discount
with respect to such Portion of Capital and second, if the Servicer has
set aside amounts in respect of the Servicing Fee pursuant to Section
1.4(b)(i), to the Servicer (payable in arrears on the last day of each
calendar month) in payment in full of accrued Servicing Fees so set
aside with respect to such Portion of Capital; and
(ii) if such distribution occurs on a Run-off Day, first to
the Issuer in payment in full of all accrued Discount with respect to
such Portion of Capital, second to the Issuer in payment in full of
such Portion of Capital, third, if the Servicer is not Owens & Minor
Medical, Inc. or an Affiliate thereof, to the Servicer in payment in
full of all accrued Servicing Fees with respect to such Portion of
Capital, fourth, if the Capital and accrued Discount with respect to
each Portion of Capital has been reduced to zero, and all accrued
Servicing Fees payable to the Servicer (if other than Owens & Minor
Medical, Inc. or an Affiliate thereof) have been paid in full, to the
Issuer, the Administrator and any other Indemnified Party or Affected
Person in payment in full of any other amounts owed thereto by the
Seller hereunder and then to the Servicer (if the Servicer is the
Seller) in payment in full of all accrued Servicing Fees.
After the Capital and Discount and Servicing Fees with respect to the Purchased
Interest, and any other amounts payable by the Seller to the Issuer, the
Administrator or any other Indemnified Party or Affected Person hereunder, have
been paid in full, all additional Collections with respect to the Purchased
Interest shall be paid to the Seller for its own account.
(e) For the purposes of this Section 1.4:
(i) if on any day the Outstanding Balance of any Pool
Receivable is reduced or adjusted as a result of any defective,
rejected, returned, repossessed or foreclosed goods or services, or any
discount or other adjustment made by the Seller, or any setoff or
dispute between the Seller and an Obligor, or any credit memorandum, or
any billing error, but not including reductions or adjustments in
respect of finance charges (any of the foregoing reductions or
adjustments being herein called a "Dilution Adjustment"), the Seller
shall be deemed to have received on such day a Collection of such Pool
Receivable in the amount of such reduction or adjustment;
(ii) if on any day any of the representations or
warranties in paragraphs (g) or (n) of Exhibit III is not
true with respect to any Pool Receivable, the Seller shall
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be deemed to have received on such day a Collection of such
Pool Receivable in full;
(iii) except as provided in paragraph (i) or (ii) of this
Section 1.4(e), or as otherwise required by applicable law or the
relevant Contract, all Collections received from an Obligor of any
Receivable shall be applied to the Receivables of such Obligor in the
order of the age of such Receivables, starting with the oldest such
Receivable, unless such Obligor designates in writing its payment for
application to specific Receivables; and
(iv) if and to the extent the Administrator or the Issuer
shall be required for any reason to pay over to an Obligor (or any
trustee, receiver, custodian or similar official in any Insolvency
Proceeding) any amount received by it hereunder, such amount shall be
deemed not to have been so received but rather to have been retained by
the Seller and, accordingly, the Administrator or the Issuer, as the
case may be, shall have a claim against the Seller for such amount,
payable when and to the extent that any distribution from or on behalf
of such Obligor is made in respect thereof.
(f) Except for reductions in connection with the division or
combination of Portions of Capital pursuant to Section 1.7 hereof or pursuant to
any other Purchase Agreement, if at any time the Seller shall wish to cause the
reduction of a Portion of Capital (but not to commence the liquidation, or
reduction to zero, of the entire Capital of the Purchased Interest), the Seller
may do so as follows:
(i) the Seller shall give the Administrator at least five
Business Days' prior written notice thereof (including the amount of
such proposed reduction and the proposed date on which such reduction
will commence),
(ii) on the proposed date of commencement of such reduction
and on each day thereafter, the Servicer shall cause Collections with
respect to such Portion of Capital not to be reinvested until the
amount thereof not so reinvested shall equal the desired amount of
reduction, and
(iii) the Servicer shall hold such Collections in trust for
the Issuer, for payment to the Administrator on the last day of the
current Settlement Period relating to such Portion of Capital, and the
applicable Portion of Capital shall be deemed reduced in the amount to
be paid to the Administrator only when in fact finally so paid;
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provided that,
A. the amount of any such reduction shall be not less than
$1,000,000 and shall be an integral multiple of $100,000, and the
entire Capital of the Purchased Interest after giving effect to such
reduction shall be not less than $10,000,000 and shall be in an
integral multiple of $1,000,000,
B. the Seller shall choose a reduction amount, and the
date of commencement thereof, so that to the extent
practicable such reduction shall commence and conclude in
the same Fixed Period, and
C. if two or more Portions of Capital shall be outstanding at
the time of any proposed reduction, such proposed reduction shall be
applied, unless the Seller shall otherwise specify in the notice given
pursuant to Section 1.4(f)(i), to the Portion of Capital with the
shortest remaining Fixed Period.
Section 1.5. Fees. The Seller shall pay to the Administrator certain
fees in the amounts and on the dates set forth in a letter dated December 28,
1995 between the Seller and the Administrator, as such letter agreement may be
amended, supplemented or otherwise modified from time to time.
Section 1.6. Payments and Computations, Etc. (a) All amounts to be paid
or deposited by the Seller or the Servicer hereunder shall be paid or deposited
no later than 1:00 p.m. (New York City time) on the day when due in same day
funds to the Administration Account. All amounts received after 1:00 p.m. (New
York City time) will be deemed to have been received on the immediately
succeeding Business Day.
(b) The Seller shall, to the extent permitted by law, pay interest on
any amount not paid or deposited by the Seller (whether as Servicer or
otherwise) when due hereunder, at an interest rate equal to 2.0% per annum above
the Base Rate, payable on demand.
(c) All computations of interest under subsection (b) above and all
computations of Discount, fees, and other amounts hereunder shall be made on the
basis of a year of 360 days for the actual number of days elapsed. Whenever any
payment or deposit to be made hereunder shall be due on a day other than a
Business Day, such payment or deposit shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
such payment or deposit.
Section 1.7. Dividing or Combining Portions of the Capital
of the Purchased Interest. The Seller may, on the last day of
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any Fixed Period, either (i) divide the Capital of the Purchased Interest into
two or more portions (each, a "Portion of Capital") equal, in aggregate, to the
Capital of the Purchased Interest, provided that after giving effect to such
division the amount of each such Portion of Capital shall not be less than
$5,000,000, or (ii) combine any two or more Portions of Capital outstanding on
such last day and having Fixed Periods ending on such last day into a single
Portion of Capital equal to the aggregate of the Capital of such Portions of
Capital.
Section 1.8. Increased Costs. (a) If the Administrator, the Issuer, any
Purchaser, any other Program Support Provider or any of their respective
Affiliates (each an "Affected Person") determines that the existence of or
compliance with (i) any law or regulation or any change therein or in the
interpretation or application thereof, in each case adopted, issued or occurring
after the date hereof or (ii) any request, guideline or directive from any
central bank or other Governmental Authority (whether or not having the force of
law) issued or occurring after the date of this Agreement affects or would
affect the amount of capital required or expected to be maintained by such
Affected Person (and is not a change by way of imposition or increase of reserve
requirements referred to in Section 1.9) and such Affected Person determines
that the amount of such capital is increased by or based upon the existence of
any commitment to make purchases of or otherwise to maintain the investment in
Pool Receivables related to this Agreement or any related liquidity facility or
credit enhancement facility and other commitments of the same type, then, upon
demand by such Affected Person within 180 days after such determination and from
time to time thereafter (with a copy to the Administrator), the Seller shall
immediately pay to the Administrator, for the account of such Affected Person,
from time to time as specified by such Affected Person, additional amounts
sufficient to compensate such Affected Person in the light of such
circumstances, to the extent that such Affected Person reasonably determines
such increase in capital to be allocable to the existence of any of such
commitments. A certificate as to such amounts submitted to the Seller and the
Administrator by such Affected Person shall be conclusive and binding for all
purposes, absent prima facia error.
(b) If, due to either (i) the introduction of or any change (other than
any change by way of imposition or increase of reserve requirements referred to
in Section 1.9) in or in the interpretation of any law or regulation or (ii)
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to any Affected Person of agreeing to purchase or
purchasing, or maintaining the ownership of the Purchased Interest in respect of
which Discount is computed by reference to the Eurodollar Rate (excluding,
however, any increase in the cost to such Affected Person due to the
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imposition of any tax on such Affected Person), then, upon written demand by
such Affected Person no later than 180 days after such Affected Person shall
determine the amount of any increased cost and from time to time thereafter, the
Seller shall promptly pay to such Affected Person, from time to time as
specified, additional amounts reasonably determined by such Affected Person to
be sufficient to compensate such Affected Person for such increased costs. A
certificate as to such amounts submitted to the Seller by such Affected Person
shall be conclusive and binding for all purposes, absent prima facia error.
Section 1.9. Additional Discount on Portions of Purchased Interest
Bearing a Eurodollar Rate. The Seller shall pay to any Affected Person, so long
as such Affected Person shall be required under regulations of the Board of
Governors of the Federal Reserve System to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities,
additional Discount on the unpaid Capital of the applicable Portion of Capital
during each Fixed Period in respect of which Discount is computed by reference
to the Eurodollar Rate, for such Fixed Period, at a rate per annum equal at all
times during such Fixed Period to the remainder obtained by subtracting (i) the
Eurodollar Rate for such Fixed Period from (ii) the rate obtained by dividing
such Eurodollar Rate referred to in clause (i) above by that percentage equal to
100% minus the Eurodollar Reserve Percentage for such Fixed Period, payable on
each date on which Discount is payable on the applicable Portion of Capital.
Such additional Discount shall be reasonably determined by the Affected Person
and notified to the Seller through the Administrator within 90 days after any
Discount payment is made with respect to which such additional Discount is
requested. A certificate as to such additional Discount submitted to the Seller
by the Affected Person shall be conclusive and binding for all purposes, absent
prima facia error.
Section 1.10. Requirements of Law. In the event that any Affected
Person determines that the existence of or compliance with (a) any law or
regulation or any change therein or in the interpretation or application
thereof, in each case adopted, issued or occurring after the date hereof or (b)
any request, guideline or directive from any central bank or other Governmental
Authority (whether or not having the force of law) issued or occurring after the
date of this Agreement:
(i) does or shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, or deposits or other liabilities in or for the
account of, purchases, advances or loans by, or other credit extended
by, or any other acquisition of funds by, any office of such Affected
Person which
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are not otherwise included in the determination of the
Eurodollar Rate or the Base Rate hereunder; or
(ii) does or shall impose on such Affected Person any
other condition;
and the result of any of the foregoing is (x) to increase the cost to such
Affected Person of acting as Administrator, or of agreeing to purchase or
purchasing or maintaining the ownership of undivided ownership interests with
regard to the Purchased Interest (or interests therein) or any Portion of
Capital in respect of which Discount is computed by reference to the Eurodollar
Rate or the Base Rate except to the extent such increase in cost is due to the
imposition of any tax on such Affected Person or (y) to reduce any amount
receivable hereunder (whether directly or indirectly) funded or maintained by
reference to the Eurodollar Rate or the Base Rate except to the extent that such
reduced amount receivable is due to the imposition of any tax on such Affected
Person, then, in any such case, upon written demand by such Affected Person no
later than 180 days after such Affected Person shall determine the amount of any
such increased cost or reduced amount, and from time to time thereafter, the
Seller shall promptly pay such Affected Person any additional amounts necessary
to compensate such Affected Person for such increased cost or reduced amount
receivable. All such amounts shall be payable as incurred. A written certificate
delivered by such Affected Person to the Seller certifying, in reasonably
specific detail, the basis for, calculation of, and amount of such increased
costs or reduced amount receivable shall be conclusive in the absence of prima
facia error; provided, however, that no Affected Person shall be required to
disclose any confidential or tax planning information in any such certificate.
Section 1.11. Inability to Determine Eurodollar Rate. In the event that
the Administrator shall have determined prior to the first day of any Fixed
Period (which determination shall be conclusive and binding upon the parties
hereto) by reason of circumstances affecting the interbank Eurodollar market,
either (a) dollar deposits in the relevant amounts and for the relevant Fixed
Period are not available, (b) adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Fixed Period or (c) the Eurodollar
Rate determined pursuant hereto does not accurately reflect the cost to the
Issuer (as conclusively determined by the Administrator) of maintaining any
Portion of Capital during such Fixed Period, the Administrator shall promptly
give telephonic notice of such determination, confirmed in writing, to the
Seller prior to the first day of such Fixed Period. Upon delivery of such notice
(a) no Portion of Capital shall be funded thereafter at the Alternate Rate
determined by reference to the Eurodollar Rate, unless and until the
Administrator shall have given notice to the Seller that the
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circumstances giving rise to such determination no longer exist, and (b) with
respect to any outstanding Portions of Capital then funded at the Alternate Rate
determined by reference to the Eurodollar Rate, such Alternate Rate shall
automatically be converted to the Alternate Rate determined by reference to the
Base Rate at the respective last days of the then current Fixed Periods relating
to such Portions of Capital.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES;
COVENANTS; TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants. (a) The Seller
and the Parent hereby jointly and severally make the representations and
warranties set forth in Exhibit III, and hereby jointly and severally agree that
the covenants set forth in Exhibit V will be performed and observed.
(b) The Issuer hereby makes the representations and warranties set
forth in Exhibit IV hereto.
Section 2.2. Termination Events. If any of the Termination Events set
forth in Exhibit VI hereto shall occur, the Administrator may, by notice to the
Seller, declare the Facility Termination Date to have occurred (in which case
the Facility Termination Date shall be deemed to have occurred); provided that,
automatically upon the occurrence of any event (without any requirement for the
passage of time or the giving of notice) described in subsection (g) of Exhibit
VI, the Facility Termination Date shall occur; provided, further, that, in the
case of a Termination Event described in subsection (j) of Exhibit VI, the
Facility Termination Date shall be deemed to have occurred on the Business Day
following the date of such notice unless such Termination Event is cured during
the intervening period. Upon any such declaration, occurrence or deemed
occurrence of the Facility Termination Date, the Issuer and the Administrator
shall have, in addition to the rights and remedies which they may have under
this Agreement, all other rights and remedies provided after default under the
UCC and under other applicable law, which rights and remedies shall be
cumulative.
ARTICLE III.
INDEMNIFICATION; PERFORMANCE GUARANTY
Section 3.1. Indemnities by the Seller. (a) Without limiting any other
rights that any Securitization Party (each, an "Indemnified Party") may have
hereunder or under applicable law, the Seller and the Parent hereby jointly and
severally agree to
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indemnify each Indemnified Party from and against any and all claims, damages,
expenses, losses and liabilities (including Attorney Costs) (all of the
foregoing being collectively referred to as "Indemnified Amounts") arising out
of or resulting from this Agreement (whether directly or indirectly) or the use
of proceeds of purchases or reinvestments or the ownership of the Purchased
Interest, or any interest therein, or in respect of any Receivable or any
Contract, excluding, however, (b) Indemnified Amounts to the extent resulting
from gross negligence or willful misconduct on the part of such Indemnified
Party, (c) recourse (except as otherwise specifically provided in this
Agreement) for uncollectible Receivables, or (d) any taxes imposed on such
Indemnified Party. Without limiting or being limited by the foregoing, and
subject to the exclusions set forth in the preceding sentence, the Seller shall
pay to each Indemnified Party (within three Business Days after written demand
for such indemnification) any and all amounts necessary to indemnify such
Indemnified Party from and against any and all Indemnified Amounts relating to
or resulting from any of the following:
(i) the failure of any Receivable included in the calculation
of the Net Receivables Pool Balance as an Eligible Receivable to be an
Eligible Receivable, the failure of any information contained in a
Seller Report to be true and correct, or the failure of any other
information provided to the Issuer or the Administrator with respect to
Receivables or this Agreement to be true and correct;
(ii) the failure of any representation or warranty or
statement made or deemed made by the Seller (or any of its officers),
as Servicer or otherwise, under or in connection with this Agreement to
have been true and correct in all respects when made;
(iii) the failure by the Seller, as Servicer or otherwise, to
comply with any applicable law, rule or regulation with respect to any
Pool Receivable or the related Contract; or the failure of any Pool
Receivable or the related Contract to conform to any such applicable
law, rule or regulation;
(iv) the failure to vest in the Issuer a valid and enforceable
perfected undivided percentage ownership interest, to the extent of the
Purchased Interest, in the Receivables in, or purporting to be in, the
Receivables Pool and the Related Security and Collections with respect
thereto, in each case, free and clear of any Adverse Claim;
(v) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Receivables in, or
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purporting to be in, the Receivables Pool and the Related Security and
Collections in respect thereof, whether at the time of any purchase or
reinvestment or at any subsequent time;
(vi) any dispute, claim, offset or defense or claim of billing
error, (other than discharge in bankruptcy of the Obligor) of the
Obligor to the payment of any Receivable in, or purporting to be in,
the Receivables Pool (including, without limitation, a defense based on
such Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance
with its terms), or any other claim resulting from the sale of the
goods or services related to such Receivable or the furnishing, failure
to furnish, or agreement to accept returns of, such goods or services
or relating to collection activities with respect to such Receivable
(if such collection activities were performed by the Seller or any of
its Affiliates acting as Servicer or by any agent or independent
contractor retained by the Seller or any of its Affiliates);
(vii) any failure of the Seller, as Servicer or otherwise, to
perform its duties or obligations in accordance with the provisions
hereof or to perform its duties or obligations under the Contracts;
(viii) any breach of warranty, products liability or other
claim, investigation, litigation or proceeding arising out of or in
connection with merchandise, insurance or services which are the
subject of any Contract;
(ix) the commingling of any portion of Collections of
Pool Receivables relating to the Purchased Interest at any
time with other funds;
(x) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of purchases or reinvestments or
the ownership of the Purchased Interest or in respect of any
Receivable, Related Security or Contract; or
(xi) any reduction in Capital as a result of the distribution
of Collections pursuant to Section 1.4(d), in the event that all or a
portion of such distributions shall thereafter be rescinded or
otherwise must be returned for any reason.
(e) Taxes. (i) Any and all payments made hereunder to an Affected
Person shall be made free and clear of and without deduction for any and all
current or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities
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with respect thereto excluding: (A) taxes imposed on or measured by all or part
of the gross or net income (but not including any such tax in the nature of a
withholding tax) of such Affected Person by the jurisdiction under the laws of
which such Affected Person is organized or has its applicable lending office or
any political subdivision of any thereof and (B) taxes that would not have been
imposed if the only connection between such Affected Person and the jurisdiction
imposing such taxes was the activities of such Affected Person pursuant to or in
respect of this Agreement (including entering into, lending money or extending
credit pursuant to, receiving payments under, or enforcing this Agreement) (all
such excluded taxes, levies, imposts, deductions, changes, withholding and
liabilities collectively or individually referred to herein as "Excluded Taxes"
and all such nonexcluded taxes, levies, imposts, deductions, charges,
withholdings, and liabilities collectively or individually referred to herein as
"Taxes"). If the Seller shall be required to deduct any Taxes from or in respect
of any sum payable hereunder to any Affected Person: (A) the sum payable shall
be increased by the amount (an "additional amount") necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 3.1(b)) such Affected Person shall receive an
amount equal to the sum it would have received had no such deductions been made,
(B) the Seller shall make such deductions and (C) the Seller shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(ii) In addition, the Seller agrees to pay to the relevant
Governmental Authority in accordance with applicable law all taxes,
levies, imposts, deductions, charges, assessments or fees of any kind
(including but not limited to any current or future stamp or
documentary taxes or any other excise or property taxes, charges, or
similar levies, but excluding any Excluded Taxes) imposed upon any
Affected Person as a result of the transactions contemplated by this
Agreement or that arise from any payment made hereunder or from the
execution, delivery, or registration of or otherwise similarly with
respect to, this Agreement ("Other Taxes").
(iii) The Seller and the Parent hereby jointly and severally
agree to indemnify each Affected Person from and against the full
amount of Taxes and Other Taxes arising out of this Agreement (whether
directly or indirectly) imposed upon or paid by such Person and any
liability (including penalties, interest, and expenses (including
Attorney Costs)) arising with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted by the relevant
Governmental Authority. A certificate as to the amount of such amounts
prepared by an Affected Person, absent manifest error, shall be final,
conclusive, and
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binding for all purposes. Such indemnification shall be made within 30
days after the date the Affected Person makes a timely written demand
therefor or the time at which such amount is payable after a timely
written demand therefor has been made, whichever is earlier. A written
demand will be considered "timely" for purposes of the preceding
sentence only if it is received by the Seller and the Parent no later
than 180 days after the earlier of (A) the date on which such Affected
Person makes such payment of Taxes or Other Taxes or liability arising
therefrom or with respect thereto and (B) the date on which the
relevant Governmental Authority or other party makes written demand
upon such Affected Person for payment of such Taxes or Other Taxes or
liability arising therefrom or with respect thereto.
(iv) As soon as practicable after the date of any payment of
Taxes or Other Taxes by the Seller to a Governmental Authority
hereunder, the Seller will deliver to the relevant Affected Person the
original or a certified copy of a receipt issued by such Governmental
Authority evidencing payment thereof.
(v) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this
Section 3.1(b) shall survive the termination of this Agreement.
(vi) Each Program Support Provider that is granted a
participating interest in the Purchased Interest and is organized under
the laws of a jurisdiction other than the United States, any State
thereof, or the District of Columbia (each a "Non-U.S. Purchaser")
shall deliver to the Seller or to the Administrator: (A) two copies of
either United States Internal Revenue Service Form 1001 or Form 4224
(whichever is applicable), or (B) in the case of a Non-U.S. Purchaser
claiming an exemption from U.S. federal withholding tax under Section
871(h) or 881(c) of the Code with respect to payments of "portfolio
interest", a Form W-8 (or any subsequent versions thereof or successors
thereto) and a certificate representing that such Non-U.S. Purchaser is
not a bank for purposes of Section 881(c) of the Code, in either case
properly completed and duly executed by such Non-U.S. Purchaser
claiming complete exemption from U.S. federal withholding tax on
payments by the Seller under this Agreement. Such forms shall be
delivered by each Non-U.S. Purchaser before the date it receives its
first payment with respect to a Purchased Interest, and before the date
it receives its first payment with respect to a Purchased Interest
occurring after the date, if any, that such Non-U.S. Purchaser changes
its applicable lending office by designating a different lending office
(a "New Lending Office"). In addition, each Non-U.S. Purchaser shall
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deliver such forms promptly after (or, if reasonably practicable, prior
to) the obsolescence or invalidity of any form previously delivered by
such Non-U.S. Purchaser. Notwithstanding any other provision of this
Section 3.1(b)(vi), a Non-U.S. Purchaser shall not be required to
deliver any form pursuant to this Section 3.1(b)(vi) that such Non-U.S.
Purchaser is not legally able to deliver. Each Program Support Provider
(other than any exempt person as described in applicable Treasury
Regulations) that is granted a participating interest in the Purchased
Interest and is organized under the laws of the United States or any
state thereof or the District of Columbia shall deliver to the Seller
an original copy of Internal Revenue Service Form W-9 (or applicable
successor form) properly completed and duly executed by such Program
Support Provider.
(vii) The Seller and the Parent shall not be required to
indemnify any Non-U.S. Purchaser, or to pay any additional amounts to
any Non-U.S. Purchaser, in respect of United States federal withholding
tax (or any withholding tax imposed by a state that applies only when
such United States federal withholding tax is imposed) pursuant to this
Section 3.1(b) to the extent that: (A) the obligation to withhold
amounts with respect to United States federal withholding tax existed
on the date such Non-U.S. Purchaser was granted a participating
interest in the Purchased Interest or, with respect to payments to a
New Lending Office, the date such Non-U.S. Purchaser designated such
New Lending Office; provided, however, that this clause (A) shall not
apply to any Non-U.S. Purchaser or New Lending Office that is granted,
assigned, or transferred a participating interest in the Purchased
Interest at the request of the Seller and provided further, however,
that this clause (A) shall not apply to any Non-U.S. Purchaser or New
Lending Office that is assigned an interest in the Purchased Interest
by a Program Support Provider to the extent that the indemnity payment
or additional amounts such Non-U.S. Purchaser or New Lending Office
would be entitled to receive (without regard to this clause (A)) do not
exceed the indemnity payment or additional amounts that the Program
Support Provider making the assignment to such Non-U.S. Purchaser or
New Lending Office would have been entitled to receive in the absence
of such assignment; or (B) the obligation to make such indemnification
or to pay such additional amounts would not have arisen but for a
failure by such Non-U.S. Purchaser to comply with the provisions of
paragraph (vi) above (it being understood that the Non-U.S. Purchaser
shall not have failed to comply with the provisions of paragraph (vi)
above if it is legally unable to deliver the forms described therein on
any date after it is granted a participation interest in a Purchased
Interest or designated a New Lending Office).
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(viii) Any Affected Person claiming any indemnity payment or
additional amounts payable pursuant to this Section 3.1(b) shall use
reasonable efforts (consistent with legal and regulatory restrictions)
to file any certificate or document reasonable requested in writing by
the Seller or the Parent or to change the jurisdiction of its
applicable lending office if the making of such a filing or change
would avoid the need for or reduce the amount of any such indemnity
payment or additional amounts that may thereafter accrue and would not,
in the good faith determination of such Affected Person, be otherwise
disadvantageous to such Affected Person.
(ix) Nothing contained in this Section 3.1(b) shall require an
Affected Person to make available any of its tax returns (or any other
information that it deems to be confidential or proprietary).
(x) If any Affected Person receiving an indemnification
payment hereunder with respect to Taxes or Other Taxes or liabilities
arising therefrom shall subsequently receive a refund from any taxing
authority which is specifically attributable to such indemnification
payment, such Person shall promptly pay such refund to the Seller or
the Parent, as the case may be.
Section 3.2. Parent's Performance Guaranty. (a) Parent hereby
unconditionally and irrevocably covenants and agrees that it will cause the
Seller and the Servicer duly and punctually to perform and observe all of the
terms, conditions, covenants, agreements (including, without limitation,
agreements to make payments or deemed Collections) and indemnities of the Seller
and the Servicer under this Agreement and the other Transaction Documents
strictly in accordance with the terms hereof and thereof and that if for any
reason whatsoever the Seller or the Servicer shall fail to so perform and
observe such terms, conditions, covenants, agreements and indemnities, Parent
will duly and punctually perform and observe the same.
(b) The liabilities and obligations of Parent, in its capacity as a
guarantor under this Section 3.2, shall be absolute and unconditional under all
circumstances and shall be performed by Parent regardless of (i) whether the
Issuer or the Administrator shall have taken any steps to collect from the
Seller or the Servicer any of the amounts payable by such party under this
Agreement or shall otherwise have exercised any of their rights or remedies
under this Agreement or the other Transaction Documents against such party or
against any Obligor under any of the Pool Receivables, (ii) the validity,
legality or enforceability of this Agreement or any other Transaction Documents,
or the disaffirmance of any thereof in any event of bankruptcy relating to the
Seller or the Servicer, (iii) any law,
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regulation or decree now or hereafter in effect which might in any manner affect
any of the terms or provisions of this Agreement or any other Transaction
Document or any of the rights of Issuer or the Administrator as against the
Seller or the Servicer or as against any Obligor under any of such Pool
Receivables or which might cause or permit to be invoked any alteration in time,
amount, manner of payment or performance of any amount payable by the Seller or
the Servicer to the Issuer or the Administrator under this Agreement, (iv) the
merger or consolidation of the Seller or the Servicer into or with any
corporation or any sale or transfer by such party or all or any part of its
property, (v) the existence or assertion of any Adverse Claim with respect to
any Pool Receivable, or (vi) any other circumstance whatsoever (with or without
notice to or knowledge of Parent) which may or might in any manner or to any
extent vary the risk of Parent, or might otherwise constitute a legal or
equitable discharge of a surety or guarantor, it being the purpose and intent of
Parent that the liabilities and obligations of Parent under this Section 3.2
shall be absolute and unconditional under any and all circumstances, and shall
not be discharged except by payment and performance as in this Agreement
provided. The guaranty set forth in this Section 3.2 is a guaranty of payment
and performance and not just of collection.
(c) Without in any way affecting or impairing the liabilities and
obligations of Parent, in its capacity as a guarantor under this Section 3.2,
the Seller, Issuer or the Administrator may at any time and from time to time in
its discretion, without the consent of, or notice to, Parent, and without
releasing or affecting Parent's liability hereunder (i) extend or change the
time, manner, place or terms of this Agreement or any other Transaction
Document, (ii) settle or compromise any of the amounts payable by Seller or
Servicer to the Issuer or the Administrator under this Agreement or subordinate
the same to the claims of others, (iii) retain or obtain a lien upon or security
interest in any property to secure any of the obligations hereunder, (iv) retain
or obtain the primary or secondary obligation of any obligor or obligors, in
addition to Parent, with respect to any of the obligations due hereunder, or (v)
release or fail to perfect any lien upon or security interest in, or impair,
surrender, release or permit any substitution in exchange for, all or any part
of any property securing any of the obligations under this Agreement, it being
understood that nothing contained in this Section 3.2(c) shall give the Issuer
or the Administrator the right to take any of the foregoing actions if not
permitted by the other provisions of this Agreement, by law or otherwise.
Nothing in this Section 3.2(c) shall be deemed to waive any of the rights the
Seller may otherwise have.
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(d) The provisions of this Section 3.2 shall continue to be effective
or be reinstated, as the case may be, if at any time payment of any of the
amounts payable by Seller or Servicer, to the Issuer or the Administrator under
this Agreement is rescinded or must otherwise be restored or returned by any of
such Persons, as the case may be, upon any event of bankruptcy involving Seller
or Servicer, or otherwise, all as though such payment had not been made. Parent,
in its capacity as a guarantor under this Section 3.2, hereby waives (i) notices
of the occurrence of any default hereunder, (ii) any requirement of diligence or
promptness on the part of the Issuer or the Administrator in making demand,
commencing suit or exercising any other right or remedy under this Agreement, or
otherwise, and (iii) any right to require the Issuer or the Administrator to
exercise any right or remedy against Seller or Servicer or the Pool Receivables
prior to enforcing any of their rights against Parent under this Section 3.2.
Parent, in its capacity as a guarantor under this Section 3.2, agrees that, in
the event of an event of bankruptcy with respect to Seller or Servicer
(including Parent), and if such event shall occur at a time when all of the
indemnified amounts and other amounts due from Seller or Servicer under this
Agreement may not then be due and payable, Parent will pay to Issuer or the
Administrator forthwith the full amount which would be payable hereunder by
Parent if all such indemnified amounts and other obligations were then due and
payable.
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of Servicer. (a) The servicing, administering
and collection of the Pool Receivables shall be conducted by the Person so
designated from time to time as Servicer in accordance with this Section 4.1.
Until the Administrator gives notice to the Seller and the Servicer (in
accordance with this Section 4.1) of the designation of a new Servicer, Owens &
Minor Medical, Inc. is hereby designated as, and hereby agrees to perform the
duties and obligations of, the Servicer pursuant to the terms hereof. Upon
either (i) ninety (90) days' prior written notice to Owens & Minor Medical, Inc.
or (ii) the occurrence of a Termination Event, the Administrator may designate
as Servicer any Person (including itself) to succeed Owens & Minor Medical, Inc.
or any successor Servicer, on the condition in each case that any such Person so
designated shall agree to perform the duties and obligations of the Servicer
pursuant to the terms hereof.
(b) Upon the designation of a successor Servicer as set
forth in Section 4.1(a) hereof, Owens & Minor Medical, Inc. (or
any successor Servicer) agrees that it will terminate its
activities as Servicer hereunder in a manner which the
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Administrator determines will facilitate the transition of the performance of
such activities to the new Servicer, and Owens & Minor Medical, Inc. shall
cooperate with and assist such new Servicer. Such cooperation shall include
(without limitation) access to and transfer of records and use by the new
Servicer of all licenses, hardware or software necessary or desirable to collect
the Pool Receivables and the Related Security.
(c) Owens & Minor Medical, Inc. acknowledges that the
Administrator and the Issuer have relied on Owens & Minor
Medical, Inc.'s agreement to act as Servicer hereunder in making
their decision to execute and deliver this Agreement.
Accordingly, Owens & Minor Medical, Inc. agrees that it will not
voluntarily resign as Servicer.
(d) The Servicer may delegate its duties and obligations hereunder to
any subservicer (each, a "Sub-Servicer"); provided that, in each such
delegation, (i) such Sub-Servicer shall agree in writing to perform the duties
and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer
shall remain primarily liable to the Issuer for the performance of the duties
and obligations so delegated, (iii) the Seller, the Administrator and the Issuer
shall have the right to look solely to the Servicer for performance and (iv) the
terms of any agreement with any Sub-Servicer shall provide that the
Administrator may terminate such agreement upon the termination of the Servicer
hereunder by giving notice of its desire to terminate such agreement to the
Servicer (and the Servicer shall provide appropriate notice to such
Sub-Servicer).
Section 4.2. Duties of Servicer. (a) The Servicer shall take or cause
to be taken all such action as may be necessary or advisable to collect each
Pool Receivable from time to time, all in accordance with this Agreement and all
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy. The Servicer shall
segregate and hold in trust for the accounts of the Seller and the Issuer the
amount of the Collections to which each is entitled in accordance with Article
II hereto. The Servicer may, in accordance with the Credit and Collection
Policy, extend the maturity of any Pool Receivable (but (x) not beyond sixty
(60) days from the original maturity date of such Pool Receivables and (y) not
more than once for any Pool Receivable) and extend the maturity or adjust the
Outstanding Balance of any Defaulted Receivable as the Servicer may determine to
be appropriate to maximize Collections thereof; provided, however, that (i) such
extension or adjustment shall not alter the status of such Pool Receivable as a
Delinquent Receivable or a Defaulted Receivable or limit the rights of the
Issuer or the Administrator under this Agreement and (ii) if a Termination Event
has occurred and Owens & Minor Medical, Inc. is still serving as Servicer, Owens
& Minor Medical, Inc. may make such extension or adjustment only
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upon the prior written approval of the Administrator. The Servicer may adjust
the Outstanding Balance of any Receivables to account for any Dilution
Adjustment, provided that the appropriate Originator shall have made the
corresponding payment pursuant to Section 1.8 of the Purchase and Sale
Agreement. The Seller shall deliver to the Servicer and the Servicer shall hold
for the benefit of the Seller and the Administrator (for the benefit of the
Issuer and individually) in accordance with their respective interests, all
records and documents (including without limitation computer tapes or disks)
with respect to each Pool Receivable. Notwithstanding anything to the contrary
contained herein, the Administrator may direct the Servicer (whether the
Servicer is Owens & Minor Medical, Inc. or any other Person) to commence or
settle any legal action to enforce collection of any Pool Receivable or to
foreclose upon or repossess any Related Security; provided, however, that no
such direction may be given unless either (i) a Termination Event has occurred
or (ii) the Administrator believes in good faith that failure to commence,
settle, or effect such legal action, foreclosure or repossession could adversely
affect Receivables constituting a material portion of the Pool Receivables.
(b) The Servicer shall as soon as practicable following actual receipt
of collected funds turn over to the Seller the collections of any indebtedness
that is not a Pool Receivable, less, in the event that Owens & Minor, Inc. or
one of its Affiliates is not the Servicer, all reasonable and appropriate
out-of-pocket costs and expenses of such Servicer of servicing, collecting and
administering such collections; provided, however, the Servicer shall not be
under any obligation to remit any such funds to the Seller unless and until the
Servicer has received from the Seller evidence satisfactory to the Administrator
and the Servicer that the Seller is entitled to such funds hereunder and under
applicable law. The Servicer, if other than Owens & Minor Medical, Inc. or one
of its Affiliates, shall as soon as practicable upon demand, deliver to the
Seller all records in its possession which evidence or relate to any
indebtedness that is not a Pool Receivable, and copies of records in its
possession which evidence or relate to any indebtedness that is a Pool
Receivable.
(c) Notwithstanding anything to the contrary contained in this Article
IV, the Servicer, if not Owens & Minor Medical, Inc. or one of its Affiliates,
shall have no obligation to collect, enforce or take any other action described
in this Article IV with respect to any indebtedness that is not a Pool
Receivable other than to deliver to the Seller the collections and documents
with respect to any such indebtedness as described in Section 4.2(b). It is
expressly understood and agreed by the parties that such Servicer's duties in
respect of any indebtedness that is not a Pool Receivable are set forth in this
Section 4.2 in their entirety. Upon delivery by such Servicer of
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funds or records relating to any indebtedness that is not a Pool Receivable to
the Seller, such Servicer shall have discharged in full all of its
responsibilities to make any such delivery.
(d) The Servicer's obligations hereunder shall terminate on the later
of (i) the Facility Termination Date and (ii) the date on which all amounts
required to be paid to the Issuer, the Administrator and any other Indemnified
Party or Affected Person hereunder shall have been paid in full.
After such termination, the Servicer shall promptly deliver to the
Seller all books, records and related materials that the Seller previously
provided to the Servicer in connection with this Agreement.
Section 4.3. Lock-Box Arrangements. Prior to the initial purchase
hereunder, in accordance with Section 1 of Exhibit II, the Seller shall enter
into Lock-Box Agreements with all of the Lock-Box Banks, and deliver original
counterparts thereof to the Administrator. Upon the occurrence of a Termination
Event, the Administrator may at any time thereafter give notice to each Lock-Box
Bank that the Administrator is exercising its rights under the Lock-Box
Agreements to do any or all of the following: (i) to have the exclusive
ownership and control of the Lock-Box Accounts transferred to the Administrator
and to exercise exclusive dominion and control over the funds deposited therein,
(ii) to have the proceeds that are sent to the respective Lock-Box Accounts be
redirected pursuant to its instructions rather than deposited in the applicable
Lock-Box Account, and (iii) to take any or all other actions permitted under the
applicable Lock-Box Agreement. The Seller hereby agrees that if the
Administrator, at any time, takes any action set forth in the preceding
sentence, the Administrator shall have exclusive control of the proceeds
(including Collections) of all Pool Receivables and the Seller hereby further
agrees to take any other action that the Administrator may reasonably request to
transfer such control. Any proceeds of Pool Receivables received by the Seller,
as Servicer or otherwise, thereafter shall be sent immediately to the
Administrator. The parties hereto hereby acknowledge that if at any time the
Administrator takes control of any Lock-Box Account, the Administrator shall not
have any rights to the funds therein in excess of the unpaid amounts due to the
Administrator, the Issuer or any other Person hereunder and the Administrator
shall distribute or cause to be distributed such funds in accordance with
Section 4.2(b) hereof (including the proviso thereto) and Article II hereof (in
each case as if such funds were held by the Servicer thereunder); provided,
however, that the Administrator shall not be under any obligation to remit any
such funds to the Seller or any other Person unless and until the Administrator
has received from the Seller or such Person evidence satisfactory to the
Administrator that the Seller
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or such Person is entitled to such funds hereunder and under
applicable law.
Section 4.4. Enforcement Rights. (a) At any time following
the occurrence of a Termination Event or the designation of a
Servicer (other than Owens & Minor Medical, Inc. or any of its
Affiliates) pursuant to Section 4.1 hereof:
(i) the Administrator may direct the Obligors that payment of
all amounts payable under any Pool Receivable be made directly to the
Administrator or its designee;
(ii) the Administrator may instruct the Seller to give notice
of the Issuer's interest in Pool Receivables to each Obligor, which
notice shall direct that payments be made directly to the Administrator
or its designee, and upon such instruction from the Administrator the
Seller shall give such notice at the expense of the Seller; provided,
that if the Seller fails to so notify each Obligor, the Administrator
may so notify the Obligors; and
(iii) the Administrator may request the Seller to, and upon
such request the Seller shall, (A) assemble all of the records
necessary or desirable to collect the Pool Receivables and the Related
Security, and transfer or license the use of, to the new Servicer, all
software necessary or desirable to collect the Pool Receivables and the
Related Security, and make the same available to the Administrator or
its designee at a place selected by the Administrator, and (B)
segregate all cash, checks and other instruments received by it from
time to time constituting Collections with respect to the Pool
Receivables in a manner acceptable to the Administrator and, promptly
upon receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to the
Administrator or its designee.
(b) The Seller hereby authorizes the Administrator, and irrevocably
appoints the Administrator as its attorney-in-fact with full power of
substitution and with full authority in the place and stead of the Seller, which
appointment is coupled with an interest, to take any and all steps in the name
of the Seller and on behalf of the Seller necessary or desirable, in the
determination of the Administrator, to collect any and all amounts or portions
thereof due under any and all Pool Receivables or Related Security, including,
without limitation, endorsing the name of the Seller on checks and other
instruments representing Collections and enforcing such Pool Receivables,
Related Security and the related Contracts. Notwithstanding anything to the
contrary contained in this subsection (b), none of the powers conferred upon
such attorney-in-fact pursuant to the immediately preceding sentence shall
subject such attorney-
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in-fact to any liability if any action taken by it shall prove to be inadequate
or invalid, nor shall they confer any obligations upon such attorney-in-fact in
any manner whatsoever.
Section 4.5. Responsibilities of Seller and Owens & Minor Medical, Inc.
(a) Anything herein to the contrary notwithstanding, Seller shall pay when due
any taxes, including, without limitation, any sales taxes payable in connection
with the Pool Receivables and their creation and satisfaction. The Administrator
and the Issuer shall not have any obligation or liability with respect to any
Pool Receivable, any Related Security or any related Contract, nor shall any of
them be obligated to perform any of the obligations of Seller or any Originator
under any of the foregoing.
(b) Owens & Minor Medical, Inc. hereby irrevocably agrees that if at
any time it shall cease to be the Servicer hereunder, it shall act (if the then
current Servicer so requests) as the data-processing agent of the Servicer and,
in such capacity, Owens & Minor Medical, Inc. shall conduct the data-processing
functions of the administration of the Receivables and the Collections thereon
in substantially the same way that Owens & Minor Medical, Inc. conducted such
data-processing functions while it acted as the Servicer.
Section 4.6. Servicing Fee. For so long as the Servicer is Owens &
Minor Medical, Inc. or an Affiliate of Owens & Minor Medical, Inc., the Servicer
shall be paid a fee, through distributions contemplated by Section 1.4(d), equal
to 0.50% per annum of the average outstanding Capital. If the Servicer is not
Owens & Minor Medical, Inc. or an Affiliate of Owens & Minor Medical, Inc., then
the Servicer shall be paid a fee as negotiated in good faith by such Servicer
and by the Administrator in the Administrator's sole discretion.
ARTICLE V.
MISCELLANEOUS
Section 5.1. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or consent to any departure by the Seller or Servicer
therefrom shall be effective unless in a writing signed by the Administrator,
and, in the case of any amendment, by the Seller and the Servicer and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No failure on the part of the
Issuer or Administrator to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
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Section 5.2. Notices, Etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and sent or delivered, to each party hereto, at
its address set forth under its name on the signature pages hereof or at such
other address as shall be designated by such party in a written notice to the
other parties hereto. Notices and communications by facsimile shall be effective
when sent (and shall be followed by hard copy sent by first class mail), and
notices and communications sent by other means shall be effective when received.
Section 5.3. Assignability; Restrictions on Assignability. (a) This
Agreement and the Issuer's rights and obligations herein (including ownership of
the Purchased Interest) shall be assignable, in whole or in part, by the Issuer
and its successors and assigns subject to the limitations set forth in Section
5.3(f) hereof and with the prior written consent of the Seller; provided;
however, that such consent shall not be unreasonably withheld; and provided,
further, however, that no such consent shall be required if the assignment is
made to BofA, any Affiliate of BofA (other than a director or officer of BofA),
any Purchaser or other Program Support Provider or any Person which is (i) in
the business of issuing Notes and (ii) associated with or administered by BofA
or any Affiliate of BofA. Each assignor may, in connection with the assignment,
disclose to the applicable assignee any information relating to the Seller or
the Pool Receivables furnished to such assignor by or on behalf of the Seller,
the Issuer or the Administrator.
(b) The Issuer may at any time grant to one or more banks or other
institutions (each a "Purchaser") party to the Liquidity Asset Purchase
Agreement or to any other Program Support Provider participating interests in
the Purchased Interest subject to the limitations set forth in Section 5.3(f)
hereof. In the event of any such grant by the Issuer of a participating interest
to a Purchaser or other Program Support Provider, the Issuer shall remain
responsible for the performance of its obligations hereunder. The Seller agrees
that each Purchaser or other Program Support Provider shall be entitled to the
benefits of Sections 1.8, 1.9 and 1.10 with respect to its participating
interest subject to the limitations set forth in Section 3.1(b) hereof.
(c) This Agreement and the rights and obligations of the Administrator
hereunder shall be assignable, in whole or in part, by the Administrator and its
successors and assigns.
(d) Except as provided in Section 4.1(d), neither the Seller nor the
Servicer may assign its rights or delegate its obligations hereunder or any
interest herein without the prior written consent of the Administrator.
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(e) Without limiting any other rights that may be available under
applicable law, the rights of the Issuer may be enforced through it or by its
agents.
(f) Neither the Issuer nor the Seller shall allow the Purchased
Interest or any participating interest therein to become (i) traded on an
established securities market (as defined in U.S. Department of the Treasury
(the "Treasury") regulations section 1.7704-1(b) or (ii) readily tradable on a
secondary market or the substantial equivalent thereof (as defined in Treasury
regulations section 1.7704-1(c)). In addition, neither the Purchased Interest
nor any participating interest therein may be issued or sold in a transaction or
transactions that are required to be registered under the Securities Act of 1933
(15 U.S.C. 77a et seq.), and at no time may more than 100 Persons own interests
in the Receivables Pool. In determining the number of Persons that own interests
in the Receivables Pool for purposes of the preceding sentence, any beneficial
owner of an interest in a partnership, grantor trust, or S corporation
("Flow-Through Entity") will be treated as owning an interest in the Receivables
Pool only if substantially all of the value of such beneficial owner's interest
in the Flow-Through Entity is attributable to such Flow-Through Entity's
interest (direct or indirect) in the Receivables Pool. Any assignment or
transfer of the Purchased Interest or any participating interest therein in
violation of the foregoing restrictions will be void ab initio.
Section 5.4. Costs and Expenses. In addition to the rights of
indemnification granted under Section 3.1 hereof, the Seller agrees to pay on
demand all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including audit fees and expenses
generated by an internal or external auditor appointed by the Administrator for
the periodic auditing of Pool Receivables) of this Agreement, the Purchase and
Sale Agreement, the Liquidity Asset Purchase Agreement, the Parallel Asset
Purchase Agreement, any asset purchase agreement, reimbursement agreement,
letter of credit or similar agreement relating to the sale or transfer of
interests in Purchased Interests and the other documents and agreements to be
delivered hereunder, including, without limitation, Attorney Costs for the
Administrator, the Issuer and their respective Affiliates and agents with
respect thereto and with respect to advising the Administrator, the Issuer and
their respective Affiliates and agents as to their rights and remedies under
this Agreement and the other Transaction Documents, and all costs and expenses,
if any (including Attorney Costs), of the Administrator, the Issuer and their
respective Affiliates and agents, in connection with the enforcement of this
Agreement and the other Transaction Documents.
Section 5.5. No Proceedings; Limitation on Payments. Each
of the Seller, the Servicer, the Parent, the Administrator, each
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assignee of the Purchased Interest or any interest therein and each Person which
enters into a commitment to purchase the Purchased Interest or interests therein
hereby covenants and agrees that it will not institute against, or join any
other Person in instituting against, the Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding under any
federal or state bankruptcy or similar law, for one year and one day after the
latest maturing Note issued by the Issuer is paid in full.
Section 5.6. Confidentiality. The Seller, the Servicer, the Parent, the
Issuer and the Administrator each agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of this
Agreement, any Program Support Agreement and the other Transaction Documents
(and all drafts thereof), and all information identified as "confidential" or
"secret" by the Seller and provided to the other parties by the Seller under any
Program Support Agreement, this Agreement or any other Transaction Document, and
no such Person nor any of their respective Affiliates shall use any such
information other than in connection with or in enforcement of any Program
Support Agreement, this Agreement and the other Transaction Documents, except to
the extent such information (i) was or becomes generally available to the public
other than as a result of disclosure by such Person, or (ii) was or becomes
available on a non-confidential basis from a source other than such Person,
provided that such source is not bound by a confidentiality agreement with
respect thereto; provided, however, that any Person may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which such Person is subject or in connection with an
examination of such Person by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable requirement of law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which such Person or
its Affiliates may be party; (E) to the extent reasonably required in connection
with the exercise of any remedy hereunder or under any other Transaction
Document; (F) to such Person's independent auditors, legal counsel and other
professional advisors; (G) to any nationally recognized rating agency; (H) to
any assignee or participant of the Issuer, actual or potential, provided that
such Person agrees in writing to keep such information confidential to the same
extent required hereunder; (I) to the extent reasonably required by commercial
paper dealers in connection with the sale of Notes; and (J) as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which such Person and any of the other parties hereto is
party.
Section 5.7. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO THE
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CONFLICT OF LAWS PRINCIPLES THEREOF), EXCEPT TO THE EXTENT THAT THE PERFECTION
(OR THE EFFECT OF PERFECTION OR NON-PERFECTION) OF THE INTERESTS OF THE ISSUER
IN THE POOL RECEIVABLES, RELATED SECURITY, COLLECTIONS AND PROCEEDS THEREOF, IS
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE ISSUER, THE SELLER, THE SERVICER, THE PARENT AND THE
ADMINISTRATOR CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE ISSUER, THE SELLER, THE
SERVICER, THE PARENT AND THE ADMINISTRATOR IRREVOCABLY WAIVES, TO THE MAXIMUM
EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE ISSUER, THE
SELLER, THE SERVICER, THE PARENT AND THE ADMINISTRATOR EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY NEW YORK LAW.
Section 5.8. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.
Section 5.9. Survival of Termination. The provisions of Sections 1.8,
1.9, 1.10, 3.1, 5.4, 5.5, 5.6, 5.7, 5.10 and 5.13 shall survive any termination
of this Agreement.
Section 5.10. WAIVER OF JURY TRIAL. THE ISSUER, THE SELLER, THE
SERVICER, THE PARENT AND THE ADMINISTRATOR EACH WAIVE THEIR RESPECTIVE RIGHTS TO
A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. THE ISSUER, THE SELLER, THE SERVICER, THE PARENT AND
THE ADMINISTRATOR EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF
THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY
IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT.
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Section 5.11. Entire Agreement. This Agreement embodies the entire
agreement and understanding between the Issuer, the Seller, the Servicer, the
Parent and the Administrator, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof, except for any prior arrangements made
with respect to the payment by the Issuer of (or any indemnification for) any
fees, costs or expenses payable to or incurred (or to be incurred) by or on
behalf of the Seller, the Servicer and the Administrator.
Section 5.12. Headings. The captions and headings of this Agreement
and in any Exhibit hereto are for convenience of reference only and shall not
affect the interpretation hereof or thereof.
Section 5.13. Issuer's Liabilities. The obligations of the Issuer under
this Agreement are solely the corporate obligations of the Issuer. No recourse
shall be had for any obligation or claim arising out of or based upon this
Agreement against "MLMMI" or against any stockholder, employee, officer,
director or incorporator of the Issuer. For purposes of this paragraph, "MLMMI"
shall mean and include Merrill Lynch Money Markets, Inc. and all affiliates
thereof and any employee, officer, director, incorporator, shareholder or
beneficial owner of any of them; provided, however, that the Issuer shall not be
considered to be an affiliate of MLMMI; and provided, further, that this Section
5.13 shall not relieve any such Person of any liability it might otherwise have
for its own gross negligence or willful misconduct.
Section 5.14. Treatment of Purchased Interest for Tax Purposes. The
Seller and the Issuer hereby agree to treat the Purchased Interest and any
participating Interest therein as a debt instrument for purposes of federal and
state income tax, franchise tax, and any other federal or state tax measured in
whole or in part by income, to the extent permitted by applicable law.
Notwithstanding any other provision of this Agreement, no Program Support
Provider shall be entitled to any indemnification for any Taxes, Other Taxes or
other liabilities arising therefrom if and to the extent that such Taxes, Other
Taxes or other liabilities arise from such Program Support Provider treating the
Purchased Interest or any participating interest therein as other than a debt
instrument for purposes of federal and state income tax, and any other federal
or state tax measured in whole or in part by income when under applicable law
such interest could be treated as a debt instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
O&M FUNDING CORP.
By:________________________________
Name:
Title:
4800 Cox Road
Richmond, Virginia 23261-7626
Attention: Michael W. Lowry
Telephone: 804/747-9794
Facsimile: 804/965-5403
OWENS & MINOR MEDICAL, INC.
By:________________________________
Name:
Title:
4800 Cox Road
Richmond, Virginia 23261-7626
Attention: Michael W. Lowry
Telephone: 804/747-9794
Facsimile: 804/965-5403
OWENS & MINOR, INC.
By:________________________________
Name:
Title:
4800 Cox Road
Richmond, Virginia 23261-7626
Attention: Michael W. Lowry
Telephone: 804/747-9794
Facsimile: 804-965-5403
RECEIVABLES CAPITAL CORPORATION
By:________________________________
Name:
Title:
c/o Merrill Lynch & Co., Inc.
World Financial Center
New York, New York 10281-1310
Attention: Thomas Dunston
Telephone: 212/449-1606
Facsimile: 212/449-2234
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<PAGE>
with a copy to:
Bank of America National Trust
and Savings Association Asset
Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Mark A. Wegener
Telephone: 312/828-3343
Facsimile: 312/828-7855
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Administrator
By: _____________________________
Name: Mark A. Wegener
Title: Vice President
Asset Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Mark A. Wegener
Telephone: 312/828-3343
Facsimile: 312/828-7855
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EXHIBIT I
DEFINITIONS
As used in the Receivables Purchase Agreement to which this Exchibit I
is attached (including its Exhibits), the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined). Unless otherwise indicated, all Section,
Annex, Exhibit and Schedule references in this Exhibit are to Sections of and
Annexes, Exhibits and Schedules to the Agreement.
"Administration Account" means the special account (account
number 7062178, ABA number 07100039, Attention: Loan Division, Reference: Owens
& Minor) of the Issuer maintained at Bank of America Illinois, or such other
account as may be so designated in writing by the Administrator to the Seller
and the Servicer.
"Administrative Agent" has the meaning set forth in the
preamble to the Parallel Asset Purchase Agreement.
"Administrator" has the meaning set forth in the
preamble to the Agreement.
"Adverse Claim" means a lien, security interest or other
charge or encumbrance, or any other type of preferential arrangement, it being
understood that a lien, security interest or other charge or encumbrance, or any
other type of preferential arrangement, in favor of the Issuer shall not
constitute an Adverse Claim.
"Affected Person" has the meaning set forth in
Section 1.8.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person or is a director or officer of such Person, except that
with respect to the Issuer, Affiliate shall mean the holder(s) of its capital
stock.
"Agent-Related Person" has the meaning assigned thereto in
Section 5.2 of the Parallel Asset Purchase Agreement.
"Alternate Rate" for any Fixed Period for any Portion of
Capital of the Purchased Interest means an interest rate per annum equal to:
(i) the Eurodollar Rate for such Fixed Period plus
(x) 0.50% or (y) on each day when the Alternate Rate has
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been applicable for any portion of the Purchased Interest for more than
ninety (90) days within any twelve-month period, 0.25% plus the
appropriate spread for such date determined by reference to the Pricing
Grid Rate or
(ii) the Base Rate for such Fixed Period;
provided, however, that in the case of
(i) any Fixed Period on or prior to the first day of which the
Administrator shall have been notified by the Issuer or a Purchaser or
other Program Support Provider that the introduction of or any change
in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other Governmental Authority asserts that it is
unlawful, for the Issuer or such Purchaser or other Program Support
Provider to fund any Portion of Capital based on the Eurodollar Rate
set forth above (and the Issuer or such Purchaser or other Program
Support Provider shall not have subsequently notified the Administrator
that such circumstances no longer exist),
(ii) any Fixed Period of one to (and including)
13 days,
(iii) any Fixed Period as to which the Administrator does not
receive notice, by no later than 12:00 noon (New York City time) on (x)
the second Business Day preceding the first day of such Fixed Period
that the Seller desires that the related Portion of Capital be funded
at the CP Rate (or the Seller has given such notice and the
Administrator has notified the Seller that funding the related Portion
of Capital at the CP Rate is unacceptable to the Issuer) or (y) the
third Business Day preceding the first day of such Fixed Period that
the Seller desires that the related Portion of Capital be funded at the
Alternate Rate and based on the Eurodollar Rate, or
(iv) any Fixed Period relating to a Portion of Capital
which is less than $1,000,000,
the "Alternate Rate" for each such Fixed Period shall be an interest rate per
annum equal to the Base Rate in effect on each day of such Fixed Period. The
"Alternate Rate" for any Run-off Day (other than a Run-off Day of the type
described in clause (iii) of the definition of Run-off Day) shall be an interest
rate equal to 2% per annum above the Base Rate in effect on such day.
"Attorney Costs" means and includes all fees and
disbursements of any law firm or other external counsel, the
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allocated cost of internal legal services and all disbursements of internal
counsel.
"Average Maturity" means at any time that period of days equal
to the average maturity of the Pool Receivables calculated by the Servicer in
the then most recent Seller Report; provided that if the Administrator shall
disagree with any such calculation, the Administrator may recalculate such
Average Maturity, and any such recalculation shall be prima facie evidence of
such Average Maturity.
"Bankruptcy Code" means the United States Bankruptcy
Reform Act of 1978 (11 U.S.C. (s) 101, et seq.), as amended from
time to time.
"Base Rate" means for any day, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate shall be at all times
equal to the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by BofA in San Francisco, California, as
its "reference rate." It is a rate set by BofA based upon various
factors including BofA's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such
announced rate; and
(b) 0.50% per annum above the latest Federal Funds Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Business Day" means any day on which (i) banks are not
authorized or required to close in Chicago, New York City, Richmond or San
Francisco and (ii) if this definition of "Business Day" is utilized in
connection with the Eurodollar Rate, dealings are carried out in the London
interbank market.
"Capital" means with respect to the Receivables Purchase
Agreement and the Parallel Asset Purchase Agreement, the amount paid to the
Seller in respect of the Purchased Interest by the Issuer or by a Parallel
Purchaser pursuant to such Purchase Agreement, or such amount divided or
combined in accordance with Section 1.7 of such Purchase Agreement, in each case
reduced from time to time by Collections distributed and applied on account of
such Capital pursuant to Section 1.4(d) of such Purchase Agreement and increased
from time to time by reinvestments pursuant to Section 1.4(b)(ii) of such
Purchase Agreement; provided, that if such Capital shall have been reduced by
any
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distribution and thereafter all or a portion of such distribution is rescinded
or must otherwise be returned for any reason, such Capital shall be increased by
the amount of such rescinded or returned distribution, as though it had not been
made.
"Change of Control" means any of the following events
or circumstances:
(a) any Person or "group" (within the meaning of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended) shall
either (i) acquire beneficial ownership of more than 20% of any
outstanding class of common stock of the Parent having ordinary voting
power in the election of directors of the Parent or (ii) obtain the
power (whether or not exercised) to elect a majority of the Parent's
directors;
(b) the Parent shall not own, directly or indirectly,
100% of all issued and outstanding capital stock of the
Seller;
(c) the Parent or the Seller shall (i) merge with any
other Person and not be the surviving company or (ii) sell
all or any substantial part of its assets to another Person;
or
(d) the Board of Directors of the Parent shall not consist of
a majority of "Continuing Directors". As used in this definition,
Continuing Directors shall mean the directors of the Parent on the
effective date of this Agreement and each other director of the Parent,
if such other director's nomination for election to the Board of
Directors of the Parent is recommended by a majority of the then
Continuing Directors.
"Collection Delay Period" means 45 days or such other number
of days as the Administrator may from time to time select upon three Business
Days' notice to the Seller.
"Collections" means, with respect to any Pool Receivable, (a)
all funds which are received by any Originator, the Seller, the Servicer or the
Administrator in payment of any amounts owed in respect of such Receivable
(including, without limitation, purchase price, finance charges, interest and
all other charges), or applied to amounts owed in respect of such Receivable
(including, without limitation, insurance payments and net proceeds of the sale
or other disposition of repossessed goods or other collateral or property of the
related Obligor or any other Person directly or indirectly liable for the
payment of such Pool Receivable and available to be applied thereon),
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(b) all amounts deemed to have been received pursuant to Section 1.4(e) and (c)
all other proceeds of such Receivable.
"Columbia Receivables" means all Receivables the Obligor of
which is Columbia Health Care Corporation or any affiliate thereof.
"Contract" means, with respect to any Receivable, any and all
contracts, understandings, instruments, agreements, leases, invoices, notes, or
other writings pursuant to which such Receivable arises or which evidences such
Receivable or under which an Obligor becomes or is obligated to make payment in
respect of such Receivable.
"CP Market Disruption Event" means, at any time for any reason
whatsoever, the Issuer shall be unable or unwilling to raise, or shall be
precluded or prohibited from raising, funds through the issuance of Notes in the
United States' commercial paper market at such time.
"CP Rate" for any Fixed Period for any Portion of Capital of
the Purchased Interest means, to the extent the Issuer funds such Portion of
Capital for such Fixed Period by issuing Notes, a fluctuating rate per annum
equal to the sum of (i) the rate (or if more than one rate, the weighted average
of the rates) at which Notes of the Issuer having a term equal to such Fixed
Period and to be issued to fund such Portion of Capital may be sold by any
placement agent or commercial paper dealer selected by the Administrator on
behalf of the Issuer, as agreed between each such agent or dealer and the
Administrator and notified by the Administrator to the Servicer; provided that
if the rate (or rates) as agreed between any such agent or dealer and the
Administrator with regard to any Fixed Period for such Portion of Capital is a
discount rate (or rates), then such rate shall be the rate (or if more than one
rate, the weighted average of the rates) resulting from converting such discount
rate (or rates) to an interest-bearing equivalent rate per annum, plus (ii)
0.05% of the face amount of such Notes, expressed as a percentage of such face
amount and converted to an interest-bearing equivalent rate per annum.
"Credit and Collection Policy" means those receivables credit
and collection policies and practices of the Originators in effect on the date
of the Agreement and described in Schedule I hereto, as modified in compliance
with the Agreement.
"Damages" means any and all liabilities, losses, costs,
claims, damages, penalties and expenses, including Attorney Costs and costs of
investigation, enforcement or litigation.
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"Debt" means (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other similar instruments,
(iii) obligations to pay the deferred purchase price of property or services,
(iv) obligations as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, (v) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of kinds referred to in clauses (i) through (iv) above,
and (vi) liabilities in respect of unfunded vested benefits under plans covered
by Title IV of ERISA.
"Defaulted Receivable" means a Receivable:
(i) as to which any payment, or part thereof, remains
unpaid for at least 91 days from the original due date for
such payment;
(ii) as to which the Obligor thereof or any other
Person obligated thereon or owning any Related Security in
respect thereof has taken any action, or suffered any event to
occur, of the type described in paragraph (g) of Exhibit VI
hereto; or
(iii) which, consistent with the Credit and
Collection Policy, would be written off any Originator's books
as uncollectible.
"Delinquency Ratio" means the ratio (expressed as a percentage
and rounded upwards to the nearest 1/100 of 1%) computed as of each Month End
Date by dividing (i) the aggregate Outstanding Balance of all Pool Receivables
that were Delinquent Receivables or Defaulted Receivables on such day by (ii)
the aggregate Outstanding Balance of all Pool Receivables on such day.
"Delinquent Receivable" means a Receivable which is not
a Defaulted Receivable and:
(i) as to which any payment, or part thereof, remains
unpaid for at least 31 days from the original due date for
such payment; or
(ii) which, consistent with the Credit and Collection
Policy, would be classified as delinquent by the Servicer.
"Determination Date" means the last day of each
quarterly fiscal period of the Parent.
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"Dilution Adjustment" has the meaning set forth in
Section 1.4(e).
"Dilution Reserve" means, for the Purchased Interest under the
Receivables Purchase Agreement and the Parallel Asset Purchase Agreement, on any
date, an amount equal to:
(i) the greater of (x) 3.0% and (y) 3 times the
greatest Six Month Dilution Ratio for any of the 12 or fewer
most recent Month End Dates
times
(ii) Capital.
"Discount" means:
(i) for the Portion of Capital of the Purchased
Interest for any Fixed Period to the extent the Issuer will be
funding such Portion of Capital on the first day of such Fixed
Period through the issuance of Notes,
CPR x C x ED + TF
360
(ii) for the Portion of Capital of the Purchased
Interest for any Fixed Period to the extent the Issuer will
not be funding such Portion of Capital on the first day of
such Fixed Period through the issuance of Notes,
ED
AR x C x 360 + TF
where:
AR = the Alternate Rate for the Portion of Capital
of the Purchased Interest for such Fixed Period
C = the Portion of Capital of the Purchased
Interest during such Fixed Period
CPR = the CP Rate for the Portion of Capital of the
Purchased Interest for such Fixed Period
ED = the actual number of days during such Fixed
Period
TF = the Termination Fee, if any, for the Portion of
Capital of the Purchased Interest for such
Fixed Period;
I-7
<PAGE>
provided that no provision of the Receivables Purchase Agreement or the Parallel
Asset Purchase Agreement shall require the payment or permit the collection of
Discount in excess of the maximum permitted by applicable law; and provided,
further, that Discount for the Portion of Capital of the Purchased Interest
shall not be considered paid by any distribution to the extent that at any time
all or a portion of such distribution is rescinded or must otherwise be returned
for any reason; and provided, further, that on each day during any period when
the Issuer shall have indicated pursuant to Section 1.1(a) that it will not
purchase or reinvest in the Purchased Interest under the Agreement, Discount
will accrue on each remaining Portion of Capital under this Agreement at the
highest rate then applicable to any portion of Capital under the Parallel Asset
Purchase Agreement.
"Discount Reserve" for the Purchased Interest under the
Receivables Purchase Agreement and the Parallel Asset Purchase Agreement at any
time means the sum of (i) the Termination Discount at such time for the
Purchased Interest, and (ii) the then accrued and unpaid Discount for the
Purchased Interest.
"Dividend" means in respect of any corporation or any O&M
Party, as the case may be, (i) cash distributions or any other distributions on,
or in respect of, any class of capital stock of such corporation or such O&M
Party, as the case may be, except for distributions made solely in shares of
stock of the same class, and (ii) any and all funds, cash or other payments made
in respect of the redemption, repurchase or acquisition of such stock, unless
such stock shall be redeemed or acquired through the exchange of such stock with
stock of the same class.
"Eligible Agent" means a commercial bank having a combined
capital and surplus of at least $250,000,000 whose short-term debt is rated by
Standard & Poor's Ratings Services not lower than A-1, and at least as highly as
the Notes by each rating agency which then rates the Notes.
"Eligible Assignee" means any commercial bank having a
combined capital and surplus of at least $250,000,000 whose short-term debt is
rated by Standard & Poor's Ratings Services not lower than A-1, and at least as
highly as the Notes by each rating agency which then rates the Notes or (ii) if
a written statement is obtained from each of the rating agencies rating the
Notes that the rating of the Notes will not be downgraded or withdrawn solely as
a result of the assignment of rights and obligations under this Agreement to
such Eligible Institution.
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<PAGE>
"Eligible Receivables" means, at any time, Receivables:
(i) each Obligor of which is (a) not an Affiliate of any
Originator or the Seller (b) not subject to any action of the type
described in paragraph (g) of Exhibit VI and (c) not an Excluded
Obligor;
(ii) the Obligor of which is a United States resident or a
resident of such other jurisdiction as has been approved in writing by
the Administrator, or which are fully guaranteed by a United States
resident;
(iii) which are not Excluded Receivables;
(iv) which are denominated and payable only in U.S.
dollars in the United States;
(v) which have a stated maturity and which stated maturity
is not more than sixty (60) days after the original billing date
thereof;
(vi) which arise in the ordinary course of an
Originator's business;
(vii) which arise under a Contract which is in full force and
effect and which is a legal, valid and binding obligation of the
related Obligor, enforceable against such Obligor in accordance with
its terms;
(viii) which conform with all applicable laws, rulings
and regulations in effect;
(ix) which are not the subject of any asserted dispute
(whether or not in writing), offset, hold back defense, Adverse Claim
or other claim and which does not arise from the sale of inventory
which is subject to any Adverse Claim, provided that the partial
payment of an invoice shall not be considered a dispute;
(x) which comply with the requirements of the
Credit and Collection Policy;
(xi) which arise from the completion of the sale and
delivery of goods or services performed, and must not represent an
invoice in advance of such completion;
(xii) which are not subject to any contingent performance
requirements of the applicable Originator unless such requirements are
guaranteed or insured by third parties acceptable to the Administrator;
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<PAGE>
(xiii) which do not require the consent of the related
Obligor to be sold or assigned;
(xiv) which have not been modified or restructured since
their creation, except as permitted pursuant to Section 4.2 of the
Agreement;
(xv) (A) to which the applicable Originator has good and
marketable title immediately prior to the sale thereof to the Seller,
and as to which the Seller has good and marketable title, and (B)
which, immediately prior to the applicable Originator's sale thereof to
the Seller, were freely assignable by the applicable Originator and
which are freely assignable by the Seller;
(xvi) for which the Issuer shall have a valid, perfected and
enforceable undivided percentage ownership interest, to the extent of
the Purchased Interest, therein and in the Related Security and
Collections with respect thereto, in each case free and clear of any
Adverse Claim; provided that for the purposes of determining
eligibility of Receivables, such ownership interest need be perfected
only in the Related Security of the type described in clause (ii) of
the definition of Related Security and clause (iii) of the definition
of Related Security to the extent that such perfection can be achieved
by filing financing statements pursuant to the UCC;
(xvii) which constitute accounts as defined in the
UCC, and which are not evidenced by instruments or chattel
paper;
(xviii) which are not Delinquent Receivables at the time of
their inclusion in the Receivables Pool (excluding Receivables
transferred as part of the initial sale hereunder);
(xix) which are not Defaulted Receivables;
(xx) for which the applicable Originator has
established no offset arrangements with the related Obligor;
(xxi) for which the Defaulted Receivables of the related
Obligor do not exceed 50% of all such Obligor's Receivables, or such
other percentage not less than 25% as the Administrator shall approve
in its sole discretion;
(xxii) which represents the amount in excess of the
outstanding credits granted by the applicable Originator to the related
Obligor and security, collateral or other deposits placed by the
related Obligor with the applicable
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<PAGE>
Originator or any Affiliate of the applicable Originator
granted by the applicable Originator to the related Obligor;
(xxiii) which do not include amounts payable for
finance charges.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute of similar import,
together with the regulations there- under, in each case as in effect from time
to time. References to sections of ERISA also refer to any successor sections.
"Eurodollar Rate" means, for any Fixed Period, an interest
rate per annum (rounded upward to the nearest 1/16th of 1%) determined pursuant
to the following formula:
Eurodollar Rate = LIBOR
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means, for any Fixed
Period, the maximum reserve percentage (expressed as a decimal, rounded
upward to the nearest 1/100th of 1%) in effect on the date LIBOR for
such Fixed Period is determined under regulations issued from time to
time by the Federal Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities") having a term comparable to
such Fixed Period; and
"LIBOR" means the rate of interest per annum
determined by the Liquidity Agent to be the arithmetic mean (rounded
upward to the nearest 1/16th of 1%) of the rates of interest per annum
notified to the Liquidity Agent by each Reference Bank as the rate of
interest at which dollar deposits in the approximate amount of the
Capital associated with such Fixed Period would be offered to major
banks in the London interbank market at their request at or about 11:00
a.m. (London time) on the second Business Day prior to the commencement
of such Fixed Period.
"Excluded Obligor" means an Obligor, so designated in writing
as such by the Administrator to the Servicer, from time to time, it being
understood that from time to time the Administrator may revoke its designation
of one or more Obligors as Excluded Obligors by written notice to the Servicer.
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<PAGE>
"Excluded Receivables" means all Receivables originated
by the Detroit and Bridgeton Distribution Centers of Owens &
Minor Medical, Inc. and all Columbia Receivables.
"Facility Termination Date" means the earliest to occur of (a)
December 24, 1996, (b) the Purchase Termination Date, as defined in the
Liquidity Asset Purchase Agreement, which on the date of the Agreement is
December 24, 1996, or such later date designated as the Purchase Termination
Date from time to time pursuant to the Liquidity Asset Purchase Agreement (it
being understood that the Administrator shall notify the Servicer of the
designation of such later date, provided that failure to provide such notice
shall not limit or otherwise affect the obligations of the Servicer or the
rights of the Administrator, the Issuer, or any other party to the Liquidity
Asset Purchase Agreement), (c) the date of termination of the commitment under
any other Program Support Agreement, (d) the date determined pursuant to Section
2.2 and (e) the date the Purchase Limit reduces to zero pursuant to Section
1.1(b).
"Federal Funds Rate" means, for any period, the per annum rate
set forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board (including any
such successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective Rate". If on
any relevant day the appropriate rate for such previous day is not yet published
in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day
will be the arithmetic mean as determined by the Administrator of the rates for
the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Administrator.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any entity succeeding to any of its principal
functions.
"Final Payout Date" means the date following the Facility
Termination Date on which no Capital or Discount in respect of the Purchased
Interest shall be outstanding and all other amounts (excluding contingent
obligations under indemnities and the like as to which no present payment
obligation exists) payable by any O&M Parties or the Servicer to the Issuer, the
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<PAGE>
Purchaser, the Administrator or any other Securitization Party or Affected
Person under the Transaction Documents shall have been paid in full.
"Fixed Period" means with respect to each Portion of
Capital:
(a) initially the period commencing on the date of a purchase
pursuant to Section 1.2 and ending such number of days as the Seller
shall select, subject to the approval of the Administrator pursuant to
Section 1.2, up to 90 days after such date; and
(b) thereafter each period commencing on the last day of the
immediately preceding Fixed Period for any Portion of Capital of the
Purchased Interest and ending such number of days (not to exceed 90
days) as the Seller shall select, subject to the approval of the
Administrator pursuant to Section 1.2, on notice by the Seller received
by the Administrator (including notice by telephone, confirmed in
writing) not later than 11:00 a.m. (New York City time) on such last
day, except that if the Administrator shall not have received such
notice or approved such period on or before 11:00 a.m. (New York City
time) on such last day, such period shall be one day; provided that
(i) any Fixed Period in respect of which Discount is
computed by reference to the Alternate Rate shall be a period
from one to and including 90 days, or a period of one, two or
three months, as the Seller may select as provided above;
(ii) any Fixed Period (other than of one day) which
would otherwise end on a day which is not a Business Day shall
be extended to the next succeeding Business Day; provided,
however, if Discount in respect of such Fixed Period is
computed by reference to the Eurodollar Rate, and such Fixed
Period would otherwise end on a day which is not a Business
Day, and there is no subsequent Business Day in the same
calendar month as such day, such Fixed Period shall end on the
next preceding Business Day;
(iii) in the case of any Fixed Period of one day, (A)
if such Fixed Period is the initial Fixed Period for a
purchase pursuant to Section 1.2, such Fixed Period shall be
the day of purchase of the Purchased Interest; (B) any
subsequently occurring Fixed Period which is one day shall, if
the immediately preceding Fixed Period is more than one day,
be the last day of such immediately preceding Fixed Period,
and, if the
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<PAGE>
immediately preceding Fixed Period is one day, be the day next
following such immediately preceding Fixed Period; and (C) if
such Fixed Period occurs on a day immediately preceding a day
which is not a Business Day, such Fixed Period shall be
extended to the next succeeding Business Day;
(iv) in the case of any Fixed Period for any Portion
of Capital of the Purchased Interest which commences before
the Termination Date and would otherwise end on a date
occurring after the Termination Date, such Fixed Period shall
end on such Termination Date and the duration of each Fixed
Period which commences on or after the Termination Date shall
be of such duration as shall be selected by the Administrator;
(v) any Fixed Period in respect of which Discount is
computed by reference to the CP Rate may be terminated at the
election of, and upon notice thereof to the Seller by, the
Administrator any time upon the occurrence and during the
continuance of any CP Market Disruption Event; and
(vi) if at any time after the occurrence and during
the continuance of any CP Market Disruption Event, the
Administrator elects to terminate any Fixed Period in respect
of which Discount is computed by reference to the CP Rate, the
Portion of Capital allocated to such terminated Fixed Period
shall be allocated to a new Fixed Period to be designated by
the Administrator (but in no event to exceed 5 days) and shall
accrue Discount at the Alternate Rate.
"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 nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any body or entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including without limitation any court, and any Person
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
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<PAGE>
"Governmental Obligors" means any Obligor which is a
Governmental Authority (other than any state or other political subdivision of
any state or hospital owned by the foregoing.
"Guaranty Obligations" means any obligations (other than
endorsements in the ordinary course of business of negotiable instruments 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 therefore, (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.
"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 any O&M Party 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 any O&M
Party, whether or not such Indebtedness has been assumed, in an amount not to
exceed the fair market value of the property of any O&M Party 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 excluding from the foregoing trade payables and
accrued expenses arising or incurred in the ordinary course of business.
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<PAGE>
"Indemnified Amounts" has the meaning set forth in
Section 3.1.
"Indemnified Party" has the meaning set forth in
Section 3.1.
"Initial Purchaser Note" has the meaning set forth in Section
1.6 of the Purchase and Sale Agreement.
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidations, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the benefit
of creditors, composition, marshalling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any substantial
portion of its creditors; in each case (a) and (b) undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"Investment Grade" means (i) with respect to any Person's long
term public senior debt securities, a rating of at least BBB- by Standard &
Poor's Ratings Services or Baa3 by Moody's Investors Service, Inc. or, if such
Person's long-term public senior debt securities are rated by Duff & Phelps
Credit Rating Co., at least BBB- by such rating agency and (ii) with respect to
any Person's short-term public senior debt securities, a rating of at least A-2
by Standard & Poor's Ratings Services or P-2 by Moody's Investors Service, Inc.
or, if such Person's short-term public senior debt securities are rated by Duff
& Phelps Credit Rating Co., at least D-2 by such rating agency; provided, that
in either of the foregoing cases if such Person's public senior debt securities
are rated by more than one of the foregoing rating agencies, then each such
rating agency which rates such securities shall have given them a rating at
least equal to the categories specified above;
"Issuer" has the meaning set forth in the preamble to
the Agreement.
"LIBOR" means the rate of interest per annum determined by the
Liquidity Agent to be the arithmetic mean (rounded upward to the nearest 1/16th
of 1%) of the rates of interest per annum notified to the Liquidity Agent by
each Reference Bank as the rate of interest at which dollar deposits in the
approximate amount of the Capital associated with such Fixed Period would be
offered to major banks in the London interbank market at their request at or
about 11:00 a.m. (London time) on the second Business Day prior to the
commencement of such Fixed Period.
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<PAGE>
"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.
"Liquidity Agent" means BofA in its capacity as
Liquidity Agent pursuant to the Liquidity Asset Purchase
Agreement.
"Liquidity Asset Purchase Agreement" means that certain
Liquidity Asset Purchase Agreement dated as of December 28, 1995 among BofA as
Purchaser, Liquidity Agent and Administrator, the other Purchasers from time to
time parties thereto and the Issuer, as amended, supplemented or otherwise
modified from time to time.
"Lock-Box Account" means an account maintained at a bank or
other financial institution for the purpose of receiving or holding Collections,
either directly from Obligors, from any Originators or Seller or otherwise.
"Lock-Box Agreement" means an agreement, in substantially the
applicable form set forth in Annex B, between the Seller and each Lock-Box Bank.
"Lock-Box Bank" means any of the banks or other financial
institutions holding one or more Lock-Box Accounts.
"Loss Reserve" for the Purchased Interest under the
Receivables Purchase Agreement and the Parallel Asset Purchase Agreement on any
date means an amount equal to the greater of
(x) Capital times the greatest of the following: (i) five
times the highest Six Month Default Ratio for any of the twelve most
recent Month End Dates, (ii) 10 times the highest Six Month
Loss-to-Liquidation Ratio for any of the twelve most recent Month End
Dates, (iii) 2 times the highest Normal or Special Concentration
Percentage for any Obligor that is Investment Grade and (iv) 4 times
the highest Normal or Special Concentration Percentage for any Obligor
that is not Investment Grade and (vi) 10%;
and
(y) $3,000,000.
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<PAGE>
"Majority Parallel Purchasers" means, at any time, Parallel
Purchasers with Percentages under the Parallel Asset Purchase Agreement that are
more than 66-2/3% in the aggregate.
"Maximum Parallel Purchase" means, with respect to each
Parallel Purchaser and the Parallel Asset Purchase Agreement, the maximum amount
of Capital which such Parallel Purchaser is obligated to pay in respect of the
Purchased Interest acquired by the Parallel Purchasers under such Parallel Asset
Purchase Agreement, as set forth below its signature to such Parallel Asset
Purchase Agreement or in the Assignment pursuant to which it became a Parallel
Purchaser thereunder, as such amount may be modified
(w) in connection with any subsequent Assignment
pursuant to Section 6.3 of the Parallel Asset Purchase
Agreement,
(x) in connection with a change in the Purchase Limit
applicable to such Parallel Asset Purchase Agreement pursuant to
Section 6.1 of the Parallel Asset Purchase
Agreement,
(y) as provided in Section 1.1(a) of the Parallel Asset
Purchase Agreement to reflect the aggregate outstanding Capital of the
Purchased Interest under the Agreement to which the Seller under such
Parallel Asset Purchase Agreement is a party, or
(z) in connection with a termination of such Purchaser's
Purchase Commitment pursuant to Section 1.1(b) of the Parallel Asset
Purchase Agreement.
"Month End Date" means the last day of a calendar
month.
"Net Receivables Pool Balance" means at any time the
Outstanding Balance of Eligible Receivables then in the Receivables Pool reduced
by the sum of (i) the Outstanding Balance of such Eligible Receivables that have
become Defaulted Receivables and (ii) the aggregate amount by which the
Outstanding Balance of Eligible Receivables of each Obligor then in the
Receivables Pool exceeds the product of (A) the Normal Concentration Percentage
or Special Concentration Percentage, as the case may be, for such Obligor
multiplied by (B) the Outstanding Balance of the Eligible Receivables then in
the Receivables Pool.
"Normal Concentration Percentage" means at any time 2.0% (i)
for any Obligor except a Governmental Obligor or (ii) for all Governmental
Obligors taken as a whole.
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<PAGE>
"Notes" means short-term promissory notes issued or to be
issued by the Issuer to fund its investments in accounts receivable or other
financial assets.
"O&M Credit Agreement" means that Credit Agreement, dated as
of April 29, 1994, among the Parent (formerly O & M Holding, Inc.), as borrower,
certain of the subsidiaries of the Parent, as guarantors, the banks identified
therein, NationsBank N.A. (Carolinas), as Agent, as agent, Chemical Bank and
Crestar Bank, as co-agents, and NationsBank N.A. (Carolinas), as Administrative
Agent, as amended from time to time.
"O&M Party" means the Parent or any of its Subsidiaries
(including the Seller).
"Obligor" means, with respect to any Receivable, the Person
obligated to make payments pursuant to the Contract relating to such Receivable.
"Originator" shall have the meaning set forth in the
Introduction to the Purchase and Sale Agreement.
"Originator Note" shall have the meaning set forth in Section
1.7 of the Purchase and Sale Agreement.
"Outstanding Balance" of any Receivable at any time means the
then outstanding principal balance thereof.
"Parallel Asset Purchase Agreement" means the Parallel Asset
Purchase Agreement dated as of December 28, 1995 among O&M Funding Corp., as
Seller, Owens & Minor Medical, Inc., as Servicer, Owens & Minor, Inc., certain
financial institutions, as the Parallel Purchasers, and BofA, as Administrative
Agent, as the same may be amended, supplemented or otherwise modified in
accordance with its terms.
"Parallel Purchase Termination Date", with respect to each
Parallel Asset Purchase Agreement, has the meaning set forth in Section 6.6 of
such Parallel Asset Purchase Agreement.
"Parallel Purchaser", with respect to each Parallel Asset
Purchase Agreement, has the meaning set forth in the preamble to such Parallel
Asset Purchase Agreement.
"Parent" has the meaning set forth in the preamble to
the Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
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<PAGE>
"Pension Plan" means a "pension plan", as such term is defined
in section 3(2) of ERISA, which is subject to title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which any
Originator or the Seller or any corporation, trade or business that is, along
with such Originator or the Seller, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in
sections 414(b) and 414(c), respectively, of the Internal Revenue Code of 1986,
as amended or section 4001 of ERISA may have any liability, including any
liability by reason of having been a substantial employer within the meaning of
section 4063 of ERISA at any time during the preceding five years, or by reason
of being deemed to be a contributing sponsor under section 4069 of ERISA.
"Permitted Liens" means (i) Liens described on Schedule II
attached hereto; (ii) 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); (iii) 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); (iv) pledges or
deposits made to secure payment of worker's compensation insurance, unemployment
insurance, pensions or social security programs; (v) 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); (vi) 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 O&M Parties taken as a whole, (vii) Liens
regarding operating or financing leases permitted by the O&M Credit Agreement;
(viii) leases or subleases granted to others in the ordinary course of business
not interfering in any material respect with the business or operations of the
borrower or its Subsidiaries; (ix) purchase money Liens securing purchase money
indebtedness to the extent permitted under the O&M Credit Agreement; (x) Liens
in
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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 (xi)
any judgment lien which does not create an event of default under the O&M Credit
Agreement or a Termination Event hereunder.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
"Pool Receivable" means a Receivable in the Receivables
Pool.
"Portion of Capital" has the meaning set forth in Section 1.7.
In addition, at any time when the Capital of the Purchased Interest is not
divided into two or more portions, "Portion of Capital" means 100% of the
Capital of the Purchased Interest.
"Pricing Grid Rate" means, at any time for any Fixed
Period:
(i) a rate per annum equal to the "Applicable Margin" which
would then apply to "Eurodollar Loans", (as such terms are defined in
the O&M Credit Agreement); and
(ii) if the terms set forth in clause (i) of this definition
are no longer used in the O&M Credit Agreement, the highest applicable
margin above the Eurodollar Rate that the Parent is or would be charged
for a borrowing under the O&M Credit Agreement on such day; or
(iii) if the O&M Credit Agreement is no longer in effect, the
highest applicable margin above the Eurodollar Rate that the Parent is
or would be charged for a borrowing under any revolving committed
credit facility or agreement then in effect on such day; or
(iv) if the O&M Credit Agreement is no longer in effect and
there is no other revolving committed credit facility or agreement then
in effect, the applicable margin as set forth in clause (i) of this
definition, pursuant to the O&M Credit Agreement as in effect on the
day immediately prior to the termination thereof.
For purposes of clauses (ii), (iii), and (iv) of this definition, if
the Alternate Rate at such time is calculated with reference to the Interbank
Rate, and the applicable credit agreement contains provisions for calculating
interest based on a
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"eurodollar," "LIBOR," "IBOR," or similar rate index, then the applicable margin
shall be the margin calculated under such credit agreement by reference to such
"eurodollar," "LIBOR," "IBOR," or similar rate index. In all other
circumstances, the applicable margin will be the margin calculated under such
credit agreement by reference to the highest interest rate index available to
the Parent under the applicable credit agreement.
"Program Support Agreement" means and includes the Liquidity
Asset Purchase Agreement and any other agreement entered into by any Program
Support Provider providing for the issuance of one or more letters of credit for
the account of the Issuer, the issuance of one or more surety bonds for which
the Issuer is obligated to reimburse the applicable Program Support Provider for
any drawings thereunder, the sale by the Issuer to any Program Support Provider
of the Purchased Interest (or portions thereof) and/or the making of loans
and/or other extensions of credit to the Issuer in connection with the Issuer's
securitization program, together with any letter of credit, surety bond or other
instrument issued thereunder (but excluding any discretionary advance facility
provided by the Administrator).
"Program Support Provider" means and includes any Purchaser
and any other or additional Person (other than any customer of the Issuer) now
or hereafter extending credit or having a commitment to extend credit to or for
the account of, or to make purchases from, the Issuer or issuing a letter of
credit, surety bond or other instrument to support any obligations arising under
or in connection with the Issuer's securitization program.
"Purchase and Sale Agreement" means the Purchase and Sale
Agreement dated as of December 28, 1995 between Owens & Minor Medical, Inc. as
an Originator and as Servicer, the other Originators which may from time to time
be party thereto, Owens & Minor, Inc., as Parent and Guarantor, and O&M Funding
Corp. as the Initial Purchaser, as the same may be amended, supplemented or
otherwise modified in accordance with its terms.
"Purchase and Sale Termination Date" means the date determined
in accordance with Section 2.3 of the Purchase and Sale Agreement.
"Purchase and Sale Termination Event" has the meaning set
forth in Exhibit IV to the Purchase and Sale Agreement.
"Purchase Agreement" means the Agreement, the Purchase and
Sale Agreement or the Parallel Asset Purchase Agreement, and "Purchase
Agreements" means the Agreement, the Purchase and Sale Agreement, and the
Parallel Asset Purchase Agreement.
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"Purchase Limit" means the lesser of (i) $75,000,000, as such
amount may be reduced pursuant to Section 1.1(b) and (ii) (A) the aggregate of
the Maximum Liquidity Purchase (as defined in the Liquidity Asset Purchase
Agreement) of the Purchasers under the Liquidity Asset Purchase Agreement less
(B) the aggregate of the Discount of the existing Fixed Periods (for the
entirety of such Fixed Periods), as such amount may be reduced pursuant to
Section 1.1(b). References to the unused portion of the Purchase Limit shall
mean, at any time, the Purchase Limit minus the then outstanding Capital of the
Purchased Interest under the Agreement.
"Purchased Interest" means, with respect to the Receivables
Purchase Agreement and the Parallel Asset Purchase Agreement, at any time, the
undivided percentage ownership interest in (i) each and every Pool Receivable
now existing or hereafter arising, other than any Pool Receivable that arises on
or after the Facility Termination Date, (ii) all Related Security with respect
to such Pool Receivables, and (iii) all Collections with respect to, and other
proceeds of, such Pool Receivables and Related Security. Such undivided
percentage interest shall be computed as
C + DCR + LR + DLR + SFR
NRB
where:
C = the Capital of the Purchased Interest at the
time of computation under the applicable
Purchase Agreement.
DCR = the Discount Reserve of the Purchased Interest
under the applicable Purchase Agreement at the
time of computation.
LR = the Loss Reserve of the Purchased Interest
under the applicable Purchase Agreement at the
time of computation.
DLR = the Dilution Reserve of the Purchased Interest
under the applicable Purchase Agreement at the
time of computation.
SFR = the Servicing Fee Reserve of the Purchased
Interest under the applicable Purchase Agreement
at the time of computation.
NRB = the Net Receivables Pool Balance at the time
of computation.
The Purchased Interest shall be determined from time to time pursuant to the
provisions of Section 1.3 and shall be computed
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separately for the Receivables Purchase Agreement and the Parallel Asset
Purchase Agreement.
"Purchaser" has the meaning set forth in Section
5.3(b).
"Rate Variance Factor" means a number greater than one that
reflects the potential variance in selected interest rates over a period of time
designated by the Administrator, as specified by the Administrator from time to
time, notified to the Seller and set forth in the Seller Report in accordance
with the provisions thereof; provided that the "Rate Variance Factor" may be
changed from time to time upon at least five days' prior notice to the Servicer.
The initial Rate Variance Factor shall be 1.25.
"Receivable" means any indebtedness and other obligations owed
to any Originator or any rights of any Originator to payment from or on behalf
of an Obligor whether constituting an account, chattel paper, instrument or
general intangible, arising in connection with the sale or lease of goods or the
rendering of services by any Originator, and includes, without limitation, the
obligation to pay any finance charges, fees and other charges with respect
thereto. Indebtedness and other obligations arising from any one transaction,
including, without limitation, indebtedness and other obligations represented by
an individual invoice or agreement, shall constitute a Receivable separate from
a Receivable consisting of the indebtedness and other obligations arising from
any other transaction.
"Receivables Pool" means at any time all of the then
outstanding Receivables excluding the Excluded Receivables.
"Reference Bank" means BofA.
"Related Security" means with respect to any
Receivable:
(i) all of any Originator's interest in any goods
(including returned goods), and documentation or title
evidencing the shipment or storage of any goods (including
returned goods), relating to any sale giving rise to such
Receivable;
(ii) all other security interests or liens and
property subject thereto from time to time purporting to
secure payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise, together
with all UCC financing statements or similar filings signed by
an Obligor relating thereto; and
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(iii) all guaranties, indemnities, insurance and
other agreements (including the related Contract) or
arrangements of whatever character from time to time
supporting or securing payment of such Receivable or otherwise
relating to such Receivable whether pursuant to the Contract
related to such Receivable or otherwise.
"Restricted Payments" has the meaning given thereto in
paragraph (m) of Exhibit V.
"Run-off Day" means (i) each day on which the conditions set
forth in Section 2 of Exhibit II are not satisfied, (ii) each day which occurs
on or after the Termination Date, and (iii) each day as to which the Issuer has
indicated to the Seller pursuant to Section 1.1(a) that it will not reinvest in
the Purchased Interest hereunder.
"Securitization Parties" means the Issuer, the Administrator,
any Purchaser, any Parallel Purchaser, the Administrative Agent, any Program
Support Provider, their respective Affiliates, employees, agents and
representatives, and the respective successors, transferees and assigns of any
of the foregoing.
"Seller" has the meaning set forth in the preamble to
the Agreement.
"Seller Report" means a report, in substantially the form of
Annex A hereto, furnished by the Servicer to the Administrator pursuant to the
Agreement.
"Servicer" has the meaning set forth in the preamble to
the Agreement.
"Servicing Fee" shall mean the fee referred to in
Section 4.6.
"Servicing Fee Reserve" for the Purchased Interest under the
Receivables Purchase Agreement and the Parallel Asset Purchase Agreement at any
time means the sum of (i) the unpaid Servicing Fee relating to the Purchased
Interest accrued to such time, plus (ii) an amount equal to (a) the Capital of
the Purchased Interest at the time of computation multiplied by (b) the product
of (x) the percentage per annum at which the Servicing Fee is accruing on such
date and (y) a fraction having the sum of the Average Maturity plus the
Collection Delay Period (each as in effect at such date) as its numerator and
360 as its denominator.
"Settlement Period" for each Portion of Capital means each
period commencing on the first day and ending on the last day of each Fixed
Period for such Portion of Capital and, on and
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after the Termination Date, such period (including, without limitation, a period
of one day) as shall be selected from time to time by the Administrator or, in
the absence of any such selection, each period of 30 days from the last day of
the immediately preceding Settlement Period.
"Sub-Servicer" has the meaning set forth in
Section 4.1.
"Six Month Default Ratio" means the ratio (expressed as a
percentage and rounded to the nearest 1/100 of 1%) computed as of each Month End
Date by dividing (i) the amount of Pool Receivables that became Defaulted
Receivables during the six month period ending on such Month End Date by (ii)
the aggregate amount of Pool Receivables invoiced by the Originators during the
six month period ending on the Month End Date which occurred four months before
such Month End Date.
"Six Month Dilution Ratio" means the ratio (expressed as a
percentage and rounded to the nearest 1/100 of 1%) computed as of each Month End
Date by dividing (i) the aggregate reduction attributable to Dilution
Adjustments in each case occurring during the six month period ending on such
Month End Date by (ii) the aggregate amount of Pool Receivables invoiced by the
Originators during the six month period ending on the Month End Date which
occurred one month before such Month End Date.
"Six Month Loss-to-Liquidation Ratio" means the ratio
(expressed as a percentage and rounded to the nearest 1/100th of 1%) computed as
of each Month End Date by dividing (i) the aggregate Outstanding Balance of all
Pool Receivables written off by the Seller, or which should have been written
off by the Seller in accordance with the Credit and Collection Policy, during
the six month period ending on such Month End Date by (ii) the aggregate amount
of Collections of Pool Receivables actually received during such six month
period.
"Solvent" means, as to any Person at any time, that (a) the
fair value of the property of such Person is greater than the amount of such
Person's liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for purposes
of Section 101(32) of the Bankruptcy Code and, in the alternative, for purposes
of Sections 55-80 and 55-81 of the Virginia Code Annotated; (b) the present fair
saleable value of the property of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its debts as
they become absolute and matured; (c) such Person is able to realize upon its
property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such
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<PAGE>
debts and liabilities mature; and (e) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute unreasonably small capital.
"Special Concentration Percentage" means, for any Obligor,
such percentage as has been so designated in writing as such by the
Administrator at its sole discretion to the Seller, from time to time, with
respect to an Obligor, it being understood that the Administrator may (i) lower
such percentage from time to time at its sole discretion by written notice to
the Seller and (ii) raise such percentage only with the written consent of the
Seller.
"Subsidiary" means, with respect to any Person, any
corporation of which more than 50% of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
such Person, by such Person and one or more other Subsidiaries of such Person,
or by one or more other Subsidiaries of such Person.
"Supplement" means a Supplement executed by the Parent or any
Subsidiary of the Parent in form and substance satisfactory to the Administrator
and the Administrative Agent under the Parallel Asset Purchase Agreement,
pursuant to which the Parent or a Subsidiary of the Parent shall become an
Originator under the Purchase and Sale Agreement.
"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 any corporation as determined in accordance with generally accepted
accounting principles.
"Termination Date" means the earlier of (i) the Business Day
which the Seller or the Administrator so designates by notice to the other at
least 10 Business Days in advance and (ii) the Facility Termination Date.
"Termination Discount" means, for the Purchased Interest on
any date, an amount equal to the Rate Variance Factor on such date multiplied by
the product of (i) the Capital of the Purchased Interest on such date and (ii)
the product of (a) the Base Rate for the Purchased Interest for a 30-day Fixed
Period deemed to commence on such date and (b) a fraction having as its
numerator the sum of the Average Maturity plus the Collection
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<PAGE>
Delay Period (each as in effect at such date) and 360 as its denominator.
"Termination Event" has the meaning specified in
Exhibit VI.
"Termination Fee" means, for any Fixed Period during which a
Run-off Day occurs, the amount, if any, by which (i) the additional Discount
(calculated without taking into account any Termination Fee or any shortened
duration of such Fixed Period pursuant to clause (iv) of the definition thereof)
which would have accrued during such Fixed Period on the reductions of Capital
of the Purchased Interest relating to such Fixed Period had such reductions
remained as Capital, exceeds (ii) the income, if any, received by the Issuer
from the Issuer investing the proceeds of such reductions of Capital, as
determined by the Administrator, which determination shall be binding and
conclusive for all purposes, absent manifest error.
"Transaction Documents" means the Agreement, the Purchase and
Sale Agreement, the Parallel Asset Purchase Agreement, the Lock-Box Agreements,
the Liquidity Asset Purchase Agreement and all other certificates, instruments,
UCC financing statements, reports, notices, agreements and documents executed or
delivered under or in connection with the Agreement, in each case as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with the Agreement.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the applicable jurisdiction.
"Unmatured Termination Event" means, with respect to any
Purchase Agreement, an event which, with the giving of notice or lapse of time,
or both, would constitute a Termination Event under such Purchase Agreement.
Other Terms. All accounting terms not specifically defined herein shall
be construed in accordance with generally accepted accounting principles. All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
Unless the context otherwise requires, "or" means "and/or", and "including" (and
with correlative meaning "include" and "includes") means including without
limiting the generality of any description preceding such term.
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<PAGE>
EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The initial
purchase under the Agreement is subject to the conditions precedent that the
Administrator shall have received on or before the date of such purchase the
following, each in form and substance (including the date thereof) satisfactory
to the Administrator:
(a) A duly executed counterpart of this Agreement.
(b) A duly executed counterpart of the Purchase and
Sale Agreement.
(c) A duly executed counterpart copy of the Parallel
Asset Purchase Agreement.
(d) Certified copies of (i) the resolutions of the Board of
Directors of each of the Seller, the Servicer and the Parent authorizing the
execution, delivery, and performance by the Seller, the Servicer and the Parent,
respectively, of the Agreement and the other Transaction Documents, (ii) all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to the Agreement and the other Transaction
Documents and (iii) the certificate of incorporation and by-laws of each of the
Seller, the Servicer and the Parent
(e) A certificate of the Secretary or Assistant Secretary of
each of the Seller, the Servicer and the Parent certifying the names and true
signatures of the officers of the Seller, the Servicer and the Parent,
respectively, authorized to sign the Agreement and the other Transaction
Documents. Until the Administrator receives a subsequent incumbency certificate
from the Seller, the Servicer or the Parent in form and substance satisfactory
to the Administrator, the Administrator shall be entitled to rely on the last
such certificate delivered to it.
(f) Signed copies of proper financing statements, in a form
suitable for filing under the UCC of all jurisdictions that the Administrator
may deem necessary or desirable in order to perfect the interests of the Issuer
contemplated by the Agreement.
(g) Signed copies of proper financing statements, if any, in a
form suitable for filing under the UCC of all jurisdictions that the
Administrator may deem necessary to release all security interests and other
rights of any Person in the Receivables, Contracts or Related Security
previously granted by the Seller.
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(h) Completed UCC requests for information, dated on or before
the date of such initial purchase, listing the financing statements referred to
in subsection (d) above and all other effective financing statements filed in
the jurisdictions referred to in subsection (f) above that name the Seller as
debtor, together with copies of such other financing statements (none of which
shall cover any Receivables, Contracts or Related Security), and similar search
reports with respect to federal tax liens and liens of the Pension Benefit
Guaranty Corporation in such jurisdictions as the Administrator may request,
showing no such liens on any of the Receivables, Contracts or Related Security.
(i) A favorable opinion of Hunton & Williams, counsel for the
Seller, the Servicer and the Parent, substantially in the form of Annex B hereto
and as to such other matters as the Administrator may reasonably request.
(j) A favorable opinion of Drew St. J. Carneal, Esq.,
Senior Vice President, Corporate Counsel and Secretary of the
Parent, substantially in the form of Annex C hereto and as to
such other matters as the Administrator may reasonably request.
(k) Satisfactory results of a review and audit of the
Originators' collection, operating and reporting systems, Credit and Collection
Policy, historical receivables data and accounts, including satisfactory results
of a review of the Originators' operating location(s) and satisfactory review
and approval of the Eligible Receivables in existence on the date of the initial
purchase under the Agreement.
(l) Seller Report representing the performance of the
portfolio purchased through the Agreement for the month prior to closing.
(m) Evidence of payment by Owens & Minor Medical, Inc. and the
Seller of all accrued and unpaid fees (including those contemplated by the
letter agreement referred to in Section 1.5), costs and expenses to the extent
then due and payable on the date thereof, together with Attorney Costs of the
Administrator to the extent invoiced prior to or on such date, plus such
additional amounts of Attorney Costs as shall constitute the Administrator's
reasonable estimate of Attorney Costs incurred or to be incurred by it through
the closing proceedings (provided that such estimate shall not thereafter
preclude final settling of accounts between the Seller and the Administrator);
including any such costs, fees and expenses arising under or referenced in
Section 5.4.
(n) A letter agreement between the Seller and the
Administrator contemplated by Section 1.5.
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(o) Good standing certificates with respect to each of
the Seller, the Servicer and the Parent issued by the Secretary
of the State Corporation Commission of Virginia.
(p) Such other approvals, opinions or documents as the
Administrator or Purchasers may reasonably request.
2. Conditions Precedent to All Purchases and
Reinvestments. Each purchase (including the initial purchase)
and each reinvestment shall be subject to the further conditions
precedent that:
(a) in the case of each purchase, the Servicer shall have
delivered to the Administrator on or prior to such purchase, in form and
substance satisfactory to the Administrator, a completed Seller Report with
respect to the immediately preceding calendar month, dated within three (3)
Business Days prior to the date of such purchase and such additional information
as may reasonably be requested by the Administrator including, without
limitation, a listing of Obligors and their respective portions of the Pool
Receivables at any time;
(b) on the date of such purchase or reinvestment the following
statements shall be true (and acceptance of the proceeds of such purchase or
reinvestment shall be deemed a representation and warranty by the Seller and the
Parent that such statements are then true):
(i) the representations and warranties contained in
Exhibit III are true and correct on and as of the date of such purchase
or reinvestment as though made on and as of such date; and
(ii) no event has occurred and is continuing, or
would result from such purchase or reinvestment, that constitutes a
Termination Event or that would constitute a Termination Event but for
the requirement that notice be given or time elapse or both; and
(c) the Administrator shall have received such other
approvals, opinions or documents as it may reasonably request.
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EXHIBIT III
REPRESENTATIONS AND WARRANTIES
OF
SELLER, SERVICER AND THE PARENT
The Seller, the Servicer and the Parent each jointly and
severally make the following representations and warranties:
(a) Organization and Good Standing. It is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Virginia, and is duly qualified to do business, and is in good
standing, as a foreign corporation in every jurisdiction where the nature of its
business requires it to be so qualified.
(b) Due Qualification; No Conflicts. The execution, delivery
and performance by it of the Agreement and the other Transaction Documents to
which it is a party, including, in the case of the Seller, the Seller's use of
the proceeds of purchases and reinvestments, (i) are within its corporate
powers, (ii) have been duly authorized by all necessary corporate action, (iii)
do not contravene or result in a default under or conflict with (1) its charter
or by-laws, (2) any law, rule or regulation applicable to it, (3) any
contractual restriction binding on or affecting it or its property or (4) any
order, writ, judgment, award, injunction or decree binding on or affecting it or
its property, and (iv) do not result in or require the creation of any Adverse
Claim upon or with respect to any of its properties. The Agreement and the other
Transaction Documents to which it is a party have been duly executed and
delivered by it.
(c) Consents. No authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority or other Person is
required for the due execution, delivery and performance by it of the Agreement
or any other Transaction Document to which it is a party other than (i) the
filing of financing statements against Owens & Minor Medical, Inc. and the
Seller in the State Corporation Commission of Virginia and (ii) comparable
filings with respect to all other Originators in the jurisdiction provided in
their respective Supplement to perfect the Initial Purchaser's interest in the
Pool Receivables under the Receivables Purchase Agreement.
(d) Binding Obligations. Each of the Agreement and the other
Transaction Documents to which it is a party (and which on its face purports to
create an obligation) constitutes the legal, valid and binding obligation of it
enforceable against it in accordance with its terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditor's rights generally and by general
principles of equity regardless of
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whether such enforceability is considered in a proceeding in
equity or at law.
(e) Financial Statements.
(i) The consolidated and consolidating balance sheet
of the Parent and its Subsidiaries as of December 31, 1994,
and the related consolidated and consolidating statements of
income and retained earnings of the Parent and its
Subsidiaries for the fiscal year then ended, copies of which
have been furnished to the Administrator, fairly present the
financial condition of the Parent and its Subsidiaries as at
such date and the results of the operations of the Seller and
its Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles
consistently applied, and since December 31, 1994 there has
been no material adverse change in the business, operations,
property or financial or other condition or operations of the
Seller or the Parent or any of their Subsidiaries taken as a
whole (except as reflected in the unaudited financial
statements of Parent as of September 30, 1995), the ability of
the Seller or the Parent to perform its obligations under the
Agreement or the other Transaction Documents or the
collectibility of the Pool Receivables, or which affects the
legality, validity or enforceability of the Purchase and Sale
Agreement or the other Transaction Documents.
(ii) The unaudited condensed balance sheet of the
Originators as of December 31, 1994, and the related condensed
statements of income of the Originators for the fiscal year
ended December 31, 1994, heretofore furnished to the
Administrator, are the financial statements of the Originators
routinely prepared for internal use.
(f) No Proceedings. There is no pending or threatened action
or proceeding affecting either (x) the Seller and its Subsidiaries taken as a
whole or (y) the Parent and its Subsidiaries taken as a whole, which is before
any Governmental Authority or arbitrator and which would reasonably be expected
to materially adversely affect the business, operations, property, financial or
other condition or operations of either (x) the Seller and its Subsidiaries
taken as a whole or (y) the Parent and its Subsidiaries taken as a whole, or
their ability to perform its obligations under the Agreement or the other
Transaction Documents or the collectibility of the Receivables, or which affects
or purports to affect the legality, validity or enforceability of the Agreement
or the other Transaction Documents.
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(g) Quality of Title; Valid Sale; Etc. The Seller is the legal
and beneficial owner of the Pool Receivables and Related Security free and clear
of any Adverse Claim; upon each purchase or reinvestment, the Issuer shall
acquire a valid and enforceable perfected undivided percentage ownership
interest, to the extent of the Purchased Interest, in each Pool Receivable then
existing or thereafter arising and in the Related Security and Collections and
other proceeds, with respect thereto, free and clear of any Adverse Claim. No
effective financing statement or other instrument similar in effect covering any
Contract or any Pool Receivable or the Related Security or Collections with
respect thereto or any Lock-Box Account is on file in any recording office,
except those filed in favor of the Issuer relating to the Agreement.
(h) Accuracy of Information. Each Seller Report (if prepared
by the Seller or one of its Affiliates, or to the extent that information
contained therein is supplied by the Seller or an Affiliate), information,
exhibit, financial statement, document, book, record or report furnished or to
be furnished at any time by or on behalf of the Seller to the Administrator in
connection with the Agreement is or will be accurate in all material respects as
of its date or (except as otherwise disclosed to the Administrator at such time)
as of the date so furnished, and no such item contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained therein, in the light
of the circumstances under which they were made, not misleading.
(i) Principal Place of Business. The principal place of
business and chief executive office (as such terms are used in the UCC) of the
Seller and the office where the Seller keeps its records concerning the
Receivables are located at the address referred to in Schedule III (or at such
other addresses designated in accordance with such paragraph (b) of Exhibit V).
(j) Lock-Box Banks, Accounts. The names and addresses of all
the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts
of the Seller at such Lock-Box Banks, are specified in Schedule IV to the
Agreement (or at such other Lock- Box Banks and/or with such other Lock-Box
Accounts as have been notified to the Administrator in accordance with the
Agreement) and all Lock-Box Accounts are subject to Lock-Box Agreements.
(k) No Violation. It is not in violation of any order of any
court, arbitrator or Governmental Authority which violation would reasonably be
expected to have a material adverse effect on its business, operations, property
or financial or other condition.
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(l) Ownership of Issuer. Neither it nor any of its
Affiliates has any direct or indirect ownership or other
financial interest in the Issuer.
(m) Proceeds. No proceeds of any purchase or reinvestment will
be used for any purpose that violates any applicable law, rule or regulation,
including, without limitation, Regulations G or U of the Federal Reserve Board.
(n) Eligible Receivables. Each Pool Receivable included as an
Eligible Receivable in the calculation of the Net Receivables Pool Balance, is
an Eligible Receivable.
(o) No Purchase and Sale Termination Events. No event has
occurred and is continuing, or would result from a purchase in respect of, or
reinvestment in respect of the Purchased Interest or from the application of the
proceeds therefrom, which constitutes a Termination Event.
(p) Maintenance of Books and Records. The Seller has accounted
for each sale of undivided percentage ownership interests in Receivables in its
books and financial statements as a sale, consistent with Generally Accepted
Accounting Principles.
(q) Credit and Collection Policy. The Seller has complied in
all material respects with the Credit and Collection Policy with regard to each
Receivable.
(r) Compliance with Transaction Documents. It has complied
with all of the terms, covenants and agreements contained in the Agreement and
the other Transaction Documents and applicable to it.
(s) Corporate Name. The Seller's complete corporate name is
set forth in the preamble to the Agreement, and the Seller does not use and has
not during the last six years used any other corporate name, trade name, doing
business name or fictitious name, except as set forth on Schedule III and except
for names first used after the date of the Agreement and set forth in a notice
delivered to the Administrator pursuant to paragraph (l)(vi) of Exhibit V.
(t) No Labor Disputes. There are no strikes, lockouts or other
labor disputes against it or any of its subsidiaries, or, to the best of its
knowledge, threatened against or affecting it or any of its subsidiaries, and no
significant unfair labor practice complaint is pending against it or any of its
subsidiaries or, to the best knowledge of it, threatened against any of them by
or before any Governmental Authority that would have a material adverse effect
on its business, operations, property or financial or other condition.
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(u) Pension Plans. During the preceding twelve months, no
steps have been taken to terminate any Pension Plan of the Seller, the Servicer
or the Parent which was not fully funded, unless adequate reserves have been set
aside for the funding thereof, and no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a lien under section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which could result in the incurrence by the Seller,
the Servicer or the Parent of any material liability, fine or penalty.
(v) Investment Company Act. It is not, and is not controlled
by, an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended.
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EXHIBIT IV
REPRESENTATIONS AND WARRANTIES OF ISSUER
The Issuer represents and warrants as follows:
(a) Organization and Good Standing. The Issuer is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and is duly qualified to do business, and is in
good standing, as a foreign corporation in every jurisdiction where the nature
of its business requires it to be so qualified.
(b) Due Qualification; No Conflicts. The execution, delivery
and performance by the Issuer of the Agreement and the other Transaction
Documents to which it is a party, including the Issuer's use of the proceeds of
purchases and reinvestments, (i) are within the Issuer's corporate powers, (ii)
have been duly authorized by all necessary corporate action, (iii) do not
contravene or result in a default under or conflict with (1) the Issuer's
charter or by-laws, (2) any law, rule or regulation applicable to the Issuer,
(3) any contractual restriction binding on or affecting the Issuer or its
property or (4) any order, writ, judgment, award, injunction or decree binding
on or affecting the Issuer or its property, and (iv) do not result in or require
the creation of any Adverse Claim upon or with respect to any of its properties.
The Agreement and the other Transaction Documents to which it is a party have
been duly executed and delivered by the Issuer.
(c) Consents. No authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority or other Person is
required for the due execution, delivery and performance by the Issuer of the
Agreement or any other Transaction Document to which it is a party.
(d) Binding Obligations. Each of the Agreement and the other
Transaction Documents to which it is a party constitutes the legal, valid and
binding obligation of the Issuer enforceable against the Issuer in accordance
with its terms except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditor's rights generally and by general principles of equity regardless of
whether such enforceability is considered in a proceeding in equity or at law.
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EXHIBIT V
COVENANTS
Covenants of the Seller and the Parent. Until the latest of the
Facility Termination Date, the date on which no Capital of or Discount in
respect of the Purchased Interest shall be outstanding or the date all other
amounts owed by the Seller under the Agreement to the Issuer, the Administrator
and any other Indemnified Party or Affected Person shall be paid in full, each
of the Seller and the Parent, jointly and severally, agree that obligations set
forth in this Exhibit V shall be performed and observed.
(a) Compliance with Laws, Etc. The Seller shall comply in all
material respects with all applicable laws, rules, regulations and orders, and
preserve and maintain its corporate existence, rights, franchises,
qualifications, and privileges except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve and
maintain such existence, rights, franchises, qualifications, and privileges
would not materially adversely affect the collect- ibility of the Receivables or
the enforceability of any related Contract or the ability of the Seller to
perform its obligations under any related Contract or under the Agreement.
(b) Offices, Records and Books of Account; Etc. The Seller
(i) shall keep its principal place of business and chief executive office (as
such terms are used in the UCC) and the office where it keeps its records
concerning the Receivables at the address of the Seller set forth on Schedule
III attached hereto or, upon at least 60 days' prior written notice of a
proposed change to the Administrator, at any other locations in jurisdictions
where all actions reasonably requested by the Administrator to protect and
perfect the interest of the Issuer in the Receivables and related items have
been taken and completed and (ii) shall provide the Administrator with at least
60 days' written notice prior to making any change in the Seller's name or
making any other change in the Seller's identity or corporate structure
(including a merger) which could render any UCC financing statement filed in
connection with this Agreement "seriously misleading" as such term is used in
the UCC; each notice to the Administrator pursuant to this sentence shall set
forth the applicable change and the effective date thereof. The Seller also will
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing Receivables and
related Contracts in the event of the destruction of the originals thereof), and
keep and maintain all documents, books, records, computer tapes and disks and
other information reasonably necessary or advisable
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for the collection of all Receivables (including, without limitation, records
adequate to permit the daily identification of each Receivable and all
Collections of and adjustments to each existing Receivable).
(c) Performance and Compliance with Contracts and Credit and
Collection Policy. The Seller shall, at its expense, timely and fully perform
and comply with all material provisions, covenants and other promises required
to be observed by it under the Contracts related to the Receivables, and timely
and fully comply in all material respects with the Credit and Collection Policy
with regard to each Receivable and the related Contract.
(d) Ownership Interest, Etc. The Seller shall, at its expense,
take all action necessary or desirable to establish and maintain a valid and
enforceable and perfected undivided ownership interest, to the extent of the
Purchased Interest, in the Pool Receivables and the Related Security and
Collections and other proceeds with respect thereto, free and clear of any
Adverse Claim, in favor of the Issuer, including, without limitation, taking
such action to perfect, protect or more fully evidence the interest of the
Issuer under the Agreement as the Issuer, through the Administrator, may
request.
(e) Sales, Liens, Etc. The Seller shall not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Adverse Claim upon or with respect to, any or all of its right, title
or interest in, to or under the Seller's undivided interest in any Receivable,
Related Security, or Collections, or upon or with respect to any account to
which any Collections of any Receivables are sent, or assign any right to
receive income in respect of any items contemplated by this paragraph (e).
(f) Extension or Amendment of Receivables. Except as provided
in Section 4.2(a) the Agreement, the Seller shall not extend the maturity or
adjust the Outstanding Balance or otherwise modify the terms of any Pool
Receivable. The Seller will not amend, modify or waive any term or condition of
any related Contract in a way which would adversely affect the collectibility of
any Receivables.
(g) Change in Business or Credit and Collection Policy. Without the
written consent of the Administrator, the Seller shall not make (i) any material
change in the character of its business or in the Credit and Collection Policy,
or (ii) any change at all in the Credit and Collection Policy that would
adversely affect the collectibility of the Receivables Pool or the
enforceability of any related Contract or the ability of the Seller to perform
its obligations under any related Contract or under the Agreement.
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(h) Audits. The Seller shall, from time to time during regular business
hours as requested by the Administrator, permit the Administrator, or its agents
or representatives, (i) to examine and make copies of and make abstracts from
all books, records and documents (including, without limitation, computer tapes
and disks) in the possession or under the control of the Seller relating to
Receivables and the Related Security, provided that copies of the related
Contracts may only be made if the Servicer is not the Seller or if a Termination
Event has occurred and (ii) to visit the offices and properties of the Seller
for the purpose of examining such materials described in clause (i) above, and
to discuss matters relating to Receivables and the Related Security or the
Seller's performance hereunder or under the Contracts with any of the officers,
employees, agents or contractors of the Seller having knowledge of such matters.
(i) Lock-Box Agreements; Change in Lock-Box Banks,
Lock-Box Accounts and Payment Instructions to Obligors.
(i) By January 31, 1996, the Seller shall have
delivered to the Administrator copies of executed Lock-Box Agreements
with the Lock-Box Banks in form and substance satisfactory to the
Administrator.
(ii) The Seller shall not add or terminate any bank
as a Lock-Box Bank or any account as a Lock-Box Account from those
listed in Schedule IV to the Agreement, or make any change in its
instructions to Obligors regarding payments to be made to the Seller or
payments to be made to any Lock-Box Account (or related post office
box), unless the Administrator shall have consented thereto in writing
and the Administrator shall have received copies of all agreements and
documents (including without limitation Lock-Box Agreements) that it
may request in connection therewith.
(j) Deposits to Lock-Box. The Seller shall (i) instruct all
Obligors (other than Obligors which customarily make direct payment to the
Company for deposit in one of the Lock-Box Accounts designated on Schedule IV as
a "Deposit Account", provided that the Company complies with Clause (ii) of this
subsection (j)) to make payments of all Receivables to one or more Lock-Box
Accounts or to post office boxes to which only Lock-Box Banks have access (and
shall instruct the Lock-Box Banks to cause all items and amounts relating to
such Receivables received in such post office boxes to be removed and deposited
into a Lock-Box Account on a daily basis), and (ii) deposit, or cause to be
deposited, any Collections of Pool Receivables received by it into Lock-Box
Accounts not later than one Business Day after receipt thereof. Each Lock-Box
Account shall at all times be subject to a Lock-Box Agreement. The Seller will
not deposit or otherwise credit, or cause or permit to be so
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deposited or credited, to any Lock-Box Account cash or cash proceeds other than
Collections of Pool Receivables. Notwithstanding the foregoing, Columbia
Receivables may be commingled except that the Company will, at the
Administrator's request, establish a separate account and cause Columbia
Receivables to be paid by the Obligors into such separate account to avoid such
commingling.
(k) Marking of Records. At its expense, the Seller shall mark
its master data processing records relating to Pool Receivables and related
Contracts, including with a legend evidencing that the undivided percentage
ownership interests with regard to the Purchased Interest related to such
Receivables and related Contracts have been sold in accordance with the
Agreement.
(l) Reporting Requirements. The Seller will provide to the
Administrator (in multiple copies, if requested by the Administrator) the
following:
(i) as soon as available and in any event within 45
days after the end of the first three quarters of each fiscal year of
the Parent, the consolidated and consolidating balance sheet of the
Parent and its Subsidiaries as of the end of such quarter and the
consolidated and consolidating statement of income and retained
earnings of the Parent and its Subsidiaries for the period commencing
at the end of the previous fiscal year and ending with the end of such
quarter, certified by the chief financial officer or Treasurer of the
Parent;
(ii) as soon as available and in any event within 90
days after the end of each fiscal year of the Parent, a copy of the
annual report for such year for the Parent and its Subsidiaries,
containing financial statements for such year audited by KPMG Peat
Marwick or other independent certified public accountants acceptable to
the Administrator;
(iii) as soon as available and in any event not later
than 10th Day of each Calendar Month, a Seller Report as of the
previous Month End Date; and within five Business Days of a request by
the Administrator for a Seller Report as of a date other than a Month
End Date, such Seller Report;
(iv) as soon as possible and in any event within five
days after the occurrence of each Termination Event or event which,
with the giving of notice or lapse of time, or both, would constitute a
Termination Event, a statement of the chief financial officer or
Treasurer of the Parent
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setting forth details of such Termination Event or event and the action
that the Seller has taken and proposes to take with respect thereto;
(v) promptly after the sending or filing thereof,
copies of all reports that the Seller or the Parent sends to any of its
security holders, and copies of all reports and registration statements
that the Seller or the Parent or any of their Subsidiaries files with
the Securities and Exchange Commission or any national securities
exchange;
(vi) promptly after the filing or receiving thereof,
copies of all reports and notices that the Seller, the Parent or any of
their Affiliates files under ERISA with the Internal Revenue Service or
the Pension Benefit Guaranty Corporation or the U.S. Department of
Labor or that the Seller, the Parent or any of their Affiliates
receives from any of the foregoing or from any multiemployer plan
(within the meaning of Section 4001(a)(3) of ERISA) to which the
Seller, the Parent or any of their Affiliates is or was, within the
preceding five years, a contributing employer, in each case in respect
of the assessment of withdrawal liability or an event or condition
which could, in the aggregate, result in the imposition of liability on
the Seller, the Parent and/or any such Affiliate in excess of $500,000;
(vii) at least thirty days prior to any change in the
Seller's name or any other change requiring the amendment of UCC
financing statements, a notice setting forth such changes and the
effective date thereof;
(viii) such other information respecting the
Receivables or the condition or operations, financial or otherwise, of
the Seller, the Parent or any of their Affiliates as the Administrator
may from time to time reasonably request;
(ix) promptly after the Seller or the Parent obtains
knowledge thereof, notice of any (a) litigation, investigation or
proceeding which may exist at any time between any O&M Party and any
Governmental Authority which, if not cured or if adversely determined,
as the case may be, would have a material adverse effect on the
business, operations, property or financial or other condition of the
Seller or the Parent; or (b) litigation or proceeding adversely
affecting any O&M Party in which the amount involved is $5,000,000 or
more and not covered by insurance or in which injunctive or similar
relief is sought or (c) litigation or proceeding relating to any
Transaction Document; and
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(x) promptly after the occurrence thereof, notice of
a material adverse change in the business, operations, property or
financial or other condition of the Seller or the Parent affecting any
O&M Party.
(m) General Restriction.
(i) The Seller shall not (A) pay or declare any
Dividend, (B) lend or advance any funds, including in respect
of any Originator Note, or (C) repay any loans or advances to,
for or from any Originator or any other Affiliated Party
(including making any payment pursuant to any Initial
Purchaser Note) except in accordance with clause (o) of this
Exhibit V and this clause (m). Actions of the type described
in the preceding sentence are herein collectively called
"Restricted Payments".
(ii) Types of Permitted Payments. Subject to the
limitations set forth in clause (o) below, the Seller may make
Restricted Payments so long as such Restricted Payments are
made only to an Originator and only in one or more of the
following ways:
(A) the Seller may make cash payments on any
Initial Purchaser Note in accordance with its terms; and
(B) if no amounts are then outstanding under
any Initial Purchaser Note, the Seller may
(1) make demand loans to Owens &
Minor Medical, Inc., so long as each such
loan is evidenced by an Originator Note; and
(2) declare and pay Dividends to any
shareholder (provided, that payment of such
Dividends must comply with Virginia law; and
provided, further, that Dividends may not be
paid more frequently than once every month).
(iii) Additional Specific Restrictions. The Seller may
make Restricted Payments only out of Collections paid or
released to the Seller pursuant to Sections 1.4(b)(ii) and
1.4(b)(iv) of the Receivables Purchase Agreement or from other
net income of the Seller. Furthermore, the Seller shall not
pay, make or declare:
(A) any Dividend if, after giving effect thereto, the
Seller's Tangible Net Worth would be less than $7,500,000;
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(B) any Restricted Payment if, after giving
effect thereto, a Termination Event or Unmatured
Termination Event shall have occurred and be
continuing; or
(C) any Restricted Payment if, after giving
effect thereto, the Seller would not be Solvent.
(n) ERISA Matters. Each of the Seller and the Parent shall
notify the Administrator as soon as is practicable and in any event not later
than two Business Days after (i) the institution of any steps by the Seller or
the Parent or any other Person to terminate any Pension Plan which is not fully
funded, unless adequate reserves have been set aside for the funding thereof,
(ii) the failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a lien under section 302(f) of ERISA,
(iii) the taking of any action with respect to a Pension Plan which could result
in the requirement that the Seller or the Parent furnish a bond or other
security to the PBGC or such Pension Plan or (iv) the occurrence of any other
event concerning any Pension Plan which is reasonably likely to result in a
material adverse effect.
(o) Separate Corporate Existence of the Seller. Each of the
Seller and the Parent hereby acknowledges that the Seller, the Issuer and the
Administrator are entering into the transactions contemplated by the Purchase
and Sale Agreement and by the Receivables Purchase Agreement in reliance upon
the Seller's identity as a legal entity separate from its Affiliates. Therefore,
each of the Seller and the Parent shall take all steps to continue the Seller's
identity as such a separate legal entity and to make it apparent to third
Persons that the Seller is an entity with assets and liabilities distinct from
those of its Affiliates and those of any other Person, and not a division of any
of its Affiliates or any other Person. Without limiting the generality of the
foregoing, each of the Seller and the Parent will, and will cause its Affiliates
to, take such actions as shall be required in order that:
(i) The Seller will be a limited purpose corporation whose
primary activities are restricted in its articles of incorporation to
purchasing Pool Receivables from each Originator (or other Persons
approved in writing by the Administrator), entering into agreements for
the servicing of such Pool Receivables, selling undivided interests in
the Pool Receivables to the Issuer and conducting such other activities
as it deems necessary or appropriate to carry out its primary
activities;
(ii) At least one member of the Seller's Board of Directors
shall be an individual who is not a direct, indirect or beneficial
stockholder, officer, director,
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employee, affiliate, associate, customer or supplier of any
of its Affiliates;
(iii) No director or officer of the Seller shall at
any time serve as a trustee in bankruptcy for any of its
Affiliates;
(iv) Any employee, consultant or agent of the Seller will be
compensated from the Seller's own bank accounts for services provided
to the Seller except as provided in the Receivables Purchase Agreement
in respect of the Servicing Fee. The Seller will engage no agents other
than a Servicer for the Pool Receivables, which Servicer (if an
Affiliate) will be fully compensated for its services to the Seller by
payment of the Servicing Fee;
(v) The Seller may incur indirect or overhead expenses for
items shared between the Seller and any of its Affiliates which are not
reflected in the Servicing Fee, such as legal, auditing and other
professional services, but such expenses will be allocated to the
extent practical on the basis of cost, it being understood that each of
the Originators and the Parent shall jointly and severally pay all
expenses relating to the preparation, negotiation, execution and
delivery of the Transaction Documents, including legal and other fees;
(vi) The Seller's operating expenses will not be paid
by any of its Affiliates;
(vii) The Seller will have its own separate telephone number,
stationery and bank checks signed by it and in its own name and, if it
uses premises leased, owned or occupied by any of its Affiliates, its
portion of such premises will be defined and separately identified and
it will pay such other Affiliates reasonable compensation for the use
of such premises;
(viii) The books and records of the Seller will be
maintained separately from those of its Affiliates;
(ix) The assets of the Seller will be maintained in a manner
that facilitates their identification and segregation from those of its
Affiliates; and the Seller will strictly observe corporate formalities
in its dealings with each of its Affiliates;
(x) The Seller shall not maintain joint bank accounts with any
of its Affiliates or other depository accounts to which any of its
Affiliates (other than O&M Medical (or any of its Affiliates) in its
capacity as the Servicer under the Purchase and Sale Agreement or under
the Receivables Purchase Agreement) has independent access;
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(xi) The Seller shall not, directly or indirectly, be named
and shall not enter into any agreement to be named as a direct or
contingent beneficiary or loss payee on any insurance policy covering
the property of any other Seller Party or any Affiliate of any other
Seller Party unless it pays a proportional share of the premium
relating to any such insurance policy;
(xii) The Seller will maintain arm's-length relationships with
each of its Affiliates. Any of its Affiliates that renders or otherwise
furnishes services or merchandise to the Seller will be compensated by
the Seller at market rates for such services or merchandise; and
(xiii) Neither the Seller, on the one hand, nor any of its
Affiliates, on the other hand, will be or will hold itself out to be
responsible for the debts of the other or the decisions or actions in
respect of the daily business and affairs of the other.
(xiv) Every representation and warranty of the Seller and the
Parent contained in the Officer's Certificates delivered in connection
with the opinion of Hunton & Williams pursuant to Section 1(j) of
Exhibit II of this Agreement (the "Certificate"), a true copy of which
Certificate is attached hereto as Annex D, is true and correct in all
material respects as of the date hereof; and each of the Seller and the
Parent shall comply with all of its respective covenants and other
obligations set forth in the Certificate.
(p) Mergers, Acquisitions, Sales, Investments, etc.
The Seller shall not
(i) be a party to any merger or consolidation, or directly or
indirectly purchase or otherwise acquire all or substantially all of
the assets or any stock of any class of, or any partnership or joint
venture interest in, any other Person,
(ii) sell, transfer, convey or lease any of its assets
other than pursuant to this Receivables Purchase Agreement,
or
(iii) make, incur or suffer to exist any investment in, equity
contribution to, loan or advance to, or payment obligation in respect
of the deferred purchase price of property from, any other Person,
except as expressly contemplated by the Purchase and Sale Agreement and
this Receivables Purchase Agreement.
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EXHIBIT VI
TERMINATION EVENTS
Each of the following shall be a "Termination Event":
(a) (i) The Servicer (if Owens & Minor Medical, Inc. or any of
its Affiliates) shall fail to perform or observe any term, covenant or agreement
under any Transaction Document to which it is a party and such failure shall
continue for two Business Days or (ii) any Person which is the Servicer shall
fail to make when due any payment or deposit to be made by it under any
Transaction Document to which it is a party and such failure shall continue for
two Business Days; or
(b) The Servicer shall fail (i) to transfer to any successor
Servicer when required any rights, pursuant to the Agreement, which the Servicer
then has, or (ii) to make any payment required under the Agreement; or
(c) Any representation or warranty made or deemed made by the
Seller, the Servicer or the Parent (or any of their respective officers) under
or in connection with the Agreement or any information or report delivered by
the Seller, the Servicer or the Parent pursuant to the Agreement shall prove to
have been incorrect or untrue in any material respect when made or deemed made
or delivered; or
(d) The Seller, the Servicer or the Parent shall fail to
perform or observe any other term, covenant or agreement contained in the
Agreement on its part to be performed or observed and any such failure shall
remain unremedied for 10 days (or, with respect to a failure to deliver the
Seller Report pursuant to the Agreement, such failure shall remain unremedied
for five days); or
(e) Any O&M Party shall fail to pay any principal of or
premium or interest on any of its Debt (including Debt owing pursuant to the O&M
Credit Agreement) which is outstanding in a principal amount of at least
$10,000,000 in the aggregate when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any, specified
in the agreement, mortgage, indenture or instrument relating to such Debt; or
any other event shall occur or condition shall exist under any agreement,
mortgage, indenture or instrument relating to any such Debt and shall continue
after the applicable grace period, if any, specified in such agreement,
mortgage, indenture or instrument, if the effect of such event or condition is
to accelerate, or to permit the acceleration of, the
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maturity of such Debt; or any such Debt shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to repay, redeem,
purchase or defease such Debt shall be required to be made, in each case prior
to the stated maturity thereof; or
(f) The Agreement or any purchase or any reinvestment pursuant
to the Agreement shall for any reason (other than pursuant to the terms hereof)
cease to create, or the Purchased Interest shall for any reason cease to be, a
valid and enforceable perfected undivided percentage ownership interest to the
extent of the Purchased Interest in each Pool Receivable and the Related
Security and Collections and other proceeds with respect thereto, free and clear
of any Adverse Claim; or
(g) Any O&M Party shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against any O&M Party seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 30 days, or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of its
property) shall occur; or any O&M Party shall take any corporate action to
authorize any of the actions set forth above in this paragraph (g); or
(h) Any event occurs which materially adversely affects the
collectibility of the Eligible Receivables or there shall have occurred any
other event which materially adversely affects the ability of the Servicer to
collect Eligible Receivables; or
(i) As of the last day of any calendar month, either (i) the
Six Month Default Ratio shall exceed 4% or (ii) the Six Month Dilution Ratio
shall exceed 5% or (iii) the Six Month Loss- to-Liquidation Ratio shall exceed
1.0% or (iv) the average of the Delinquency Ratios for the six consecutive Month
End Dates ending with such last day shall exceed 25%; or
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(j) The Purchased Interest shall exceed 100%.
(k) Any O&M Party shall contract, create, incur, assume or permit to
exist any Lien with respect to any of its property of assets of any kind
(whether real or personal, tangible or intangible), whether now owned or after
acquired, except for Permitted Liens.
(l) The Tangible Net Worth of Initial Purchaser shall at any time be
less than $5,000,000.
(m) Any Change of Control shall occur.
(n) A Termination Event of the type described in Exhibit IV to the
Purchase and Sale Agreement shall have occurred.
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SCHEDULE I
CREDIT AND COLLECTION POLICY
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SCHEDULE II
PERMITTED LIENS
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SCHEDULE III
TRADE NAMES AND LOCATIONS
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SCHEDULE IV
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
Lock-Box Bank Lock-Box Account
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ANNEX A
FORM OF LOCK-BOX AGREEMENT
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LOCK-BOX AGREEMENT
December ____, 1995
Address of Lock-Box Bank
Dear __________:
Reference is made to our lock-box account no. _____ (the "Lock Box
Account") and our deposit account no. _____ (together with the Lock Box Account,
the "Accounts") maintained with you. Reference is further made to (i) the
Purchase and Sale Agreement dated as of December 28, 1995 (as the same may be
amended, modified or otherwise supplemented from time to time, the "Purchase and
Sale Agreement") between the Originators party thereto, Owens & Minor Medical,
Inc. ("O&M Medical"), as an Originator and as Servicer, and O&M Funding Corp.,
as Initial Purchaser ("O&M Funding") and Owens & Minor, Inc. ("O&M"), and (ii)
the Receivables Purchase Agreement dated as of December 28, 1995 (as the same
may be amended, modified or otherwise supplemented from time to time, the
"Receivables Purchase Agreement") among O&M Funding, as Seller, O&M Medical, as
Servicer, O&M, Receivables Capital Corporation ("RCC"), as Issuer, and Bank of
America National Trust and Savings Association, as administrator (the
"Administrator"), and (iii) the Parallel Asset Purchase Agreement dated as of
December 28, 1995 (as it may be amended, modified, or otherwise supplemented
from time to time, the "Parallel Asset Purchase Agreement") among O&M Funding,
O&M Medical, O&M, the Parallel Purchasers from time to time parties thereto, and
Bank of America National Trust and Savings Association, as Administrative Agent
for such Parallel Purchasers (in such capacity the "PAPA Agent")
Please be advised that pursuant to the Purchase and Sale Agreement O&M
Medical has sold all of its right, title and interest in (but not its
obligations under) the Accounts, all amounts on deposit therein, all
certificates and instruments, if any, evidencing such Accounts and amounts on
deposit therein and any related agreements between you and O&M Medical to O&M
Funding. In addition:
(i)(a) pursuant to the Purchase and Sale Agreement, O&M
Medical has sold to O&M Funding and may hereafter sell to O&M Funding
all of O&M Medical's right, title and interest in accounts, chattel
paper, instruments or general intangibles (collectively, "Receivables")
with respect to which payments are or may hereafter be made to the
Accounts, (b) pursuant to the Receivables Purchase Agreement, O&M
Funding has assigned and/or may hereafter assign to RCC one or more
undivided percentage interests in Receivables with respect to which
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payments are or may hereafter be made to the Accounts, and (c) pursuant
to the Parallel Asset Purchase Agreement, O&M Funding has assigned and
may hereafter assign to the PAPA Agent for the benefit of the Parallel
Purchasers one or more undivided percentage interests in Receivables
with respect to which payment may be made hereafter to the Accounts;
and
(ii)(a) pursuant to the Purchase and Sale Agreement, O&M
Medical has granted a security interest in such Receivables, the
Accounts and related property to O&M Funding, (b) pursuant to the
Receivables Purchase Agreement O&M Funding has granted a security
interest in such Receivables, the Accounts and related property to RCC,
and (c) pursuant to the Parallel Asset Purchase Agreement, O&M Funding
has granted a security interest in such Receivables, the Accounts and
related property to the PAPA Agent for the benefit of the Parallel
Purchasers.
Your execution of this letter agreement is a condition precedent to
continued maintenance of the Accounts with you.
We hereby transfer exclusive ownership and control of the Accounts to
the Administrator on behalf of RCC and the PAPA Agent as their interests may
appear, subject only to the condition subsequent that the Administrator shall
have given you notice of its election to assume such ownership and control,
which notice may be in the form attached hereto as Exhibit A or in any other
form that gives you reasonable notice of such election.
We hereby irrevocably instruct you, at all times from and after the
date of your receipt of notice from the Administrator as described above, to
make all payments to be made by you out of or in connection with the Accounts
directly to the Administrator, at its address set forth below its signature
hereto or as the Administrator otherwise notifies you (at account no. 7062178,
ABA no. 071000039) for the account of RCC and the PAPA Agent as their interests
may appear, or otherwise in accordance with the instructions of the
Administrator.
The PAPA Agent hereby agrees with you and the Administrator, that you
are authorized and instructed to accept all instructions with respect to the
Accounts from the Administrator and not the PAPA Agent, irrespective of whether
such instructions conflict with an instruction given to you by the PAPA Agent,
and the PAPA Agent hereby irrevocably appoints the Administrator as the agent of
the PAPA Agent for the purpose of giving you instructions hereunder.
We also hereby notify you that, at all times from and after the date of
your receipt of notice from the Administrator as described above, the
Administrator shall be irrevocably entitled to exercise in our place and stead
any and all rights in respect of or in connection with the Accounts, including,
without limitation,
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(a) the right to specify when payments are to be made out of or in connection
with the Accounts and (b) the right to require preparation of duplicate monthly
bank statements on the Accounts for the Administrator's audit purposes and
mailing of such statements directly to an address specified by the
Administrator.
Notice from the Administrator may be personally served or sent by
Telex, facsimile or U.S. mail, certified return receipt requested, to the
address, Telex or facsimile number set forth under your signature to this letter
agreement (or to such other address, Telex or facsimile number as to which you
shall notify the Administrator in writing). If notice is given by Telex or
facsimile, it will be deemed to have been received when the notice is sent and
the answerback is received (in the case of Telex) or receipt is confirmed by
telephone or other electronic means (in the case of facsimile). All other
notices will be deemed to have been received when actually received or, in the
case of personal delivery, delivered.
By executing this letter agreement, you acknowledge and consent to the
existence of the Administrator's right to ownership and control of the Accounts
and RCC's and the PAPA Agent's security interest in the Accounts, as their
interests may appear, and amounts from time to time on deposit therein and agree
that from the date hereof the Accounts shall be maintained by you for the
benefit of, and amounts from time to time therein held by you as agent for, the
Administrator on the terms provided herein. The Accounts are to be titled "O&M
Funding Corp. and Bank of America National Trust and Savings Association as the
Administrator for Receivables Capital Corporation, and as Administrative Agent
for the Parallel Purchasers, as their interests may appear". Except as otherwise
provided in this letter agreement, payments to the Accounts are to be processed
in accordance with the standard procedures currently in effect. All service
charges and fees with respect to the Accounts shall continue to be payable by us
as under the arrangements currently in effect.
By executing this letter agreement, you irrevocably waive and agree not
to assert, claim or endeavor to exercise, irrevocably bar and estop yourself
from asserting, claiming or exercising, and acknowledge that you have not
heretofore received a notice, writ, order or any form of legal process from any
other person or entity asserting, claiming or exercising, any right of set-off,
banker's lien or other purported form of claim with respect to the Accounts or
any funds from time to time therein. Except for your right to payment of your
service charges and fees and to make deductions for returned items, you shall
have no rights in the Accounts or funds therein. To the extent you may ever have
such rights, you hereby expressly subordinate all such rights to all rights of
the Administrator and the PAPA Agent.
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You may terminate this letter agreement by cancelling the Accounts
maintained with you, which cancellation and termination shall become effective
only upon thirty days' prior written notice thereof from you to the
Administrator. Incoming mail addressed to or wire transfers to the Accounts
received after such cancellation shall be forwarded in accordance with the
Administrator's instructions. This letter agreement may also be terminated upon
written notice to you by the Administrator stating that the Receivables Purchase
Agreement pursuant to which this letter agreement was obtained is no longer in
effect. Except as otherwise provided in this paragraph, this letter agreement
may not be terminated or amended without the prior written consent of the
Administrator. This letter agreement may be executed in any number of
counterparts, and by the parties hereto on separate counterparts, each of which
when so executed shall be deemed to be an original and all of which when taken
together shall constitute one and the same agreement.
Please acknowledge your agreement to the terms set forth in this letter
agreement by signing the two copies of this letter agreement enclosed herewith
in the space provided below, sending one such signed copy to the Administrator
at its address provided above and returning the other signed copy to us.
Very truly yours,
OWENS & MINOR MEDICAL, INC.
By:
Name:
Title:
Acknowledged and agreed to as of the date first written above:
RECEIVABLES CAPITAL CORPORATION
By: Bank of America National Trust
and Savings Association,
as attorney-in-fact
By:
Name:
Title:
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BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Administrator
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as PAPA Agent
By:
Name:
Title:
Address for notice:
Asset Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Mr. Omar Bolli
Telephone: 312/828-5448
Facsimile: 312/828-7855
[Lock Box Bank]
By:
Name:
Title:
Address for notice:
Attention: _____________________
Telex No.: _____________________
(Answerback: ____________________)
Telephone: _____________________
Facsimile: _____________________
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EXHIBIT A to
Lock-Box Agreement
[Letterhead of Bank of America National
Trust and Savings Association]
Address of Lock-Box Bank
Re: Owens & Minor Medical, Inc.
Lock Box Account No. _____
Deposit Account No. _____
Dear __________:
Reference is made to the letter agreement dated December __, 1995 (the
"Letter Agreement") among Owens & Minor Medical, Inc., Receivables Capital
Corporation ("RCC"), the undersigned, as Administrator and you concerning the
above described accounts (the "Accounts"). We hereby give you notice of our
assumption of ownership and control of the Accounts as provided in the Letter
Agreement.
We hereby instruct you to make all payments to be made by you out of or
in connection with the Accounts directly to the undersigned, at our address set
forth above, to account no. 7062178 for the Accounts of RCC and the PAPA Agent
(as defined in the Letter Agreement) as their interests may appear.
[other instructions]
Very truly yours,
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrator
By:
Name:
Title:
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ANNEX B
FORM OF HUNTON & WILLIAMS OPINION
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ANNEX C
FORM OF CORPORATE COUNSEL'S OPINION
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ANNEX D
OPINION CERTIFICATE
Exhibit 10(p)
Execution Copy
PARALLEL ASSET PURCHASE AGREEMENT
among
O&M FUNDING CORP.,
as Seller,
OWENS & MINOR MEDICAL, INC.,
as Servicer,
OWENS & MINOR, INC.,
as Parent and Guarantor,
THE PARALLEL PURCHASERS
FROM TIME TO TIME PARTY HERETO,
as Parallel Purchasers,
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent
Dated as of December 28, 1995
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PARALLEL ASSET PURCHASE AGREEMENT
This PARALLEL ASSET PURCHASE AGREEMENT (this "Agreement") is entered
into as of December 28, 1995 among O&M FUNDING CORP., a Virginia corporation, as
seller (the "Seller"), OWENS & MINOR MEDICAL, INC., a Virginia corporation, as
the initial Servicer (in such capacity, together with its successors and
permitted assigns in such capacity, the "Servicer"), OWENS & MINOR, INC., a
Virginia corporation, as parent and guarantor (the "Parent"), BANK OF AMERICA
ILLINOIS (in its individual capacity "BAI") and each of the parties that has
executed as an "Assignee" an Assignment of Parallel Asset Purchase Commitment in
the form of Annex A hereto (each, an "Assignment") (BAI and each such other
party being referred to collectively as the "Parallel Purchasers" and
individually as a "Parallel Purchaser") and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association (in its individual capacity
"Bank of America"), as administrator and agent for the Parallel Purchasers (the
"Administrative Agent").
PRELIMINARY STATEMENTS
A. The Seller desires to sell, transfer and assign an undivided
variable percentage interest in a pool of receivables to the Administrative
Agent, on behalf of the Parallel Purchasers, and the Parallel Purchasers desire
to acquire such undivided variable percentage interest, as such percentage
interest shall be adjusted from time to time based upon, in part, reinvestment
payments which are made by the Parallel Purchasers and additional incremental
payments made to the Seller; and each Parallel Purchaser, by becoming a party
hereto, agrees to purchase and make reinvestments on the terms and conditions
set forth in this Agreement in its ratable portion of the Purchased Interest
hereunder (its "Purchase Commitment").
B. Reference is made to the Receivables Purchase Agreement dated as of
December 28, 1995 (the "Receivables Purchase Agreement") among Seller, Owens &
Minor Medical, Inc., as Servicer, Owens & Minor, Inc., Receivables Capital
Corporation, as the Issuer, and Bank of America, as agent for the Issuer, a copy
of which has been delivered to each Parallel Purchaser; under which agreement
the Seller thereunder may sell, transfer and assign, and the Issuer may acquire,
an undivided variable percentage interest in a pool of receivables owned by
Seller, as such percentage interest shall be adjusted from time to time based
upon, in part, reinvestment payments which are made by the Issuer and additional
incremental payments made to the Seller.
C. Certain terms that are used throughout this Agreement
are defined in Exhibit I to the Receivables Purchase Agreement
(as incorporated herein by reference). References in the
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Receivables Purchase Agreement to a Parallel Asset Purchase Agreement are
references to this Agreement, as the same may be amended, modified or
supplemented from time to time.
D. Bank of America has been requested and is willing to act as
Administrative Agent hereunder.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.1. Parallel Purchase Facility. (a) On the terms and
conditions hereinafter set forth, each Parallel Purchaser severally shall
purchase undivided percentage ownership interests and shall make reinvestments
with regard to their Purchased Interest from the Seller from time to time during
the period from the date hereof to the Parallel Purchase Termination Date. Under
no circumstances shall any Parallel Purchaser be obligated to make any purchase
or reinvestment under this Agreement if after giving effect to such purchase or
reinvestment the aggregate outstanding Capital of the Purchased Interest of the
Parallel Purchasers, together with the aggregate outstanding Capital of
Purchased Interests under the Receivables Purchase Agreement, would exceed the
Purchase Limit. Each purchase and reinvestment shall be made ratably by the
Parallel Purchasers according to their respective Maximum Parallel Purchase.
Each Parallel Purchaser shall make its respective ratable portions of each
purchase and reinvestment on the same day as the other parties making such
purchase or reinvestment.
(b) The Seller may, upon at least 10 Business Days' notice to the
Administrative Agent, terminate the purchase facility provided in this Section
1.1 in whole or, from time to time, irrevocably reduce in part the unused
portion of the Purchase Limit; provided that each partial reduction shall be in
the amount of at least $5,000,000 or an integral multiple of $1,000,000 in
excess thereof and; provided further that each such reduction shall be made
ratably with respect to each Parallel Purchaser according to its respective
Maximum Parallel Purchase.
SECTION 1.2. Making Purchases. (a) Each purchase (not including
reinvestments) of the Purchased Interest hereunder shall be made upon the
Seller's irrevocable written notice delivered to the Administrative Agent
in accordance with Section 6.2 (which notice must be received by the
Administrative Agent prior to noon New York City time and, with respect to
which, the Administrative Agent will provide prompt notice to each Parallel
Purchaser by telephone or facsimile) (i) three
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Business Days prior to the requested purchase date, in the case of a purchase to
be funded at the Alternate Rate and based on the Eurodollar Rate and (ii) one
Business Day prior to the requested purchase date, in the case of a purchase to
be funded at the Alternate Rate and based on the Base Rate, which notice shall
specify (A) the amount requested to be paid to the Seller (such amount, which
shall not be less than $1,000,000, being the "Capital" relating to the undivided
ownership interest then being purchased), (B) the date of such purchase (which
shall be a Business Day) and (C) the desired funding basis for such purchase and
the desired duration of the initial Fixed Period(s) for such purchase. The
notice delivered by the Administrative Agent to the Parallel Purchasers shall
contain a brief description of the circumstances giving rise to the purchase
hereunder which description shall be based upon information available to the
Administrative Agent at the time of such purchase and be made in good faith by
the Administrative Agent; it being understood that the failure of any such
notice to provide such a description shall not affect the obligations of the
Parallel Purchasers hereunder.
(b) On the date of each purchase (not including reinvestments) of
undivided ownership interests with regard to the Purchased Interest hereunder,
each Parallel Purchaser shall, upon satisfaction of the applicable conditions
set forth in Exhibit I, deposit in the Administrative Account in same day funds,
an amount equal to such Parallel Purchaser's ratable portion (calculated
according to its Maximum Parallel Purchase (its "Percentage")) of the Capital
relating to the undivided ownership interest then being purchased. Each Parallel
Purchaser's obligation hereunder shall be several, such that the failure of any
Parallel Purchaser to make payment to the Administrative Agent in connection
with any purchase hereunder shall not relieve any other Parallel Purchaser of
its obligation hereunder to make payment for any purchase. Further, in the event
any Parallel Purchaser fails to satisfy its obligation to purchase any Purchased
Interest as required hereunder, upon receipt of notice of such failure from the
Administrative Agent (which shall be provided within one Business Day after the
Administrative Agent receives notice or otherwise obtains knowledge of such
failure), subject to satisfaction of the applicable conditions set forth in
Exhibit I, the non-defaulting Parallel Purchasers shall purchase the defaulting
Parallel Purchaser's Percentage in the related Purchased Interest pro rata in
proportion to their relative Percentages; provided that, in no event shall any
Parallel Purchaser be obligated to make any purchase or reinvestment under this
Agreement if after giving effect to such purchase or reinvestment (i) the
aggregate outstanding Capital of the Purchased Interest of the Parallel
Purchasers, together with the aggregate outstanding Capital of Purchased
Interests under the Receivables Purchase Agreement, would exceed the Purchase
Limit or (ii) the aggregate outstanding
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Capital of the Purchased Interest attributable to such Parallel Purchaser
exceeds such Parallel Purchaser's Maximum Parallel Purchase. Unless the
Administrative Agent shall have received notice from a Parallel Purchaser on the
date of the sale of any Purchased Interest prior to 2:30 P.M. (New York City
time) on the date of any proposed sale, that such Parallel Purchaser will not
make available to the Administrative Agent the amount of that Parallel
Purchaser's Percentage, the Administrative Agent may assume that each Parallel
Purchaser has made such amount available to the Administrative Agent on the
purchase date and the Administrative Agent may (but shall not be so required),
in reliance upon such assumption, make available to the Seller on such date a
corresponding amount by depositing such amount in the Administrative Account. If
and to the extent any Parallel Purchaser shall not have made its full amount
available to the Administrative Agent, and the Administrative Agent in such
circumstances has made available to the Seller the corresponding amount, that
Parallel Purchaser shall on the next Business Day following the date of such
sale make such amount available to the Administrative Agent, together with
interest at the Federal Funds Rate for each day during such period. A
certificate of the Administrative Agent submitted to any Parallel Purchaser with
respect to amounts owing under this clause (b) shall be conclusive, absent
manifest error. If such amount is so made available, such payment to the
Administrative Agent shall constitute such Parallel Purchaser's purchase on the
date of sale for all purposes of this Agreement. If such amount is not made
available to the Administrative Agent on the next Business Day following the
date of such purchase, the Administrative Agent shall notify the Seller of such
failure to fund and, upon demand by the Administrative Agent, the Seller shall
pay such amount to the Administrative Agent for the Administrative Agent's
account, together with interest thereon for each day elapsed since the date of
such purchase, at a rate per annum equal to the Federal Funds Rate.
(c) Effective on the date of each purchase pursuant to this Section 1.2
and each reinvestment pursuant to Section 1.4, the Seller hereby sells and
assigns to the Administrative Agent on behalf of each Parallel Purchaser
(without any formal or other instrument of assignment) an undivided percentage
ownership interest in (i) each Pool Receivable then existing, (ii) all Related
Security with respect to such Pool Receivables, and (iii) Collections with
respect to, and other proceeds of, such Pool Receivables and Related Security,
equal to such Parallel Purchaser's Percentage of the Purchased Interest
hereunder.
(d) Each Parallel Purchaser's Purchase Commitment shall be irrevocable
from the effective date of this Agreement or as set forth in the applicable
Assignment, as the case may be, until the earliest of the (i) Parallel Purchase
Termination Date and (ii) the date on which the Parallel Purchasers' obligation
to
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purchase and reinvest hereunder is terminated pursuant to Section
1.1(b).
SECTION 1.3. Purchased Interest Computation. The Purchased Interest
shall be initially computed on the date of the initial purchase hereunder.
Thereafter until the Parallel Purchase Termination Date, the Purchased Interest
shall be automatically recomputed (or deemed to be recomputed) on each Business
Day other than a Run-off Day. The Purchased Interest, as computed (or deemed
recomputed) as of the day immediately preceding the Parallel Purchase
Termination Date, shall thereafter remain constant. The Purchased Interest
shall become zero when the Capital thereof and Discount thereon shall have been
paid in full, all the amounts owed by the Seller hereunder to the Parallel
Purchasers or the Administrative Agent, or any other Securitization Party or
Affected Person, are paid in full and the Servicer shall have received the
accrued Servicing Fee thereon.
SECTION 1.4. Settlement Procedures. (a) Collection of the Pool
Receivables shall be administered by the Servicer in accordance with the terms
of this Agreement. The Seller shall provide to the Servicer on a timely
basis all information needed for such administration, including notice of
the occurrence of any Run-off Day and current computations of the Purchased
Interest.
(b) The Servicer shall, on each day on which Collections of Pool
Receivables are received (or deemed received) by the Seller or the Servicer:
(i) set aside and hold in trust (and, at the request of the
Administrative Agent, segregate) for the Parallel Purchasers, out of
the percentage of such Collections represented by the Purchased
Interest, first an amount equal to the Discount accrued through such
day for each Portion of Capital and not previously set aside and
second, to the extent funds are available therefor, if Owens & Minor
Medical, Inc. or an Affiliate thereof Seller is not the Servicer, an
amount equal to the Servicing Fee determined in accordance with Section
4.6 accrued through such day for the Purchased Interest and not
previously set aside; and
(ii) subject to Section 1.4(f), if such day is not a Run-off
Day, remit to the Seller, on behalf of the Parallel Purchasers
according to the Percentage of each, the remainder of the Percentage of
such Collections, represented by the Purchased Interest, to the extent
representing a return of Capital; such Collections shall be
automatically reinvested in Pool Receivables, and in the Related
Security and Collections and other proceeds with respect thereto, and
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the Purchased Interest shall be automatically recomputed
pursuant to Section 1.3;
(iii) if such day is a Run-off Day, (x) set aside, segregate
and hold in trust for the Parallel Purchasers according to the
Percentage of each the entire remainder of the Percentage of the
Collections represented by the Purchased Interest; provided that if
amounts are set aside and held in trust on any Run-off Day and
thereafter, the conditions set forth in Section 2 of Exhibit I are
satisfied or are waived by the Administrative Agent, such previously
set aside amounts shall, to the extent representing a return of
Capital, be reinvested in accordance with the preceding paragraph (ii)
on the day of such subsequent satisfaction or waiver of conditions; and
(y) transfer the Seller's share of the Collections represented by the
Purchased Interest to the Seller; and
(iv) during such times as amounts are required to be
reinvested in accordance with the foregoing paragraph (ii) or the
proviso to paragraph (iii), release to the Seller (subject to Section
1.4(f)) any Collections in excess of (x) such amounts and (y) the
amounts that are required to be deposited pursuant to paragraph (i)
above.
(c) The Servicer shall deposit into the Administration Account (or such
other account designated by the Administrative Agent), on the last day of each
Settlement Period relating to a Portion of Capital (or at such other times as
the Administrative Agent shall require), Collections held in the Administration
Account for the Parallel Purchasers pursuant to Section 1.4(b)(i) or Section
1.4(f) with respect to such Portion of Capital and the lesser of (x) the amount
of Collections then held for the Parallel Purchasers pursuant to Section
1.4(b)(iii) and (y) such Portion of Capital.
(d) Upon receipt of funds deposited into the Administration Account
pursuant to Section 1.4(c), with respect to any Portion of Capital, the
Administrative Agent shall cause such funds to be distributed as follows:
(i) if such distribution occurs on a day that is not a
Run-off Day, first to each Parallel Purchaser in payment in full of its
Percentage of all accrued Discount and then to the Servicer (payable in
arrears on each Month End Date) in payment in full of all accrued
Servicing Fees so set aside with respect to such Portion of Capital;
and
(ii) if such distribution occurs on a Run-off Day, first to
each Parallel Purchaser in payment in full of its Percentage of all
accrued Discount, second to each Parallel Purchaser in payment in full
of its Percentage of Capital,
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third, if the Seller is not the Servicer, to the Servicer in payment in
full of all accrued Servicing Fees with respect to such Portion of
Capital, fourth, if the Capital and accrued Discount with respect to
each Portion of Capital has been reduced to zero, and all accrued
Servicing Fees payable to the Servicer (if other than the Seller) have
been paid in full, to the Parallel Purchasers, the Administrative Agent
and any other Securitization Party or Affected Person in payment in
full of any other amounts owed thereto by the Seller hereunder and then
to the Servicer (if the Servicer is the Seller) in payment in full of
all accrued Servicing Fees.
After the Capital and Discount and Servicing Fees with respect to the Purchased
Interest, and any other amounts payable by the Seller to the Parallel
Purchasers, the Administrative Agent or any other Securitization Party or
Affected Person hereunder, have been paid in full, all additional Collections
with respect to the Purchased Interest shall be paid to the Seller for its own
account.
(e) For the purposes of this Section 1.4:
(i) if on any day the Outstanding Balance of any Pool
Receivable is reduced or adjusted as a result of any defective,
rejected, returned, repossessed or foreclosed goods or services, or any
discount or other adjustment made by the Seller, or any setoff or
dispute between the Seller and an Obligor, or any credit memorandum or
any billing error, the Seller shall be deemed to have received on such
day a Collection of such Pool Receivable in the amount of such
reduction or adjustment;
(ii) if on any day any of the representations or warranties
in paragraphs (g) or (m) of Exhibit II is not true with respect to any
Pool Receivable, the Seller shall be deemed to have received on such
day a Collection of such Pool Receivable in full;
(iii) except as provided in paragraph (i) or (ii) of this
Section 1.4(e), or as otherwise required by applicable law or the
relevant Contract, all Collections received from an Obligor of any
Receivable shall be applied to the Receivables of such Obligor in the
order of the age of such Receivables, starting with the oldest such
Receivable, unless such Obligor designates in writing its payment for
application to specific Receivables; and
(iv) if and to the extent the Administrative Agent or any
Parallel Purchaser shall be required for any reason to pay over to an
Obligor (or any trustee, receiver, custodian or similar official in any
Insolvency Proceeding) any amount
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received by it hereunder, such amount shall be deemed not to have been
so received but rather to have been retained by the Seller and,
accordingly, the Administrative Agent or such Parallel Purchaser, as
the case may be, shall have a claim against the Seller for such amount,
payable when and to the extent that any distribution from or on behalf
of such Obligor is made in respect thereof.
(f) Except for reductions in connection with the division or
combination of Portions of Capital pursuant to Section 1.7 hereof, if at any
time Seller shall wish to cause the reduction of a Portion of Capital (but not
to commence the liquidation, or reduction to zero, of the entire Capital of the
Purchased Interest), the Seller may do so as follows:
(i) the Seller shall give the Administrative Agent at least
five Business Days' prior written notice thereof (including the amount
of such proposed reduction and the proposed date on which such
reduction will commence),
(ii) on the proposed date of commencement of such reduction
and on each day thereafter, the Servicer shall cause Collections with
respect to such Portion of Capital not to be reinvested until the
amount thereof not so reinvested shall equal the desired amount of
reduction, and
(iii) the Servicer shall hold such Collections in trust for
each Parallel Purchaser in proportion to its Percentage, for payment to
the Administrative Agent on the last day of the current Settlement
Period relating to such Portion of Capital, and the applicable Portion
of Capital shall be deemed reduced in the amount to be paid to the
Administrative Agent only when in fact finally so paid;
provided that,
A. the amount of any such reduction shall be not less than
$1,000,000 and shall be an integral multiple of $100,000, and the
entire Capital of the Purchased Interest after giving effect to such
reduction shall be not less than $10,000,000 and shall be in an
integral multiple of $1,000,000,
B. the Seller shall choose a reduction amount, and the
date of commencement thereof, so that to the extent
practicable such reduction shall commence and conclude in
the same Fixed Period, and
C. if two or more Portions of Capital shall be
outstanding at the time of any proposed reduction, such
proposed reduction shall be applied, unless the Seller shall
otherwise specify in the notice given pursuant to Section
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1.4(f)(i), to the Portion of Capital with the shortest
remaining Fixed Period.
SECTION 1.5. [Reserved.]
SECTION 1.6. Payments and Computations, Etc. (a) All amounts to be
paid or deposited by the Seller or the Servicer hereunder shall be paid or
deposited no later than 1:00 p.m. (New York City time) on the day when due in
same day funds to the Administration Account. All amounts received after 1:00
p.m. (New York City time) will be deemed to have been received on the
immediately succeeding Business Day. The Administrative Agent will promptly
thereafter (on such day) cause to be distributed like funds relating to the
payment of Discount, Capital or other amounts to the Parallel Purchasers in
accordance with their Percentages in each case to be applied in accordance with
the terms of this Agreement.
(b) The Seller shall, to the extent permitted by law, pay interest on
any amount not paid or deposited by the Seller (whether as Servicer or
otherwise) when due hereunder, at an interest rate equal to 2.0% per annum above
the Base Rate, payable on demand. Such interest shall be for the account of, and
distributed by the Administrative Agent to, the Parallel Purchasers or other
Persons to which such amounts are owed.
(c) All computations of interest under subsection (b) above and all
computations of Discount, fees, and other amounts hereunder shall be made on the
basis of a year of 360 days for the actual number of days elapsed. Whenever any
payment or deposit to be made hereunder shall be due on a day other than a
Business Day, such payment or deposit shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
such payment or deposit.
SECTION 1.7. Dividing or Combining Portions of the Capital of the
Purchased Interest. The Seller may, on the last day of any Fixed Period, either
(i) divide the Capital of the Purchased Interest into two or more portions, but
not to exceed ten portions in effect at any time, (each, a "Portion of Capital")
equal, in aggregate, to the Capital of the Purchased Interest, provided that
after giving effect to such division the amount of each such Portion of Capital
shall not be less than $5,000,000, or (ii) combine any two or more Portions of
Capital outstanding on such last day and having Fixed Periods ending on such
last day into a single Portion of Capital equal to the aggregate of the Capital
of such Portions of Capital.
SECTION 1.8. Increased Costs. (a) If any Securitization Party, any
Parallel Purchaser or any of their respective Affiliates (each an "Affected
Person") determines that the existence of or compliance with (i) any law or
regulation or any
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change therein or in the interpretation or application thereof, in each case
adopted, issued or occurring after the date hereof or (ii) any request,
guideline or directive from any central bank or other Governmental Authority
(whether or not having the force of law) issued or occurring after the date of
this Agreement affects or would affect the amount of capital required or
expected to be maintained by such Affected Person (and is not a change by way of
imposition or increase of reserve requirements referred to in Section 1.9)
otherwise accounted for in the determination of the Eurodollar Rate) and such
Affected Person determines that the amount of such capital is increased by or
based upon the existence of any commitment to make purchases of or otherwise to
maintain the investment in Pool Receivables related to this Agreement or any
Program Support Agreement and other commitments of the same type related to this
Agreement, then, upon demand by such Affected Person within 180 days of such
determination (with a copy to the Administrative Agent), the Seller shall pay to
the Administrative Agent, for the account of such Affected Person, from time to
time as specified by such Affected Person, additional amounts sufficient to
compensate such Affected Person in the light of such circumstances, to the
extent that such Affected Person reasonably determines such increase in capital
to be allocable to the existence of any of such commitments. A certificate as to
such amounts submitted to the Seller and the Administrative Agent by such
Affected Person setting forth in reasonable detail the calculation of such
amounts shall be conclusive and binding for all purposes, absent prima facia
error.
(b) If, due to either (i) the introduction of or any change (other than
any change by way of imposition or increase of reserve requirements referred to
in Section 1.9) in or in the interpretation of any law or regulation or (ii)
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to any Affected Person of agreeing to purchase or
purchasing, or maintaining the ownership of the Purchased Interest in respect of
which Discount is computed by reference to the Eurodollar Rate excluding,
however, any increase in the cost to such Affected Person due to the imposition
of any tax on such Affected Person, then, upon written demand by such Affected
Person no later than 180 days after such Affected Person shall determine its
liability for such increased cost and from time to time thereafter, the Seller
shall promptly pay to such Affected Person, from time to time as specified,
additional amounts reasonably determined by such Affected Person to be
sufficient to compensate such Affected Person for such increased costs. A
certificate as to such amounts submitted to the Seller by such Affected Person
shall be conclusive and binding for all purposes, absent prima facia error.
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SECTION 1.9. Additional Discount on Portions of Purchased Interest
Bearing a Eurodollar Rate. The Seller shall pay to any Affected Person, so long
as such Affected Person shall be required under regulations of the Board of
Governors of the Federal Reserve System to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities,
additional Discount on the unpaid Capital of the applicable Portion of Capital
during each Fixed Period in respect of which Discount is computed by reference
to the Eurodollar Rate, for such Fixed Period, at a rate per annum equal at all
times during such Fixed Period to the remainder obtained by subtracting (i) the
Eurodollar Rate for such Fixed Period from (ii) the rate obtained by dividing
such Eurodollar Rate referred to in clause (i) above by that percentage equal to
100% minus the Eurodollar Rate Reserve Percentage for such Fixed Period, payable
on each date on which Discount is payable on the applicable Portion of Capital.
Such additional Discount shall be reasonably determined by the Affected Person
and notified to the Seller through the Administrative Agent within 90 days after
any Discount payment is made with respect to which such additional Discount is
requested. A certificate as to such additional Discount submitted to the Seller
by the Affected Person shall be conclusive and binding for all purposes, absent
prima facia error.
SECTION 1.10. Requirements of Law. In the event that any Affected
Person determines that the existence of or compliance with (i) any law or
regulation or any change therein or in the interpretation or application
thereof, in each case adopted, issued or occurring after the date hereof or (ii)
any request, guideline or directive from any central bank or other Governmental
Authority (whether or not having the force of law) issued or occurring after the
date of this Agreement:
(A) does or shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, or deposits or other liabilities in or for the
account of, purchases, advances or loans by, or other credit extended
by, or any other acquisition of funds by, any office of such Affected
Person which are not otherwise included in the determination of the
Eurodollar Rate or the Base Rate hereunder; or
(B) does or shall impose on such Affected Person any
other condition;
and the result of any of the foregoing is (x) to increase the cost to such
Affected Person of acting as Administrative Agent, or of agreeing to purchase or
purchasing or maintaining the ownership of undivided ownership interests with
regard to the Purchased Interest (or interests therein) or any Portion of
Capital in respect of which Discount is computed by reference to
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the Eurodollar Rate or the Base Rate (except to the extent that such increase in
cost is due to the imposition of any tax on such Affected Person) or (y) to
reduce any amount receivable hereunder (whether directly or indirectly) funded
or maintained by reference to the Eurodollar Rate or the Base Rate (except to
the extent that such reduced amount receivable is due to the imposition of any
tax on such Affected Person), then, in any such case, upon written demand by
such Affected Person no later than 180 days after such Affected Person shall
determine the amount of any such increased cost or reduced amount, and from time
to time thereafter, the Seller shall promptly pay such Affected Person any
additional amounts necessary to compensate such Affected Person for such
increased cost or reduced amount receivable. All such amounts shall be payable
as incurred. A written certificate delivered by such Affected Person to the
Seller certifying, in reasonably specific detail, the basis for, calculation of,
and amount of such increased costs or reduced amount receivable shall be
conclusive in the absence of prima facia error; provided, however, that no
Affected Person shall be required to disclose any confidential or tax planning
information in any such certificate.
SECTION 1.11. Inability to Determine Eurodollar Rate. In the event
that the Administrative Agent shall have determined prior to the first day of
any Fixed Period (which determination shall be conclusive and binding upon the
parties hereto) by reason of circumstances affecting the interbank Eurodollar
market, either (a) dollar deposits in the relevant amounts and for the relevant
Fixed Period are not available, (b) adequate and reasonable means do not exist
for ascertaining the Eurodollar Rate for such Fixed Period or (c) the Eurodollar
Rate determined pursuant hereto does not accurately reflect the cost to the
Issuer (as conclusively determined by the Administrative Agent) of maintaining
any Portion of Capital during such Fixed Period, the Administrative Agent shall
promptly give telephonic notice of such determination, confirmed in writing, to
the Seller prior to the first day of such Fixed Period. Upon delivery of such
notice (a) no Portion of Capital shall be funded thereafter at the Alternate
Rate determined by reference to the Eurodollar Rate, unless and until the
Administrative Agent shall have given notice to the Seller that the
circumstances giving rise to such determination no longer exist, and (b) with
respect to any outstanding Portions of Capital then funded at the Alternate Rate
determined by reference to the Eurodollar Rate, such Alternate Rate shall
automatically be converted to the Alternate Rate determined by reference to the
Base Rate at the respective last days of the then current Fixed Periods relating
to such Portions of Capital.
ARTICLE II
REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS
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SECTION 2.1. Representations and Warranties; Covenants.
(a) The Seller, Servicer and the Parent hereby jointly and severally
make the representations and warranties set forth in Exhibit II, and hereby
jointly and severally agree that the covenants set forth in Exhibit III will be
performed and observed.
SECTION 2.2. Termination Events. If any of the Termination Events set
forth in Exhibit IV shall occur, the Administrative Agent may, by notice to the
Seller, declare the Parallel Purchase Termination Date to have occurred (in
which case the Parallel Purchase Termination Date shall be deemed to have
occurred); provided that, automatically upon the occurrence of any event
(without any requirement for the passage of time or the giving of notice)
described in subsection (g) of Exhibit IV, the Parallel Purchase Termination
Date shall occur; provided, further, that, in the case of a Termination Event
described in subsection (j) of Exhibit IV, the Facility Termination Date shall
be deemed to have occurred on the Business Day following the date of such notice
unless such Termination Event is cured during the intervening period. Upon any
such declaration, occurrence or deemed occurrence of the Parallel Purchase
Termination Date, the Parallel Purchasers and the Administrative Agent shall
have, in addition to the rights and remedies which they may have under this
Agreement, all other rights and remedies provided after default under the UCC
and under other applicable law, which rights and remedies shall be cumulative.
Notwithstanding anything to the contrary in this Agreement (including without
limitation any Exhibit hereto), this Section 2.2 shall not be limited or
otherwise affected by satisfaction of the conditions to reinvestments or
purchases set forth in Section 2 of Exhibit I.
ARTICLE III
INDEMNIFICATION
SECTION 3.1. (a) Indemnities by the Seller. Without limiting any
other rights that any Securitization Party (each an "Indemnified Party") may
have hereunder or under applicable law, the Seller and the Parent hereby jointly
and severally agree to indemnify each Indemnified Party from and against any and
all claims, damages, expenses, losses and liabilities (including Attorney Costs)
(all of the foregoing being collectively referred to as "Indemnified Amounts")
arising out of or resulting from this Agreement (whether directly or indirectly)
or the use of proceeds of purchases or reinvestments or the ownership of the
Purchased Interest, or any interest therein, or in respect of any Receivable or
any Contract, excluding, however, (a) Indemnified Amounts to the extent
resulting from gross negligence or willful
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misconduct on the part of such Indemnified Party, (b) recourse (except as
otherwise specifically provided in this Agreement) for uncollectible
Receivables, or (c) any taxes imposed on such Indemnified Party. Without
limiting or being limited by the foregoing, and subject to the exclusions set
forth in the preceding sentence, the Seller and the Parent jointly and severally
agree to pay to each Indemnified Party (within three Business Days after written
demand for such indemnification) any and all amounts necessary to indemnify such
Indemnified Party from and against any and all Indemnified Amounts relating to
or resulting from any of the following:
(i) the failure of any Receivable included in the calculation
of the Net Receivables Pool Balance as an Eligible Receivable to be an
Eligible Receivable, the failure of any information contained in a
Seller Report to be true and correct, or the failure of any other
information provided to the Issuer or the Administrative Agent with
respect to Receivables or this Agreement to be true and correct;
(ii) the failure of any representation or warranty or
statement made or deemed made by the Seller (or any of its officers),
Servicer or Parent under or in connection with this Agreement to have
been true and correct in all respects when made;
(iii) the failure by the Seller to comply with any applicable
law, rule or regulation with respect to any Pool Receivable or the
related Contract; or the failure of any Pool Receivable or the related
Contract to conform to any such applicable law, rule or regulation;
(iv) the failure to vest in the Issuer a valid and
enforceable perfected undivided percentage ownership interest, to the
extent of the Purchased Interest, in the Receivables in, or purporting
to be in, the Receivables Pool and the Related Security and Collections
with respect thereto, in each case, free and clear of any Adverse
Claim;
(v) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Receivables in, or purporting to be in, the Receivables
Pool and the Related Security and Collections in respect thereof,
whether at the time of any purchase or reinvestment or at any
subsequent time;
(vi) any dispute, claim, offset or defense or claim of
billing error, (other than discharge in bankruptcy of the Obligor) of
the Obligor to the payment of any Receivable in,
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or purporting to be in, the Receivables Pool (including, without
limitation, a defense based on such Receivable or the related Contract
not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any other
claim resulting from the sale of the goods or services related to such
Receivable or the furnishing or failure to furnish, or agreement to
accept returns of, such goods or services or relating to collection
activities with respect to such Receivable (if such collection
activities were performed by the Seller or any of its Affiliates acting
as Servicer or by any agent or independent contractor retained by the
Seller or any of its Affiliates);
(vii) any failure of the Seller or any Originator or any
Servicer, to perform its duties or obligations in accordance with the
provisions hereof or to perform its duties or obligations under the
Contracts;
(viii) any breach of warranty, products liability or other
claim, investigation, litigation or proceeding arising out of or in
connection with merchandise, insurance or services which are the
subject of any Contract;
(ix) the commingling of any portion of Collections
of Pool Receivables relating to the Purchased Interest at
any time with other funds;
(x) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of purchases or reinvestments or
the ownership of the Purchased Interest or in respect of any
Receivable, Related Security or Contract; or
(xi) any reduction in Capital as a result of the distribution
of Collections pursuant to Section 1.4(d), in the event that all or a
portion of such distributions shall thereafter be rescinded or
otherwise must be returned for any reason.
(b) Taxes.
(i) Any and all payments made hereunder to an Affected Person
shall be made free and clear of and without deduction for any and all
current or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto excluding: (A)
taxes imposed on or measured by all or part of the gross or net income
(but not including any such tax in the nature of a withholding tax) of
such Affected Person by the jurisdiction under the laws of which such
Affected Person is organized or has its applicable lending office or
any political subdivision of
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any thereof and (B) taxes that would not have been imposed if the only
connection between such Affected Person and the jurisdiction imposing
such taxes was the activities of such Affected Person pursuant to or in
respect of this Agreement (including entering into, lending money or
extending credit pursuant to, receiving payments under, or enforcing
this Agreement) (all such excluded taxes, levies, imposts, deductions,
changes, withholding and liabilities collectively or individually
referred to herein as "Excluded Taxes" and all such nonexcluded taxes,
levies, imposts, deductions, charges, withholdings, and liabilities
collectively or individually referred to herein as "Taxes"). If the
Seller shall be required to deduct any Taxes from or in respect of any
sum payable hereunder to any Affected Person: (A) the sum payable shall
be increased by the amount (an "additional amount") necessary so that
after making all required deductions (including deductions applicable
to additional sums payable under this Section 3.1(b)) such Affected
Person shall receive an amount equal to the sum it would have received
had no such deductions been made, (B) the Seller shall make such
deductions and (C) the Seller shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(ii) In addition, the Seller agrees to pay to the relevant
Governmental Authority in accordance with applicable law all taxes,
levies, imposts, deductions, charges, assessments or fees of any kind
(including but not limited to any current or future stamp or
documentary taxes or any other excise or property taxes, charges, or
similar levies, but excluding any Excluded Taxes) imposed upon any
Affected Person as a result of the transactions contemplated by this
Agreement or that arise from any payment made hereunder or from the
execution, delivery, or registration of or otherwise similarly with
respect to, this Agreement ("Other Taxes").
(iii) The Seller and the Parent hereby jointly and severally
agree to indemnify each Affected Person from and against the full
amount of Taxes and Other Taxes arising out of this Agreement (whether
directly or indirectly) imposed upon or paid by such Person and any
liability (including penalties, interest, and expenses (including
Attorney Costs)) arising with respect thereto whether or not such Taxes
or Other Taxes were correctly or legally asserted by the relevant
Governmental Authority. A certificate as to the amount of such amounts
prepared by an Affected Person, absent manifest error, shall be final,
conclusive, and binding for all purposes. Such indemnification shall be
made within 30 days after the date the Affected Person makes a timely
written demand therefor or the time at which such
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amount is payable after a timely written demand therefor has been made,
whichever is earlier. A written demand will be considered "timely" for
purposes of the preceding sentence only if it is received by the Seller
and the Parent no later than 180 days after the earlier of (A) the date
on which such Affected Person makes such payment of Taxes or Other
Taxes or liability arising therefrom or with respect thereto and (B)
the date on which the relevant Governmental Authority or other party
makes written demand upon such Affected Person for payment of such
Taxes or Other Taxes or liability arising therefrom or with respect
thereto.
(iv) As soon as practicable after the date of any payment of
Taxes or Other Taxes by the Seller to a Governmental Authority
hereunder, the Seller will deliver to the relevant Affected Person the
original or a certified copy of a receipt issued by such Governmental
Authority evidencing payment thereof.
(v) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this
Section 3.1(b) shall survive the termination of this Agreement.
(vi) Each Program Support Provider that is granted a
participating interest in the Purchased Interest and is organized under
the laws of a jurisdiction other than the United States, any State
thereof, or the District of Columbia (each a "Non-U.S. Purchaser")
shall deliver to the Seller or the Administrator: (A) two copies of
either United States Internal Revenue Service Form 1001 or Form 4224
(whichever is applicable), or (B) in the case of a Non- U.S. Purchaser
claiming an exemption from U.S. federal withholding tax under Section
871(h) or 881(c) of the Code with respect to payments of "portfolio
interest", a Form W-8 (or any subsequent versions thereof or successors
thereto) and a certificate representing that such Non-U.S. Purchaser is
not a bank for purposes of Section 881(c) of the Code, in either case
properly completed and duly executed by such Non-U.S. Purchaser
claiming complete exemption from U.S. federal withholding tax on
payments by the Seller under this Agreement. Such forms shall be
delivered by each Non-U.S. Purchaser before the date it receives its
first payment with respect to a Purchased Interest, and before the date
it receives its first payment with respect to a Purchased Interest
occurring after the date, if any, that such Non- U.S. Purchaser changes
its applicable lending office by designating a different lending office
(a "New Lending Office"). In addition, each Non-U.S. Purchaser shall
deliver such forms promptly after (or, if reasonably practicable, prior
to) the obsolescence or invalidity of any form previously delivered by
such Non-U.S. Purchaser.
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Notwithstanding any other provision of this Section 3.1(b)(vi), a
Non-U.S. Purchaser shall not be required to deliver any form pursuant
to this Section 3.1(b)(vi) that such Non-U.S. Purchaser is not legally
able to deliver. Each Program Support Provider (other than any exempt
person as described in applicable Treasury Regulations) that is granted
a participating interest in the Purchased Interest and is organized
under the laws of the United States or any state thereof or the
District of Columbia shall deliver to the Seller an original copy of
Internal Revenue Service Form W-9 (or applicable successor form)
properly completed and duly executed by such Program Support Provider.
(vii) The Seller and the Parent shall not be required to
indemnify any Non-U.S. Purchaser, or to pay any additional amounts to
any Non-U.S. Purchaser, in respect of United States federal withholding
tax (or any withholding tax imposed by a state that applies only when
such United States federal withholding tax is imposed) pursuant to this
Section 3.1(b) to the extent that: (A) the obligation to withhold
amounts with respect to United States federal withholding tax existed
on the date such Non-U.S. Purchaser was granted a participating
interest in the Purchased Interest or, with respect to payments to a
New Lending Office, the date such Non-U.S. Purchaser designated such
New Lending Office; provided, however, that this clause (A) shall not
apply to any Non-U.S. Purchaser or New Lending Office that is granted,
assigned, or transferred a participating interest in the Purchased
Interest at the request of the Seller and provided further, however,
that this clause (A) shall not apply to any Non-U.S. Purchaser or New
Lending Office that is assigned an interest in the Purchased Interest
by a Program Support Provider to the extent that the indemnity payment
or additional amounts such Non-U.S. Purchaser or New Lending Office
would be entitled to receive (without regard to this clause (A)) do not
exceed the indemnity payment or additional amounts that the Program
Support Provider making the assignment to such Non-U.S. Purchaser or
New Lending Office would have been entitled to receive in the absence
of such assignment; or (B) the obligation to make such indemnification
or to pay such additional amounts would not have arisen but for a
failure by such Non-U.S. Purchaser to comply with the provisions of
paragraph (vi) above (it being understood that the Non-U.S. Purchaser
shall not have failed to comply with the provisions of paragraph (vi)
above if it is legally unable to deliver the forms described therein on
any date after it is granted a participation interest in a Purchased
Interest or designated a New Lending Office).
(viii) Any Affected Person claiming any indemnity
payment or additional amounts payable pursuant to this
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Section 3.1(b) shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document reasonable
requested in writing by the Seller or the Parent or to change the
jurisdiction of its applicable lending office if the making of such a
filing or change would avoid the need for or reduce the amount of any
such indemnity payment or additional amounts that may thereafter accrue
and would not, in the good faith determination of such Affected Person,
be otherwise disadvantageous to such Affected Person.
(ix) Nothing contained in this Section 3.1(b) shall require an
Affected Person to make available any of its tax returns (or any other
information that it deems to be confidential or proprietary).
(x) If any Affected Person receiving an indemnification
payment hereunder with respect to Taxes or Other Taxes or liabilities
arising therefrom shall subsequently receive a refund from any taxing
authority which is specifically attributable to such indemnification
payment, such Person shall promptly pay such refund to Seller or the
Parent, as the case may be.
Section 3.2. Parent's Performance Guaranty. (a) Parent hereby
unconditionally and irrevocably covenants and agrees that it will cause the
Seller and the Servicer duly and punctually to perform and observe all of the
terms, conditions, covenants, agreements (including, without limitation,
agreements to make payments or deemed Collections) and indemnities of the Seller
and the Servicer under this Agreement and the other Transaction Documents
strictly in accordance with the terms hereof and thereof and that if for any
reason whatsoever the Seller or the Servicer shall fail to so perform and
observe such terms, conditions, covenants, agreements and indemnities, Parent
will duly and punctually perform and observe the same.
(b) The liabilities and obligations of Parent, in its capacity as a
guarantor under this Section 3.2, shall be absolute and unconditional under all
circumstances and shall be performed by Parent regardless of (i) whether any
Parallel Purchaser or the Administrative Agent shall have taken any steps to
collect from the Seller or the Servicer any of the amounts payable by such party
under this Agreement or shall otherwise have exercised any of their rights or
remedies under this Agreement or the other Transaction Documents against such
party or against any Obligor under any of the Pool Receivables, (ii) the
validity, legality or enforceability of this Agreement or any other Transaction
Documents, or the disaffirmance of any thereof in any event of bankruptcy
relating to the Seller or the Servicer, (iii) any law, regulation or decree now
or hereafter in effect which might in any manner affect any of the terms or
provisions of this
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Agreement or any other Transaction Document or any of the rights of any Parallel
Purchaser or the Administrative Agent as against the Seller or the Servicer or
as against any Obligor under any of such Pool Receivables or which might cause
or permit to be invoked any alteration in time, amount, manner of payment or
performance of any amount payable by the Seller or the Servicer to any Parallel
Purchaser or the Administrative Agent under this Agreement, (iv) the merger or
consolidation of the Seller or the Servicer into or with any corporation or any
sale or transfer by such party or all or any part of its property, (v) the
existence or assertion of any Adverse Claim with respect to any Pool Receivable,
or (vi) any other circumstance whatsoever (with or without notice to or
knowledge of Parent) which may or might in any manner or to any extent vary the
risk of Parent, or might otherwise constitute a legal or equitable discharge of
a surety or guarantor, it being the purpose and intent of Parent that the
liabilities and obligations of Parent under this Section 3.2 shall be absolute
and unconditional under any and all circumstances, and shall not be discharged
except by payment and performance as in this Agreement provided. The guaranty
set forth in this Section 3.2 is a guaranty of payment and performance and not
just of collection.
(c) Without in any way affecting or impairing the liabilities and
obligations of Parent, in its capacity as a guarantor under this Section 3.2,
the Seller, any Parallel Purchaser or the Administrative Agent may at any time
and from time to time in its discretion, without the consent of, or notice to,
Parent, and without releasing or affecting Parent's liability hereunder (i)
extend or change the time, manner, place or terms of this Agreement or any other
Transaction Document, (ii) settle or compromise any of the amounts payable by
Seller or Servicer to any Parallel Purchaser or the Administrative Agent under
this Agreement or subordinate the same to the claims of others, (iii) retain or
obtain a lien upon or security interest in any property to secure any of the
obligations hereunder, (iv) retain or obtain the primary or secondary obligation
of any obligor or obligors, in addition to Parent, with respect to any of the
obligations due hereunder, or (v) release or fail to perfect any lien upon or
security interest in, or impair, surrender, release or permit any substitution
in exchange for, all or any part of any property securing any of the obligations
under this Agreement, it being understood that nothing contained in this Section
3.2(c) shall give any Parallel Purchaser or the Administrative Agent the right
to take any of the foregoing actions if not permitted by the other provisions of
this Agreement, by law or otherwise. Nothing in this Section 3.1(c) shall be
deemed to waive any of the rights the Seller may otherwise have.
(d) The provisions of this Section 3.2 shall continue to be
effective or be reinstated, as the case may be, if at any time
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payment of any of the amounts payable by Seller or Servicer, to any Parallel
Purchaser or the Administrative Agent under this Agreement is rescinded or must
otherwise be restored or returned by any of such Persons, as the case may be,
upon any event of bankruptcy involving Seller or Servicer, or otherwise, all as
though such payment had not been made. Parent, in its capacity as a guarantor
under this Section 3.2, hereby waives (i) notices of the occurrence of any
default hereunder, (ii) any requirement of diligence or promptness on the part
of any Parallel Purchaser or the Administrative Agent in making demand,
commencing suit or exercising any other right or remedy under this Agreement, or
otherwise, and (iii) any right to require any Parallel Purchaser or the
Administrative Agent to exercise any right or remedy against Seller or Servicer
or the Pool Receivables prior to enforcing any of their rights against Parent
under this Section 3.2. Parent, in its capacity as a guarantor under this
Section 3.2, agrees that, in the event of an event of bankruptcy with respect to
Seller or Servicer (including Parent), and if such event shall occur at a time
when all of the indemnified amounts and other amounts due from Seller or
Servicer under this Agreement may not then be due and payable, Parent will pay
to Issuer or the Administrative Agent forthwith the full amount which would be
payable hereunder by Parent if all such indemnified amounts and other
obligations were then due and payable.
ARTICLE IV
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of Servicer. (a) The servicing, administering
and collection of the Pool Receivables shall be conducted by the Person so
designated from time to time as Servicer in accordance with this Section 4.1.
Until the Administrative Agent gives notice to Owens & Minor Medical, Inc. (in
accordance with this Section 4.1) of the designation of a new Servicer, Owens &
Minor Medical, Inc. is hereby designated as, and hereby agrees to perform the
duties and obligations of, the Servicer pursuant to the terms hereof. Upon
either (i) ninety (90) days' prior written notice to Owens & Minor Medical, Inc.
or (ii) the occurrence of a Termination Event, the Administrative Agent may
designate as Servicer any Person (including itself) to succeed Owens & Minor
Medical, Inc. or any successor Servicer, on the condition in each case that any
such Person so designated shall agree to perform the duties and obligations of
the Servicer pursuant to the terms hereof.
(b) Upon the designation of a successor Servicer as set forth in
Section 4.1(a) hereof, Owens & Minor Medical, Inc. agrees that it will terminate
its activities as Servicer hereunder in a manner which the Administrative Agent
determines will facilitate the transition of the performance of such
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activities to the new Servicer, and Owens & Minor Medical, Inc. shall cooperate
with and assist such new Servicer. Such cooperation shall include (without
limitation) access to and transfer of records and use by the new Servicer of all
licenses, hardware or software necessary or desirable to collect the Pool
Receivables and the Related Security.
(c) Owens & Minor Medical, Inc. acknowledges that the
Administrative Agent and each Parallel Purchaser have relied on
Owens & Minor Medical, Inc.'s agreement to act as Servicer
hereunder in making their decision to execute and deliver this
Agreement. Accordingly, Owens & Minor Medical, Inc. agrees that
it will not voluntarily resign as Servicer.
(d) The Servicer may delegate its duties and obligations hereunder to
any subservicer (each, a "Sub-Servicer"); provided that, in each such
delegation, (i) such Sub-Servicer shall agree in writing to perform the duties
and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer
shall remain primarily liable to each Parallel Purchaser for the performance of
the duties and obligations so delegated, (iii) the Seller, the Administrative
Agent and each Parallel Purchaser shall have the right to look solely to the
Servicer for performance and (iv) the terms of any agreement with any
Sub-Servicer shall provide that the Administrative Agent may terminate such
agreement upon the termination of the Servicer hereunder by giving notice of its
desire to terminate such agreement to the Servicer (and the Servicer shall
provide appropriate notice to such Sub-Servicer).
Section 4.2. Duties of Servicer. (a) The Servicer shall take or cause
to be taken all such action as may be necessary or advisable to collect each
Pool Receivable from time to time, all in accordance with this Agreement and all
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy. The Servicer shall
segregate and hold in trust for the accounts of the Seller and each Parallel
Purchaser the amount of the Collections to which each is entitled in accordance
with Article II hereto. The Servicer may, in accordance with the Credit and
Collection Policy, extend the maturity of any Pool Receivable (but not beyond
sixty (60) days from the original maturity date of such Pool Receivables and (y)
not more than once for any Pool Receivable) and extend the maturity or adjust
the Outstanding Balance of any Defaulted Receivable as the Servicer may
determine to be appropriate to maximize Collections thereof; provided, however,
that (i) such extension or adjustment shall not alter the status of such Pool
Receivable as a Delinquent Receivable or a Defaulted Receivable or limit the
rights of each Parallel Purchaser or the Administrative Agent under this
Agreement and (ii) if a Termination Event has occurred and Owens & Minor
Medical, Inc. is still serving as Servicer, Owens & Minor Medical, Inc. may make
such extension or adjustment only upon the
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prior written approval of the Administrative Agent. The Seller shall deliver to
the Servicer and the Servicer shall hold for the benefit of the Seller and the
Administrative Agent (for the benefit of each Parallel Purchaser and
individually) in accordance with their respective interests, all records and
documents (including without limitation computer tapes or disks) with respect to
each Pool Receivable. Notwithstanding anything to the contrary contained herein,
the Administrative Agent may direct the Servicer whether the Servicer is Owens &
Minor Medical, Inc. or any other Person to commence or settle any legal action
to enforce collection of any Pool Receivable or to foreclose upon or repossess
any Related Security; provided, however, that no such direction may be given
unless either (i) a Termination Event has occurred or (ii) the Administrative
Agent believes in good faith that failure to commence, settle, or effect such
legal action, foreclosure or repossession could adversely affect Receivables
constituting a material portion of the Pool Receivables.
(b) The Servicer shall as soon as practicable following actual receipt
of collected funds turn over to the Seller the collections of any indebtedness
that is not a Pool Receivable, less in the event Owens & Minor Medical, Inc. or
one of its Affiliates is not such Servicer, all reasonable and appropriate
out-of-pocket costs and expenses of such Servicer of servicing, collecting and
administering such collections; provided, however, the Servicer shall not be
under any obligation to remit any such funds to the Seller unless and until the
Servicer has received from the Seller evidence satisfactory to the
Administrative Agent and the Servicer that the Seller is entitled to such funds
hereunder and under applicable law. The Servicer shall as soon as practicable
upon demand, deliver to the Seller all records in its possession which evidence
or relate to any indebtedness that is not a Pool Receivable, and copies of
records in its possession which evidence or relate to any indebtedness that is a
Pool Receivable.
(c) Notwithstanding anything to the contrary contained in this Article
IV, the Servicer, if not, Owens & Minor Medical, Inc. or one of its Affiliates
shall have no obligation to collect, enforce or take any other action described
in this Article IV with respect to any indebtedness that is not a Pool
Receivable other than to deliver to the Seller the collections and documents
with respect to any such indebtedness as described in Section 4.2(b). It is
expressly understood and agreed by the parties that such Servicer's duties in
respect of any indebtedness that is not a Pool Receivable are set forth in this
Section 4.2 in their entirety. Upon delivery by such Servicer of funds or
records relating to any indebtedness that is not a Pool Receivable to the
Seller, such Servicer shall have discharged in full all of its responsibilities
to make any such delivery.
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(d) The Servicer's obligations hereunder shall terminate on the later
of (i) the Parallel Purchase Termination Date and (ii) the date on which all
amounts required to be paid to each Parallel Purchaser, the Administrative Agent
and any other Indemnified Party or Affected Person hereunder shall have been
paid in full.
After such termination the Servicer shall promptly deliver to the
Seller all books, records and related materials that the Seller previously
provided to the Servicer in connection with this Agreement.
Section 4.3. Lock-Box Arrangements. Prior to the initial purchase
hereunder, in accordance with Section (i) of Exhibit III, the Seller shall enter
into Lock-Box Agreements with all of the Lock-Box Banks, and deliver original
counterparts thereof to the Administrative Agent. Upon the occurrence of a
Termination Event, the Administrative Agent may at any time thereafter give
notice to each Lock-Box Bank that the Administrative Agent is exercising its
rights under the Lock-Box Agreements to do any or all of the following: (i) to
have the exclusive ownership and control of the Lock-Box Accounts transferred to
the Administrative Agent and to exercise exclusive dominion and control over the
funds deposited therein, (ii) to have the proceeds that are sent to the
respective Lock-Box Accounts be redirected pursuant to its instructions rather
than deposited in the applicable Lock-Box Account, and (iii) to take any or all
other actions permitted under the applicable Lock-Box Agreement. The Seller
hereby agrees that if the Administrative Agent, at any time, takes any action
set forth in the preceding sentence, the Administrative Agent shall have
exclusive control of the proceeds (including Collections) of all Pool
Receivables and the Seller hereby further agrees to take any other action that
the Administrative Agent may reasonably request to transfer such control. Any
proceeds of Pool Receivables received by the Seller, as Servicer or otherwise,
thereafter shall be sent immediately to the Administrative Agent. The parties
hereto hereby acknowledge that if at any time the Administrative Agent takes
control of any Lock-Box Account, the Administrative Agent shall not have any
rights to the funds therein in excess of the unpaid amounts due to the
Administrative Agent, any Parallel Purchaser or any other Person hereunder and
the Administrative Agent shall distribute or cause to be distributed such funds
in accordance with Section 4.2(b) hereof (including the proviso thereto) and
Article II hereof (in each case as if such funds were held by the Servicer
thereunder); provided, however, that the Administrative Agent shall not be under
any obligation to remit any such funds to the Seller or any other Person unless
and until the Administrative Agent has received from the Seller or such Person
evidence satisfactory to the Administrative Agent that the Seller or such Person
is entitled to such funds hereunder and under applicable law.
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Section 4.4. Enforcement Rights. (a) At any time following the
occurrence of a Termination Event or the designation of a Servicer (other than
Owens & Minor Medical, Inc. or any of its Affiliates) pursuant to Section 4.1
hereof:
(i) the Administrative Agent may direct the Obligors that
payment of all amounts payable under any Pool Receivable be made
directly to the Administrative Agent or its designee;
(ii) the Administrative Agent may instruct the Seller to give
notice of each Parallel Purchaser's interest in Pool Receivables to
each Obligor, which notice shall direct that payments be made directly
to the Administrative Agent or its designee, and upon such instruction
from the Administrative Agent the Seller shall give such notice at the
expense of the Seller; provided, that if the Seller fails to so notify
each Obligor, the Administrative Agent may so notify the Obligors; and
(iii) the Administrative Agent may request the Seller to, and
upon such request the Seller shall, (A) assemble all of the records
necessary or desirable to collect the Pool Receivables and the Related
Security, and transfer or license the use of, to the new Servicer, all
software necessary or desirable to collect the Pool Receivables and the
Related Security, and make the same available to the Administrative
Agent or its designee at a place selected by the Administrative Agent,
and (B) segregate all cash, checks and other instruments received by it
from time to time constituting Collections with respect to the Pool
Receivables in a manner acceptable to the Administrative Agent and,
promptly upon receipt, remit all such cash, checks and instruments,
duly endorsed or with duly executed instruments of transfer, to the
Administrative Agent or its designee.
(b) The Seller hereby authorizes the Administrative Agent, and
irrevocably appoints the Administrative Agent as its attorney-in-fact with full
power of substitution and with full authority in the place and stead of the
Seller, which appointment is coupled with an interest, to take any and all steps
in the name of the Seller and on behalf of the Seller necessary or desirable, in
the determination of the Administrative Agent, to collect any and all amounts or
portions thereof due under any and all Pool Receivables or Related Security,
including, without limitation, endorsing the name of the Seller on checks and
other instruments representing Collections and enforcing such Pool Receivables,
Related Security and the related Contracts. Notwithstanding anything to the
contrary contained in this subsection (b), none of the powers conferred upon
such attorney-in-fact pursuant to the immediately preceding sentence shall
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subject such attorney-in-fact to any liability if any action taken by it shall
prove to be inadequate or invalid, nor shall they confer any obligations upon
such attorney-in-fact in any manner whatsoever.
Section 4.5. Responsibilities of the Seller. (a) Anything herein to the
contrary notwithstanding, the Seller shall pay when due any taxes, including,
without limitation, any sales taxes payable in connection with the Pool
Receivables and their creation and satisfaction. Neither the Administrative
Agent nor any Parallel Purchaser shall have any obligation or liability with
respect to any Pool Receivable, any Related Security or any related Contract,
nor shall any of them be obligated to perform any of the obligations of the
Seller or any Originator under any of the foregoing.
(b) Owens & Minor Medical, Inc. hereby irrevocably agrees that if at
any time it shall cease to be the Servicer hereunder, it shall act (if the then
current Servicer so requests) as the data-processing agent of the Servicer and,
in such capacity, Owens & Minor Medical, Inc. shall conduct the data-processing
functions of the administration of the Receivables and the Collections thereon
in substantially the same way that Owens & Minor Medical, Inc. conducted such
data-processing functions while it acted as the Servicer.
Section 4.6. Servicing Fee. For so long as the Servicer is Owens &
Minor Medical, Inc.or an Affiliate of Owens & Minor Medical, Inc., the Servicer
shall be paid a fee, through distributions contemplated by Section 1.4(d), equal
to 0.50% per annum of the average outstanding Capital. If the Servicer is not
Owens & Minor Medical, Inc. then the Servicer shall be paid a fee as negotiated
in good faith by such Services and by the Administrator in the Administrator's
sole discretion.
ARTICLE V
ADMINISTRATIVE AGENT
SECTION 5.1. Authorization and Action. (a) Each Parallel Purchaser
hereby irrevocably appoints, designates and authorizes the Administrative Agent
to take such action on its behalf under the provisions of this Agreement and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement, together with such powers as are reasonably
incidental thereto. Without limiting the foregoing, each Parallel Purchaser
hereby irrevocably authorizes the Administrative Agent to execute an O&M
Intercreditor Agreement substantially in the form attached hereto as Annex B and
agrees to be bound thereby. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement, the Administrative Agent shall not have
any duties or
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responsibilities, except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with
any Parallel Purchaser, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or
otherwise exist against the Administrative Agent.
(b) The Administrative Agent may execute any of its duties under this
Agreement by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Administrative Agent shall not be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects with reasonable
care.
SECTION 5.2. Reliance, Etc. (a) None of the Administrative Agent or any
of its Affiliates or any of the officers, directors, employees, agents or
attorneys-in-fact of the Administrative Agent or any of its Affiliates (each, an
"Agent-Related Person") shall (i) be liable for any action taken or omitted to
be taken by any of them under or in connection with this Agreement or the other
Transaction Documents or the transactions contemplated hereby or thereby (except
for its own gross negligence or willful misconduct), or (ii) be responsible in
any manner to any of the Parallel Purchasers for any recital, statement,
representation or warranty made by the Seller or any Affiliate of the Seller, or
any officer thereof, contained in this Agreement or in any other Transaction
Document, 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 with, this Agreement or any other Transaction Document, or for the
value of or title to any Purchased Interest, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Transaction Document, or for any failure of the Seller or any other party to
this Agreement or any other Transaction Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Parallel Purchaser to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Transaction Document, or to inspect the properties, books
or records of the Seller or any of the Seller's Affiliates.
(b) The Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Seller), independent
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accountants and other experts selected by the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement unless it shall first receive such advice or
concurrence of the Majority Parallel Purchasers as it deems appropriate and, if
it so requests, it shall first be indemnified to its satisfaction by the
Parallel Purchasers 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, under this Agreement in accordance with a request or
consent of the Majority Parallel Purchasers and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the
Parallel Purchasers.
SECTION 5.3. Purchase Decisions. (a) Each Parallel Purchaser
acknowledges that none of the Agent-Related Persons has made any representation
or warranty to it, and that no act by the Administrative Agent hereinafter
taken, including any review of the affairs of the Seller shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Parallel Purchaser. Each Parallel Purchaser represents to the Administrative
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Seller, the value of and title to the Purchased Interest, and all applicable
bank regulatory laws relating to the transactions contemplated hereby, and made
its own decision to enter into this Agreement and to extend its purchase
commitment to the Seller hereunder. Each Parallel Purchaser also represents that
it will, independently and without reliance upon any Agent-Related Person 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 Agreement and to make such investigations
as it deems necessary to inform itself as to the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Seller. Except for notices, reports and other documents expressly herein
required to be furnished to the Parallel Purchasers by the Administrative Agent,
the Administrative Agent shall not have any duty or responsibility to provide
any Parallel Purchaser with any credit or other information concerning the
business, prospects, operations, property, financial and other condition or
creditworthiness of the Seller which may come into the possession of any of the
Agent-Related Persons.
(b) The Administrative Agent shall not be liable to any
Parallel Purchaser in connection with (x) the administration of
any of the Transaction Documents or (y) this Agreement or any
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purchases hereunder except for its own gross negligence or
willful misconduct. Without limiting the foregoing, the
Administrative Agent:
(i) may consult with legal counsel (including counsel for
the Seller), independent public accountants or other experts and shall
not be liable for any action taken or omitted to be taken in good faith
in accordance with the advice of such counsel, accountants or other
experts;
(ii) shall not be responsible for the performance or
observance by either Seller or the Servicer of any of the terms,
covenants or conditions of any of the Transaction Documents or any
instrument or document furnished pursuant thereto;
(iii) shall incur no liability by acting upon any notice,
consent, certificate or other instrument or writing, or any other
communication believed to be genuine and signed, sent or made by the
proper party; and
(iv) shall not be deemed to be acting as any Parallel
Purchaser's trustee or otherwise in a fiduciary capacity hereunder or
under or in connection with any of the Transaction Documents or any
Purchased Interest.
SECTION 5.4. Indemnification. Whether or not the transactions
contemplated hereby shall be consummated, the Parallel Purchasers shall
indemnify upon demand the Agent-Related Persons ratably from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, charges, expenses and disbursements (including Attorney Costs) of
any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the other
Transaction Documents or any document contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby, and with respect to
any investigation, litigation or proceeding (including any insolvency proceeding
or appellate proceeding) related to this Agreement, the acquisition of Purchased
Interests or the use of the proceeds thereof, whether or not any Agent-Related
Person is a party thereto (all of the foregoing, collectively, the "Indemnified
Liabilities"); provided, however, that no Parallel Purchaser shall be liable for
the payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Parallel Purchaser shall
reimburse the Administrative Agent upon demand for its ratable share of any
costs or out-of-pocket expenses (including Attorney Costs) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether
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through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, the other
Transaction Documents or any document contemplated by or referred to herein to
the extent that the Administrative Agent is not reimbursed for such expenses by
or on behalf of the Seller. The agreements in this Section 5.4 shall survive
termination of this Agreement, the Parallel Purchase Termination Date, the Final
Payout Date and payment of all obligations hereunder.
SECTION 5.5. Bank of America and its Affiliates. Bank of America and
its Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business with
the Seller and its Affiliates as though Bank of America were not the
Administrative Agent hereunder and without notice to or consent of the Parallel
Purchasers. The Parallel Purchasers acknowledge that, pursuant to such
activities, Bank of America or its Affiliates may receive information regarding
the Seller or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Seller or such Affiliate) and
acknowledge that the Administrative Agent shall be under no obligation to
provide such information to them. With respect to its purchases hereunder, Bank
of America shall have the same rights and powers under this Agreement as any
other Parallel Purchaser and may exercise the same as though it were not the
Administrative Agent, and the terms "Parallel Purchaser" and "Parallel
Purchasers" include Bank of America in its individual capacity.
SECTION 5.6. Resignation of Administrative Agent. The Administrative
Agent may resign at any time by giving 30 days' prior written notice thereof to
the Parallel Purchasers and the Issuer. The Administrative Agent may be removed
at any time by the affirmative vote of the Majority Parallel Purchasers upon 30
days' prior written notice thereof to the Administrative Agent and the Issuer,
if the Administrative Agent shall have engaged in willful misconduct or shall
have been grossly negligent in the performance of its duties as Administrative
Agent. Such resignation or removal shall become effective upon the acceptance of
appointment by a successor Administrative Agent as set forth below. The Majority
Parallel Purchasers shall have the right to appoint a successor Administrative
Agent, which shall be an Eligible Agent. If no successor Administrative Agent
shall have been so appointed by the Majority Parallel Purchasers, and shall have
accepted such appointment, within 30 days after the prior Administrative Agent's
giving of notice of resignation or the Majority Parallel Purchasers' removal of
the prior Administrative Agent, then the prior Administrative Agent may, on
behalf of the Parallel Purchasers, appoint a successor Administrative Agent
which shall be an Eligible Agent. Upon the acceptance of any
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appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the prior
Administrative Agent, and the prior Administrative Agent shall be discharged
from its duties and obligations under this Agreement. After any Administrative
Agent's resignation or removal hereunder as Administrative Agent, the provisions
of this Article V shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Administrative Agent under this Agreement. If no
successor agent has accepted appointment as Administrative Agent by the date
which is 30 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Parallel Purchasers shall perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Majority Parallel Purchasers appoint a successor agent as provided for above.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or consent to any departure by the Seller or the Servicer
therefrom shall be effective unless in a writing (a) signed by the
Administrative Agent and the Majority Parallel Purchasers, and (b) in the case
of any amendment, signed by the Seller, the Servicer, the Administrative Agent
and the Majority Parallel Purchasers; provided, however, that no amendment,
modification or waiver of any provision of this Agreement shall be effective
without the prior written consent of the Administrative Agent, the Seller and
all Parallel Purchasers if the effect of such amendment, modification or waiver
would:
(a) reduce the amount of Capital or Discount that is
payable on account of any Purchased Interest or delay any
scheduled date for payment thereof; or
(b) increase the Purchase Limit hereunder or under the
Receivables Purchase Agreement to which such Seller is a party;
or
(c) modify the reserve requirements hereunder for
uncollectible Receivables, Dilution Reserve, Discount or the
Servicing Fee; or
(d) modify any yield protection or indemnity provision
which expressly inures to the benefit of assignees or
participants of the Parallel Purchasers; or
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(e) modify the Purchase Commitment or Percentage of any
Parallel Purchaser; or
(f) amend this Section 6.1; or
(g) extend the Parallel Purchase Termination Date; or
(h) modify the definition of "Majority Parallel
Purchasers."
Any such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No failure on the part of
any Securitization Party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
SECTION 6.2. Notices, Etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and sent or delivered, to each party hereto, at
its address for notices set forth under its name on the signature pages hereof
or at such other address as shall be designated by such party in a written
notice to the other parties hereto. Notices and communications by facsimile
shall be effective when sent (and shall be followed by hard copy sent by first
class mail), and notices and communications sent by other means shall be
effective when received.
SECTION 6.3. Binding Effect; Assignability; Restrictions on Assignment.
(a) This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement and
each Parallel Purchaser's rights and obligations herein (including ownership of
the Purchased Interest) shall be assignable, in whole or in part, by such
Parallel Purchaser and its successors and assigns (subject to the limitations
set forth in Section 6.3(g) hereof) and any assignee shall become a party hereto
and shall become a Parallel Purchaser hereunder upon (i) satisfaction of the
conditions set forth in Section 6.3(b), (ii) acceptance and recording of an
Assignment by the Administrative Agent in a register (the "Register") maintained
by the Administrative agent for the recordation of the names and addresses of
the Parallel Purchasers, their respective Percentages and effective dates and
(iii) the occurrence of the effective date of such Parallel Purchaser's Purchase
Commitment (as set forth in such Assignment) and subject to the approval of such
Parallel Purchaser by the Administrative Agent.
(b) Each Parallel Purchaser may assign all or a portion of
its rights and obligations under this Agreement (subject to the
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limitations set forth in Section 6.3(g) hereof); provided,
however that:
(i) each such assignment shall be of a constant, and not a
varying, percentage of the aggregate rights and obligations of the
assigning Parallel Purchaser under this Agreement (including, without
limitation, its Purchase Commitment and its Percentage of any Purchased
Interest owned by it),
(ii) the amount of the assigning Parallel Purchaser's
Purchase Commitment being assigned pursuant to such assignment shall in
no event be less than the lesser of (a) its entire Parallel Purchaser's
Purchase Commitment and (b) $10,000,000 and, if the amount being
assigned is greater than $10,000,000 shall be in an integral multiple
of $5,000,000, and, unless such assigning Parallel Purchaser is
assigning its entire Purchase Commitment, such assigning Parallel
Purchaser's retained Purchase Commitment after giving effect to such
assignment shall in no event be less than $10,000,000,
(iii) the parties to each such assignment shall execute and
deliver an Assignment to the Administrative Agent, for its acceptance
and recording in the Register,
(iv) the assignee shall deliver to the Administrative Agent at
least five days prior to the effective date specified in the Assignment
an enforceability opinion of counsel for such assignee, addressed to
the Administrative Agent and the Issuer, in form and substance
reasonably satisfactory to such addressees (and the Administrative
Agent shall promptly deliver copies of the same to each of such
addressees), and
(v) any Parallel Purchaser assigning an interest hereunder
must simultaneously assign its interest under the Liquidity Asset
Purchase Agreement to the same assignee and to the same extent as
hereunder.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in the Assignment, (x) the assignee thereunder shall be
a party hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to this Agreement, have the rights and obligations
of a Parallel Purchaser hereunder and (y) the Parallel Purchaser which is the
assignor thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to this Agreement, relinquish its rights
(other than the right to receive payments which accrued in favor of such
Parallel Purchaser prior to such assignment) and be released from its
obligations under this Agreement (and, if such Assignment provides for an
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assignment of all such assigning Parallel Purchaser's Purchase Commitment, such
Parallel Purchaser shall cease to be a party hereto).
(c) Upon receipt by the Administrative Agent of an Assignment executed
by an assigning Parallel Purchaser and by an assignee who is an Eligible
Assignee and the satisfaction of the other conditions set forth in Section
6.3(b), the Administrative Agent shall (i) accept such Assignment, (ii) record
the information contained therein in the Register and (iii) give prompt notice
thereof to the Issuer and the Seller. The assigning Parallel Purchaser shall pay
to the Administrative Agent an assigning fee equal to $2,500 for each assignment
hereunder. Each assigning Parallel Purchaser may, in connection with the
assignment, disclose to the assignee any information relating to the Seller or
the Pool Receivables furnished to such assignor by or on behalf of the Seller,
any Parallel Purchaser or the Administrative Agent.
(d) This Agreement and the rights and obligations of the Administrative
Agent hereunder shall be assignable, in whole or in part, by the Administrative
Agent and its successors and assigns.
(e) Except as provided in Section 4.1(d), the Servicer may not assign
its rights or delegate its obligations hereunder or any interest herein without
the prior written consent of the Administrative Agent. The Seller may not assign
its rights or delegate its obligations hereunder or any interest herein without
the prior written consent of the Administrative Agent.
(f) Without limiting any other rights that may be available under
applicable law, the rights of each Parallel Purchaser may be enforced through it
or by its agents.
(g) Neither the Seller nor any Purchaser (in the case of a Purchaser,
only with respect to its own participation in the Purchased Interest) shall
allow the Purchased Interest or any participating interest therein to become (i)
traded on an established securities market (as defined in U.S. Department of the
Treasury (the "Treasury") regulations section 1.7704-1(b) or (ii) readily
tradable on a secondary market or the substantial equivalent thereof (as defined
in Treasury regulations section 1.7704-1(c)). In addition, neither the Purchased
Interest nor any participating interest therein may be issued or sold in a
transaction or transactions that are required to be registered under the
Securities Act of 1933 (15 U.S.C. 77a et seq.), and at no time may more than 100
Persons own interests in the Receivables Pool. In determining the number of
Persons that own interests in the Receivables Pool for purposes of the preceding
sentence, any beneficial owner of an interest in a partnership, grantor trust,
or S corporation ("Flow-Through Entity") will be
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treated as owning an interest in the Receivables Pool only if substantially all
of the value of such beneficial owner's interest in the Flow-Through Entity is
attributable to such Flow- Through Entity's interest (direct or indirect) in the
Receivables Pool. Any assignment or transfer of the Purchased Interest or any
participating interest therein in violation of the foregoing restrictions will
be void ab initio.
SECTION 6.4. Participations. (a) No Parallel Purchaser
may sell participations except with the prior written consent of
the Administrative Agent.
SECTION 6.5. Change in Purchase Limit. (a) If, pursuant to Section 6.1
hereof, this Agreement shall be amended to increase the Purchase Limit
hereunder, then unless all the Parallel Purchasers shall have agreed to a
different allocation and shall have so advised the Administrative Agent in
writing, on the effective date of such amendment, each Parallel Purchaser's
Maximum Parallel Purchase amount with respect to this Agreement shall be deemed
to be proportionately increased.
(b) If the Purchase Limit under this Agreement shall be reduced, the
Percentage of each Parallel Purchaser shall remain the same and each Parallel
Purchaser's Maximum Parallel Purchase amount with respect to this Agreement
shall be deemed to be proportionately reduced.
SECTION 6.6. Parallel Purchase Termination Date; Extension of Parallel
Purchase Termination Date. Subject to earlier termination of a Parallel
Purchaser's Purchase Commitment pursuant to Section 1.1(b) or Section 2.2
hereof, the Parallel Purchasers' Purchase Commitments under this Agreement shall
expire at the close of business on December 24, 1996 (such date being the
"Parallel Purchase Termination Date"). If at any time the Seller requests that
the Parallel Purchasers renew their Purchase Commitments hereunder and less than
all the Parallel Purchasers consent to such renewal within 30 days of the
Administrative Agent's request, the Administrative Agent may arrange for an
assignment to one or more Eligible Assignees of all the rights and obligations
hereunder of each such nonconsenting Parallel Purchaser in accordance with
Section 6.3, provided, that the fee payable pursuant to Section 6.3(c) shall be
payable by the assignee Parallel Purchaser. Any such assignment shall become
effective on the then current Parallel Purchase Termination Date. Each Parallel
Purchaser which does not so consent to any renewal shall cooperate fully with
the Administrative Agent in effectuating any such assignment. The Administrative
Agent will provide written notice to the Parallel Purchasers of any proposed
modifications to this Agreement requested in connection with any renewal hereof
and, even if the Parallel Purchasers have previously indicated that they will
renew the Agreement, the Parallel Purchasers shall each have the
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right to elect not to renew this Agreement in light of such
modifications.
SECTION 6.7. Rights of Program Support Providers. Seller hereby agrees
that, upon notice to Seller and the Administrative Agent, a Program Support
Provider may exercise any or all the rights of the Administrative Agent
hereunder with respect to Purchased Interests, and Collections with respect
thereto, and all other rights and interests of a Parallel Purchaser in, to or
under this Agreement or any other Transaction Document which have been assigned
(or in which a security interest has been granted) to such Program Support
Provider. Without limiting the foregoing, upon such notice such Program Support
Provider may request Servicer to segregate the Parallel Purchasers' and Program
Support Provider's allocable shares of Collections from Seller's allocable
share, and from each other's allocable share, in accordance with Section 1.4,
may designate a successor servicer pursuant to Section 4.1, may give or require
the Administrative Agent to give notice to the Lock-Box Banks as referred to in
Section 4.3, and may direct the Obligors of Pool Receivables to make payments in
respect thereof directly to an account designated by them (provided that such
Program Support Provider shall designate a single account for the making of such
payments with respect to any Pool Receivable), in each case, to the same extent
as the Administrative Agent might have done. If, in its commercially reasonable
judgment, the Servicer determines that any notice or instruction furnished under
this Section 6.7 by a Program Support Provider is in any material respect
inconsistent with any notice or instruction furnished under this Section 6.7 by
the Administrative Agent or any Program Support Provider, as soon as practicable
following such determination, the Servicer shall, by telephonic or facsimile
notice, request that the Administrative Agent provide supplemental instructions
to the Servicer that resolve such inconsistency. The Servicer shall be entitled
to rely upon any such supplemental instructions provided by the Administrative
Agent.
SECTION 6.8. Costs and Expenses. In addition to the rights of
indemnification granted under Section 3.1 hereof, the Seller agrees to pay on
demand all costs and expenses in connection with the preparation, execution,
delivery, administration and auditing (including audit fees and expenses
generated by an internal or external auditor as appointed by the Administrative
Agent) of this Agreement, any Program Support Agreement and the other
Transaction Documents, and any amendment, modification or waiver of any of the
foregoing, including, without limitation, Attorney Costs for the Administrative
Agent, each Parallel Purchaser, any Program Support Provider and their
respective Affiliates and agents with respect thereto and with respect to
advising the Administrative Agent, each Parallel Purchaser, any Program Support
Provider and their respective Affiliates and agents as to their rights and
remedies under this
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Agreement and the other Transaction Documents referred to above, and all costs
and expenses, if any (including Attorney Costs), of the Administrative Agent,
each Parallel Purchaser and their respective Affiliates and agents, in
connection with the enforcement of this Agreement and the other Transaction
Documents.
SECTION 6.9. No Proceedings; Limitation on Payments. Each of the
Seller, the Servicer, the Administrative Agent, each Parallel Purchaser and each
assignee of the Purchased Interest or any interest therein and each Person which
enters into a commitment to purchase the Purchased Interest or interests therein
hereby covenants and agrees that it will not institute against, or join any
other Person in instituting against, the Seller any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding under any
federal or state bankruptcy or similar law, for one year and one day after the
latest maturing Note issued by the Issuer is paid in full.
SECTION 6.10. Confidentiality. The Seller, the Servicer, the Parent,
each Parallel Purchaser and the Administrative Agent each agrees to take normal
and reasonable precautions and exercise due care to maintain the confidentiality
of this Agreement, any Program Support Agreement and the other Transaction
Documents (and all drafts thereof), and all information identified as
"confidential" or "secret" by the Seller and provided to the other parties by
the Seller under any Program Support Agreement, this Agreement or any other
Transaction Document, and no such Person nor any of their respective Affiliates
shall use any such information other than in connection with or in enforcement
of any Program Support Agreement, this Agreement and the other Transaction
Documents, except to the extent such information (i) was or becomes generally
available to the public other than as a result of disclosure by such Person, or
(ii) was or becomes available on a non-confidential basis from a source other
than such Person, provided that such source is not bound by a confidentiality
agreement with respect thereto; provided, however, that any Person may disclose
such information (A) at the request or pursuant to any requirement of any
Governmental Authority to which such Person is subject or in connection with an
examination of such Person by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable requirement of law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which such Person or
its Affiliates may be party; (E) to the extent reasonably required in connection
with the exercise of any remedy hereunder or under any other Transaction
Document; (F) to such Person's independent auditors, legal counsel and other
professional advisors; (G) to any nationally recognized rating agency; (H) to
any assignee, Parallel Purchaser, or assignee or participant of a Parallel
Purchaser, actual or potential,
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provided that such Person agrees in writing to keep such information
confidential to the same extent required hereunder; (I) to the extent reasonably
required by commercial paper dealers in connection with the sale of commercial
paper related to the transaction contemplated by the Transaction Documents; and
(J) as expressly permitted under the terms of any other document or agreement
regarding confidentiality to which such Person and any of the other parties
hereto is party.
SECTION 6.11. GOVERNING LAW AND JURISDICTION. (A) THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF),
EXCEPT TO THE EXTENT THAT THE PERFECTION (OR THE EFFECT OF PERFECTION OR
NON-PERFECTION) OF THE INTERESTS OF THE ISSUER IN THE POOL RECEIVABLES, RELATED
SECURITY, COLLECTIONS AND PROCEEDS THEREOF, IS GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE ISSUER, THE SELLER, THE SERVICER AND THE ADMINISTRATIVE
AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE ISSUER, THE SELLER, THE SERVICER AND
THE ADMINISTRATIVE AGENT IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY
LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE ISSUER, THE SELLER, THE SERVICER
AND THE ADMINISTRATIVE AGENT EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
NEW YORK LAW.
SECTION 6.12. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.
SECTION 6.13. Survival of Termination. The provisions of Sections 1.6,
1.8, 1.9, Article III, Sections 6.7, 6.8, 6.9, 6.10, and 6.12, and of this
Section 6.13, shall survive any termination of this Agreement.
SECTION 6.14. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
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AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. EACH PARTY HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE
OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT
TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR ANY OTHER TRANSACTION DOCUMENT.
SECTION 6.15. Entire Agreement. This Agreement together with the other
Transaction Documents embodies the entire agreement and understanding among the
Parallel Purchasers, the Seller, the Servicer and the Administrative Agent, and
supersedes all prior or contemporaneous agreements and understandings of such
Persons, verbal or written, relating to the subject matter hereof and thereof,
except for any prior arrangements made with respect to the payment by the
Parallel Purchasers of (or any indemnification for) any fees, costs or expenses
payable to or incurred (or to be incurred) by or on behalf of the Seller, the
Servicer and the Administrative Agent. The Exhibits and Annexes to this
Agreement shall be deemed incorporated by reference into this Agreement.
SECTION 6.16. Headings. The captions and headings of this Agreement
and in any Exhibit hereto are for convenience of reference only and shall not
affect the interpretation hereof or thereof.
SECTION 6.17. Purposes. The Seller and each Parallel Purchaser hereby
agree to treat the Purchased Interest and any participating Interest therein as
a debt instrument for purposes of federal and state income tax, franchise tax,
and any other federal or state tax measured in whole or in part by income, to
the extent permitted by applicable law. Notwithstanding any other provision of
this Agreement, no Affected Person shall be entitled to any indemnification for
any Taxes, Other Taxes or other liabilities arising therefrom if and to the
extent that such Taxes, Other Taxes or other liabilities arise from such
Parallel Purchaser treating the Purchased Interest or such participating
interest as other than a debt instrument for purposes of federal and state
income tax, and any other federal or state tax measured in whole or in part by
income when under applicable law such interest could be treated as a debt
instrument.
SECTION 6.18. Acknowledgment of Benefits Under Surety Bond.
Each Parallel Purchaser (other than BAI) hereby confirms and
acknowledges that it understands that the Issuer has obtained a
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surety bond (as amended, supplemented, replaced, or otherwise amended, the
"Surety Bond") which provides credit support for certain obligations of the
Issuer. In addition, Bank of America has made arrangements for all of Bank of
America's (and, in certain cases, certain of its affiliates') credit exposure in
connection with the Issuer's securitization program to be insured by the Surety
Bond, subject to Bank of America and/or such affiliates first suffering a
substantial loss. Such Bank of America loss serves as a deductible for the
Surety Bond. The Percentage Interests acquired by BAI (and, in certain cases,
certain of its affiliates) hereunder and under all other similar parallel asset
purchase agreements to which the Bank of America, BAI (or such affiliates) is or
may become a party are insured obligations under the Surety Bond. Each Parallel
Purchaser understands and agrees that Bank of America has not made any
arrangements to insure the Percentage Interests acquired by any other Purchaser,
and that in no event will any Purchaser hereunder (other than Bank of America or
BAI) receive any proceeds of any drawing on the Surety Bond, whether from the
issuer of such Surety Bond, the Issuer, or Bank of America. Neither Bank of
America nor BAI shall be required to share any payments made to it from proceeds
of any drawing on the Surety Bond.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
O&M FUNDING CORP., as Seller
By:_______________________________
Name:__________________________
Title:_________________________
Address for Notices:
4800 Cox Road
Richmond, Virginia 23261-7626
Attention: Michael W. Lowry
Telephone: 804/747-9794
Facsimile: 804/965-5403
OWENS & MINOR MEDICAL, INC.,
as Servicer
By:_______________________________
Name:__________________________
Title:_________________________
Address for Notices:
4800 Cox Road
Richmond, Virginia 23261-7626
Attention: Michael W. Lowry
Telephone: 804/747-9794
Facsimile: 804/965-5403
OWENS & MINOR, INC., as Parent
By:_______________________________
Name:__________________________
Title:_________________________
Address for Notices:
4800 Cox Road
Richmond, Virginia 23261-7626
Attention: Michael W. Lowry
Telephone: 804/747-9794
Facsimile: 804/965-5403
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BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Administrative Agent
By:________________________________
Name: Mark A. Wegener
Title: Vice President
Address:
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Mark A. Wegener
Telephone: 312/828-2345
Facsimile: 312/828-7855
with a copy to:
Bank of America National Trust and
Savings Association
Asset Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Mark A. Wegener
Telephone: 312/828-3343
Facsimile: 312/828-7855
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THE PARALLEL PURCHASERS
BANK OF AMERICA ILLINOIS
By:_______________________________
Name: Mark A. Wegener
Title: Vice President
Address:
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Mark A. Wegener
Telephone: 312/828-2345
Facsimile: 312/828-7855
with a copy to:
Bank of America National Trust and
Savings Association
Asset Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Mark A. Wegener
Telephone: 312/828-3343
Facsimile: 312/828-7855
Parallel Purchaser Percentage: 100%
Maximum Parallel Purchase: $75,000,000.00
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EXHIBIT I
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The initial
purchase under the Agreement is subject to the conditions precedent that the
Administrative Agent shall have received on or before the date of such purchase
the following, each in form and substance (including the date thereof)
satisfactory to the Administrative Agent:
(a) A duly executed counterpart of this Agreement.
(b) A duly executed counterpart of the Purchase and
Sale Agreement.
(c) A duly executed counterpart copy of the Receivables
Purchase Agreement.
(d) Certified copies of (i) the resolutions of the Board of
Directors of each of the Seller, the Servicer and the Parent authorizing the
execution, delivery, and performance by the Seller, the Servicer and the Parent,
respectively, of the Agreement and the other Transaction Documents, (ii) all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to the Agreement and the other Transaction
Documents and (iii) the certificate of incorporation and by-laws of each of the
Seller, the Servicer and the Parent
(e) A certificate of the Secretary or Assistant Secretary of
each of the Seller, the Servicer and the Parent certifying the names and true
signatures of the officers of the Seller, the Servicer and the Parent,
respectively, authorized to sign the Agreement and the other Transaction
Documents. Until the Administrative Agent receives a subsequent incumbency
certificate from the Seller, the Servicer or the Parent in form and substance
satisfactory to the Administrative Agent, the Administrative Agent shall be
entitled to rely on the last such certificate delivered to it.
(f) Signed copies of proper financing statements, in a form
suitable for filing under the UCC of all jurisdictions that the Administrative
Agent may deem necessary or desirable in order to perfect the interests of the
Parallel Purchasers contemplated by the Agreement.
(g) Signed copies of proper financing statements, if any, in a
form suitable for filing under the UCC of all jurisdictions that the
Administrative Agent may deem necessary to release all security interests and
other rights of any Person in the Receivables, Contracts or Related Security
previously granted by the Seller.
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(h) Completed UCC requests for information, dated on or before
the date of such initial purchase, listing the financing statements referred to
in subsection (d) above and all other effective financing statements filed in
the jurisdictions referred to in subsection (f) above that name the Seller as
debtor, together with copies of such other financing statements (none of which
shall cover any Receivables, Contracts or Related Security), and similar search
reports with respect to federal tax liens and liens of the Pension Benefit
Guaranty Corporation in such jurisdictions as the Administrative Agent may
request, showing no such liens on any of the Receivables, Contracts or Related
Security.
(i) A favorable opinion of Hunton & Williams, counsel for the
Seller, the Servicer and the Parent, substantially in the form of Annex C hereto
and as to such other matters as the Administrative Agent may reasonably request.
(j) A favorable opinion of in-house counsel for the Seller,
the Servicer and the Parent, substantially in the form of Annex D hereto and as
to such other matters as the Administrative Agent may reasonably request.
(k) Satisfactory results of a review and audit of the
Originators' collection, operating and reporting systems, Credit and Collection
Policy, historical receivables data and accounts, including satisfactory results
of a review of the Originators' operating location(s) and satisfactory review
and approval of the Eligible Receivables in existence on the date of the initial
purchase under the Agreement.
(l) Seller Report representing the performance of the
portfolio purchased through the Agreement for the month prior to closing.
(m) Good standing certificates with respect to each of
the Seller, the Servicer and the Parent issued by the Secretary
of the State Corporation Commission of Virginia.
(n) Such other approvals, opinions or documents as the
Administrative Agent or the Parallel Purchasers may reasonably request.
2. Conditions Precedent to All Purchases and
Reinvestments. Each purchase (including the initial purchase)
and each reinvestment shall be subject to the further conditions
precedent that:
(a) in the case of each purchase, the Servicer shall have
delivered to the Administrative Agent on or prior to such purchase, in form and
substance satisfactory to the Administrative Agent, a completed Seller Report
with respect to the immediately preceding calendar month, dated within three (3)
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Business Days prior to the date of such purchase and such additional information
as may reasonably be requested by the Administrative Agent including, without
limitation, a listing of Obligors and their respective portions of the Pool
Receivables at any time;
(b) on the date of such purchase or reinvestment the following
statements shall be true (and acceptance of the proceeds of such purchase or
reinvestment shall be deemed a representation and warranty by the Seller, the
Servicer and the Parent that such statements are then true):
(i) the representations and warranties contained in
Exhibit II are true and correct on and as of the date of such purchase
or reinvestment as though made on and as of such date; and
(ii) no event has occurred and is continuing, or
would result from such purchase or reinvestment, that constitutes a
Termination Event or that would constitute a Termination Event but for
the requirement that notice be given or time elapse or both; and
(c) the Administrative Agent shall have received such other
approvals, opinions or documents as it may reasonably request.
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EXHIBIT II
REPRESENTATIONS AND WARRANTIES
OF
SELLER, THE SERVICER AND THE PARENT
The Seller, the Servicer and the Parent each jointly and
severally make the following representations and warranties:
(a) Organization and Good Standing. It is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Virginia, and is duly qualified to do business, and is in good
standing, as a foreign corporation in every jurisdiction where the nature of its
business requires it to be so qualified.
(b) Due Qualification; No Conflicts. The execution, delivery
and performance by it of the Agreement and the other Transaction Documents to
which it is a party, including, in the case of the Seller, the Seller's use of
the proceeds of purchases and reinvestments, (i) are within its corporate
powers, (ii) have been duly authorized by all necessary corporate action, (iii)
do not contravene or result in a default under or conflict with (1) its charter
or by-laws, (2) any law, rule or regulation applicable to it, (3) any
contractual restriction binding on or affecting it or its property or (4) any
order, writ, judgment, award, injunction or decree binding on or affecting it or
its property, and (iv) do not result in or require the creation of any Adverse
Claim upon or with respect to any of its properties. The Agreement and the other
Transaction Documents to which it is a party have been duly executed and
delivered by it.
(c) Consents. No authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority or other Person is
required for the due execution, delivery and performance by it of the Agreement
or any other Transaction Document to which it is a party other than (a) the
filing of financing statements against Owens & Minor Medical, Inc. and the
Seller in the State Corporation Commission of Virginia and (b) comparable
filings with respect to all other Originators in the jurisdiction provided in
their respective Supplement to perfect the Initial Purchaser's interest in the
Pool Receivables under the Receivables Purchase Agreement.
(d) Binding Obligations. Each of the Agreement and the other
Transaction Documents to which it is a party (and which on its face purports to
create an obligation) constitutes the legal, valid and binding obligation of it
enforceable against it in accordance with its terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditor's rights
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generally and by general principles of equity regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) Financial Statements.
(i) The consolidated and consolidating balance sheet
of the Parent and its Subsidiaries as of December 31, 1994,
and the related consolidated and consolidating statements of
income and retained earnings of the Parent and its
Subsidiaries for the fiscal year then ended, copies of which
have been furnished to the Administrative Agent, fairly
present the financial condition of the Parent and its
Subsidiaries as at such date and the results of the operations
of the Seller and its Subsidiaries for the period ended on
such date, all in accordance with generally accepted
accounting principles consistently applied, and since December
31, 1994 there has been no material adverse change in the
business, operations, property or financial or other condition
or operations of the Seller or the Parent or any of their
Subsidiaries taken as a whole (except as reflected in the
unaudited financial statements of Parent as of September 30,
1995), the ability of the Seller or the Parent to perform its
obligations under the Agreement or the other Transaction
Documents or the collectibility of the Pool Receivables, or
which affects the legality, validity or enforceability of the
Purchase and Sale Agreement or the other Transaction
Documents.
(ii) The unaudited condensed balance sheet of the
Originators as of December 31, 1994, and the related condensed
statements of income of the Originators for the fiscal year
ended December 31, 1994, heretofore furnished to the
Administrative Agent, are the financial statements of the
Originators routinely prepared for internal use.
(f) No Proceedings. There is no pending or threatened action
or proceeding affecting either (x) the Seller and its Subsidiaries taken as a
whole or (y) the Parent and its Subsidiaries taken as a whole, which is before
any Governmental Authority or arbitrator and which would reasonably be expected
to materially adversely affect the business, operations, property, financial or
other condition or operations of either (x) the Seller and its Subsidiaries
taken as a whole or (y) the Parent and its Subsidiaries taken as a whole, or
their ability to perform its obligations under the Agreement or the other
Transaction Documents or the collectibility of the Receivables, or which affects
or purports to affect the legality, validity or
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enforceability of the Agreement or the other Transaction Documents.
(g) Quality of Title; Valid Sale; Etc. The Seller is the legal
and beneficial owner of the Pool Receivables and Related Security free and clear
of any Adverse Claim; upon each purchase or reinvestment, each Parallel
Purchaser shall acquire a valid and enforceable perfected undivided percentage
ownership interest, to the extent of the Purchased Interest, in each Pool
Receivable then existing or thereafter arising and in the Related Security and
Collections and other proceeds, with respect thereto, free and clear of any
Adverse Claim. No effective financing statement or other instrument similar in
effect covering any Contract or any Pool Receivable or the Related Security or
Collections with respect thereto or any Lock-Box Account is on file in any
recording office, except those filed in favor of each Parallel Purchaser
relating to the Agreement.
(h) Accuracy of Information. Each Seller Report (if prepared
by the Seller or one of its Affiliates, or to the extent that information
contained therein is supplied by the Seller or an Affiliate), information,
exhibit, financial statement, document, book, record or report furnished or to
be furnished at any time by or on behalf of the Seller to the Administrative
Agent in connection with the Agreement is or will be accurate in all material
respects as of its date or (except as otherwise disclosed to the Administrative
Agent at such time) as of the date so furnished, and no such item contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading.
(i) Principal Place of Business. The principal place of
business and chief executive office (as such terms are used in the UCC) of the
Seller and the office where the Seller keeps its records concerning the
Receivables are located at the address referred to in Schedule I (or at such
other addresses designated in accordance with such paragraph (b) of Exhibit
III).
(j) Lock-Box Banks, Accounts. The names and addresses of all
the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts
of the Seller at such Lock-Box Banks, are specified in Schedule II to the
Agreement (or at such other Lock-Box Banks and/or with such other Lock-Box
Accounts as have been notified to the Administrative Agent in accordance with
the Agreement) and all Lock-Box Accounts are subject to Lock-Box Agreements.
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(k) No Violation. It is not in violation of any order of any
court, arbitrator or Governmental Authority which violation would reasonably be
expected to have a material adverse effect on its business, operations, property
or financial or other condition.
(l) Proceeds. No proceeds of any purchase or reinvestment will
be used for any purpose that violates any applicable law, rule or regulation,
including, without limitation, Regulations G or U of the Federal Reserve Board.
(m) Eligible Receivables. Each Pool Receivable included as an
Eligible Receivable in the calculation of the Net Receivables Pool Balance, is
an Eligible Receivable.
(n) No Purchase and Sale Termination Events. No event has
occurred and is continuing, or would result from a purchase in respect of, or
reinvestment in respect of the Purchased Interest or from the application of the
proceeds therefrom, which constitutes a Termination Event.
(o) Maintenance of Books and Records. The Seller has accounted
for each sale of undivided percentage ownership interests in Receivables in its
books and financial statements as a sale, consistent with Generally Accepted
Accounting Principles.
(p) Credit and Collection Policy. The Seller has complied in
all material respects with the Credit and Collection Policy with regard to each
Receivable.
(q) Compliance with Transaction Documents. It has complied
with all of the terms, covenants and agreements contained in the Agreement and
the other Transaction Documents and applicable to it.
(r) Corporate Name. The Seller's complete corporate name is
set forth in the preamble to the Agreement, and the Seller does not use and has
not during the last six years used any other corporate name, trade name, doing
business name or fictitious name, except as set forth on Schedule I and except
for names first used after the date of the Agreement and set forth in a notice
delivered to the Administrative Agent pursuant to paragraph (l)(vi) of Exhibit
III.
(s) No Labor Disputes. There are no strikes, lockouts or
other labor disputes against it or any of its subsidiaries, or, to the best of
its knowledge, threatened against or affecting it or any of its subsidiaries,
and no significant unfair labor
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practice complaint is pending against it or any of its subsidiaries or, to the
best knowledge of it, threatened against any of them by or before any
Governmental Authority that would have a material adverse effect on its
business, operations, property or financial or other condition.
(t) Pension Plans. During the preceding twelve months, no
steps have been taken to terminate any Pension Plan of the Seller, the Servicer
or the Parent which was not fully funded, unless adequate reserves have been set
aside for the funding thereof, and no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a lien under section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which could result in the incurrence by the Seller,
the Servicer or the Parent of any material liability, fine or penalty.
(u) Investment Company Act. It is not, and is not controlled
by, an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended.
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EXHIBIT III
COVENANTS
Covenants of the Seller and the Parent. Until the latest of the
Facility Termination Date, the date on which no Capital of or Discount in
respect of the Purchased Interest shall be outstanding or the date all other
amounts owed by the Seller under the Agreement to each Parallel Purchaser, the
Administrative Agent and any other Indemnified Party or Affected Person shall be
paid in full, each of the Seller and the Parent, jointly and severally, agree
that obligations set forth in this Exhibit III shall be performed and observed.
(a) Compliance with Laws, Etc. The Seller shall comply in all
material respects with all applicable laws, rules, regulations and orders, and
preserve and maintain its corporate existence, rights, franchises,
qualifications, and privileges except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve and
maintain such existence, rights, franchises, qualifications, and privileges
would not materially adversely affect the collectibility of the Receivables or
the enforceability of any related Contract or the ability of the Seller to
perform its obligations under any related Contract or under the Agreement.
(b) Offices, Records and Books of Account; Etc. The Seller
(i) shall keep its principal place of business and chief executive office (as
such terms are used in the UCC) and the office where it keeps its records
concerning the Receivables at the address of the Seller set forth on Schedule I
attached hereto or, upon at least 60 days' prior written notice of a proposed
change to the Administrative Agent, at any other locations in jurisdictions
where all actions reasonably requested by the Administrative Agent to protect
and perfect the interest of the Parallel Purchaser in the Receivables and
related items have been taken and completed and (ii) shall provide the
Administrative Agent with at least 60 days' written notice prior to making any
change in the Seller's name or making any other change in the Seller's identity
or corporate structure (including a merger) which could render any UCC financing
statement filed in connection with this Agreement "seriously misleading" as such
term is used in the UCC; each notice to the Administrative Agent pursuant to
this sentence shall set forth the applicable change and the effective date
thereof. The Seller also will maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing Receivables and related Contracts in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records, computer tapes and disks and other information reasonably
necessary or advisable for the collection of all Receivables (including, without
limitation, records adequate to
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permit the daily identification of each Receivable and all Collections of and
adjustments to each existing Receivable).
(c) Performance and Compliance with Contracts and Credit and
Collection Policy. The Seller shall, at its expense, timely and fully perform
and comply with all material provisions, covenants and other promises required
to be observed by it under the Contracts related to the Receivables, and timely
and fully comply in all material respects with the Credit and Collection Policy
with regard to each Receivable and the related Contract.
(d) Ownership Interest, Etc. The Seller shall, at its expense,
take all action necessary or desirable to establish and maintain a valid and
enforceable and perfected undivided ownership interest, to the extent of the
Purchased Interest, in the Pool Receivables and the Related Security and
Collections and other proceeds with respect thereto, free and clear of any
Adverse Claim, in favor of each Parallel Purchaser, including, without
limitation, taking such action to perfect, protect or more fully evidence the
interest of each Parallel Purchaser under the Agreement as each Parallel
Purchaser, through the Administrative Agent, may request.
(e) Sales, Liens, Etc. The Seller shall not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Adverse Claim upon or with respect to, any or all of its right, title
or interest in, to or under the Seller's undivided interest in any Receivable,
Related Security, or Collections, or upon or with respect to any account to
which any Collections of any Receivables are sent, or assign any right to
receive income in respect of any items contemplated by this paragraph (e).
(f) Extension or Amendment of Receivables. Except as provided
in Section 4.2(a) the Agreement, the Seller shall not extend the maturity or
adjust the Outstanding Balance or otherwise modify the terms of any Pool
Receivable. The Seller will not amend, modify or waive any term or condition of
any related Contract in a way which would adversely affect the collectibility of
any Receivables.
(g) Change in Business or Credit and Collection Policy.
Without the written consent of the Administrative Agent, the Seller shall not
make (i) any material change in the character of its business or in the Credit
and Collection Policy, or (ii) any change at all in the Credit and Collection
Policy that would adversely affect the collectibility of the Receivables Pool or
the enforceability of any related Contract or the ability of the Seller to
perform its obligations under any related Contract or under the Agreement.
(h) Audits. The Seller shall, from time to time during
regular business hours as requested by the Administrative Agent, permit the
Administrative Agent, or its agents or
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representatives, (i) to examine and make copies of and make abstracts from all
books, records and documents (including, without limitation, computer tapes and
disks) in the possession or under the control of the Seller relating to
Receivables and the Related Security, provided that copies of the related
Contracts may only be made if the Servicer is not the Seller or if a Termination
Event has occurred and (ii) to visit the offices and properties of the Seller
for the purpose of examining such materials described in clause (i) above, and
to discuss matters relating to Receivables and the Related Security or the
Seller's performance hereunder or under the Contracts with any of the officers,
employees, agents or contractors of the Seller having knowledge of such matters.
(i) Lock-Box Agreements; Change in Lock-Box Banks, Lock-Box
Accounts and Payment Instructions to Obligors.
(i) By January 31, 1995, the Seller shall have
delivered to the Administrative Agent copies of executed
Lock-Box Agreements with the Lock-Box Banks in form and
substance satisfactory to the Administrative Agent.
(ii) The Seller shall not add or terminate any bank
as a Lock-Box Bank or any account as a Lock-Box Account from
those listed in Schedule II to the Agreement, or make any
change in its instructions to Obligors regarding payments to
be made to the Seller or payments to be made to any Lock-Box
Account (or related post office box), unless the
Administrative Agent shall have consented thereto in writing
and the Administrative Agent shall have received copies of all
agreements and documents (including without limitation
Lock-Box Agreements) that it may request in connection
therewith.
(j) Deposits to Lock-Box. The Seller shall (i) instruct all
Obligors (other than Obligors which customarily make direct payment to the
Company for deposit in one of the Lock-Box Accounts designated on Schedule II as
a "Deposit Account", provided that the Company complies with Clause (ii) of this
subsection (j)) to make payments of all Receivables to one or more Lock-Box
Accounts or to post office boxes to which only Lock-Box Banks have access (and
shall instruct the Lock-Box Banks to cause all items and amounts relating to
such Receivables received in such post office boxes to be removed and deposited
into a Lock-Box Account on a daily basis), and (ii) deposit, or cause to be
deposited, any Collections of Pool Receivables received by it into Lock-Box
Accounts not later than one Business Day after receipt thereof. Each Lock-Box
Account shall at all times be subject to a Lock-Box Agreement. The Seller will
not deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account cash or cash proceeds other than Collections
of Pool Receivables. Notwith-
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standing the foregoing, Columbia Receivables may be commingled except that the
Company will, at the Administrative Agent's request, establish a separate
account and cause Columbia Receivables to be paid by the Obligors into such
separate account to avoid such commingling.
(k) Marking of Records. At its expense, the Seller shall mark
its master data processing records relating to Pool Receivables and related
Contracts, including with a legend evidencing that the undivided percentage
ownership interests with regard to the Purchased Interest related to such
Receivables and related Contracts have been sold in accordance with the
Agreement.
(l) Reporting Requirements. The Seller will provide to the
Administrative Agent (in multiple copies, if requested by the Administrative
Agent) the following:
(i) as soon as available and in any event within 45
days after the end of the first three quarters of each fiscal year of
the Parent, the consolidated and consolidating balance sheet of the
Parent and its Subsidiaries as of the end of such quarter and the
consolidated and consolidating statement of income and retained
earnings of the Parent and its Subsidiaries for the period commencing
at the end of the previous fiscal year and ending with the end of such
quarter, certified by the chief financial officer or Treasurer of the
Parent;
(ii) as soon as available and in any event within 90
days after the end of each fiscal year of the Parent, a copy of the
annual report for such year for the Parent and its Subsidiaries,
containing financial statements for such year audited by KPMG Peat
Marwick or other independent certified public accountants acceptable to
the Administrative Agent;
(iii) as soon as available and in any event not later
than 10th Day of each Calendar Month, a Seller Report as of the
previous Month End Date; and within five Business Days of a request by
the Administrative Agent for a Seller Report as of a date other than a
Month End Date, such Seller Report;
(iv) as soon as possible and in any event within five
days after the occurrence of each Termination Event or event which,
with the giving of notice or lapse of time, or both, would constitute a
Termination Event, a statement of the chief financial officer or
Treasurer of the Parent setting forth details of such Termination Event
or event and the action that the Seller has taken and proposes to take
with respect thereto;
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(v) promptly after the sending or filing thereof,
copies of all reports that the Seller or the Parent sends to any of its
security holders, and copies of all reports and registration statements
that the Seller or the Parent or any of their Subsidiaries files with
the Securities and Exchange Commission or any national securities
exchange;
(vi) promptly after the filing or receiving thereof,
copies of all reports and notices that the Seller, the Parent or any of
their Affiliates files under ERISA with the Internal Revenue Service or
the Pension Benefit Guaranty Corporation or the U.S. Department of
Labor or that the Seller, the Parent or any of their Affiliates
receives from any of the foregoing or from any multiemployer plan
(within the meaning of Section 4001(a)(3) of ERISA) to which the
Seller, the Parent or any of their Affiliates is or was, within the
preceding five years, a contributing employer, in each case in respect
of the assessment of withdrawal liability or an event or condition
which could, in the aggregate, result in the imposition of liability on
the Seller, the Parent and/or any such Affiliate in excess of $500,000;
(vii) at least thirty days prior to any change in the
Seller's name or any other change requiring the amendment of UCC
financing statements, a notice setting forth such changes and the
effective date thereof;
(viii) such other information respecting the
Receivables or the condition or operations, financial or otherwise, of
the Seller, the Parent or any of their Affiliates as the Administrative
Agent may from time to time reasonably request;
(ix) promptly after the Seller or the Parent obtains
knowledge thereof, notice of any (a) litigation, investigation or
proceeding which may exist at any time between any O&M Party and any
Governmental Authority which, if not cured or if adversely determined,
as the case may be, would have a material adverse effect on the
business, operations, property or financial or other condition of the
Seller or the Parent; or (b) litigation or proceeding adversely
affecting any O&M Party in which the amount involved is $5,000,000 or
more and not covered by insurance or in which injunctive or similar
relief is sought or (c) litigation or proceeding relating to any
Transaction Document; and
(x) promptly after the occurrence thereof, notice of
a material adverse change in the business, operations, property or
financial or other condition of the Seller or the Parent affecting any
O&M Party.
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(m) General Restriction.
(i) The Seller shall not (A) pay or declare any
Dividend, (B) lend or advance any funds, including in respect
of any Originator Note, or (C) repay any loans or advances to,
for or from any Originator or any other Affiliated Party
(including making any payment pursuant to any Initial
Purchaser Note) except in accordance with clause (o) of this
Exhibit III and this clause (m). Actions of the type described
in the preceding sentence are herein collectively called
"Restricted Payments".
(ii) Types of Permitted Payments. Subject to the
limitations set forth in clause (o) below, the Seller may make
Restricted Payments so long as such Restricted Payments are
made only to an Originator and only in one or more of the
following ways:
(A) the Seller may make cash payments on any
Initial Purchaser Note in accordance with its terms; and
(B) if no amounts are then outstanding under
any Initial Purchaser Note, the Seller may
(1) make demand loans to Owens &
Minor Medical, Inc., so long as each such
loan is evidenced by an Originator Note; and
(2) declare and pay Dividends to any
shareholder (provided, that payment of such
Dividends must comply with Virginia law; and
provided, further, that Dividends may not be
paid more frequently than once every month).
(iii) Additional Specific Restrictions. The Seller
may make Restricted Payments only out of Collections paid or
released to the Seller pursuant to Sections 1.4(b)(ii) and
1.4(b)(iv) of the Receivables Purchase Agreement or from other
net income of the Seller. Furthermore, the Seller shall not
pay, make or declare:
(A) any Dividend if, after giving effect
thereto, the Seller's Tangible Net Worth would be
less than $7,500,000;
(B) any Restricted Payment if, after giving
effect thereto, a Termination Event or Unmatured
Termination Event shall have occurred and be
continuing; or
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(C) any Restricted Payment if, after giving
effect thereto, the Seller would not be Solvent.
(n) ERISA Matters. Each of the Seller and the Parent shall
notify the Administrative Agent as soon as is practicable and in any event not
later than two Business Days after (i) the institution of any steps by the
Seller or the Parent or any other Person to terminate any Pension Plan which is
not fully funded, unless adequate reserves have been set aside for the funding
thereof, (ii) the failure to make a required contribution to any Pension Plan if
such failure is sufficient to give rise to a lien under section 302(f) of ERISA,
(iii) the taking of any action with respect to a Pension Plan which could result
in the requirement that the Seller or the Parent furnish a bond or other
security to the PBGC or such Pension Plan or (iv) the occurrence of any other
event concerning any Pension Plan which is reasonably likely to result in a
material adverse effect.
(o) Separate Corporate Existence of the Seller. Each of the
Seller and the Parent hereby acknowledges that the Seller, each Parallel
Purchaser and the Administrative Agent are entering into the transactions
contemplated by this Agreement in reliance upon the Seller's identity as a legal
entity separate from its Affiliates. Therefore, each of the Seller and the
Parent shall take all steps to continue the Seller's identity as such a separate
legal entity and to make it apparent to third Persons that the Seller is an
entity with assets and liabilities distinct from those of its Affiliates and
those of any other Person, and not a division of any of its Affiliates or any
other Person. Without limiting the generality of the foregoing, each of the
Seller and the Parent will, and will cause its Affiliates to, take such actions
as shall be required in order that:
(i) The Seller will be a limited purpose corporation whose
primary activities are restricted in its articles of incorporation to
purchasing Pool Receivables from each Originator (or other Persons
approved in writing by the Administrative Agent), entering into
agreements for the servicing of such Pool Receivables, selling
undivided interests in the Pool Receivables to each Parallel Purchaser
and conducting such other activities as it deems necessary or
appropriate to carry out its primary activities;
(ii) At least one member of the Seller's Board of Directors
shall be an individual who is not a direct, indirect or beneficial
stockholder, officer, director, employee, affiliate, associate,
customer or supplier of any of its Affiliates;
(iii) No director or officer of the Seller shall at
any time serve as a trustee in bankruptcy for any of its
Affiliates;
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(iv) Any employee, consultant or agent of the Seller will be
compensated from the Seller's own bank accounts for services provided
to the Seller except as provided in the Receivables Purchase Agreement
in respect of the Servicing Fee. The Seller will engage no agents other
than a Servicer for the Pool Receivables, which Servicer (if an
Affiliate) will be fully compensated for its services to the Seller by
payment of the Servicing Fee;
(v) The Seller may incur indirect or overhead expenses for
items shared between the Seller and any of its Affiliates which are not
reflected in the Servicing Fee, such as legal, auditing and other
professional services, but such expenses will be allocated to the
extent practical on the basis of cost, it being understood that each of
the Originators and the Parent shall jointly and severally pay all
expenses relating to the preparation, negotiation, execution and
delivery of the Transaction Documents, including legal and other fees;
(vi) The Seller's operating expenses will not be paid
by any of its Affiliates;
(vii) The Seller will have its own separate telephone number,
stationery and bank checks signed by it and in its own name and, if it
uses premises leased, owned or occupied by any of its Affiliates, its
portion of such premises will be defined and separately identified and
it will pay such other Affiliates reasonable compensation for the use
of such premises;
(viii) The books and records of the Seller will be
maintained separately from those of its Affiliates;
(ix) The assets of the Seller will be maintained in a manner
that facilitates their identification and segregation from those of its
Affiliates; and the Seller will strictly observe corporate formalities
in its dealings with each of its Affiliates;
(x) The Seller shall not maintain joint bank accounts with any
of its Affiliates or other depository accounts to which any of its
Affiliates (other than O&M Medical (or any of its Affiliates) in its
capacity as the Servicer under the Purchase and Sale Agreement or under
the Receivables Purchase Agreement) has independent access;
(xi) The Seller shall not, directly or indirectly, be named
and shall not enter into any agreement to be named as a direct or
contingent beneficiary or loss payee on any insurance policy covering
the property of any other Seller Party or any Affiliate of any other
Seller Party unless it pays a proportional share of the premium
relating to any such insurance policy;
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(xii) The Seller will maintain arm's-length relationships with
each of its Affiliates. Any of its Affiliates that renders or otherwise
furnishes services or merchandise to the Seller will be compensated by
the Seller at market rates for such services or merchandise; and
(xiii) Neither the Seller, on the one hand, nor any of its
Affiliates, on the other hand, will be or will hold itself out to be
responsible for the debts of the other or the decisions or actions in
respect of the daily business and affairs of the other.
(xiv) Every representation and warranty of the Seller and the
Parent contained in the Officer's Certificates delivered in connection
with the opinion of Hunton & Williams pursuant to Section 1(j) of
Exhibit II of the Receivables Purchase Agreement (the "Certificate"), a
true copy of which Certificate is attached hereto as Annex C, is true
and correct in all material respects as of the date hereof; and each of
the Seller and the Parent shall comply with all of its respective
covenants and other obligations set forth in the Certificate.
(p) Mergers, Acquisitions, Sales, Investments, etc.
The Seller shall not
(i) be a party to any merger or consolidation, or directly or
indirectly purchase or otherwise acquire all or substantially all of
the assets or any stock of any class of, or any partnership or joint
venture interest in, any other Person,
(ii) sell, transfer, convey or lease any of its assets
other than pursuant to this Receivables Purchase Agreement,
or
(iii) make, incur or suffer to exist any investment in, equity
contribution to, loan or advance to, or payment obligation in respect
of the deferred purchase price of property from, any other Person,
except as expressly contemplated by the Purchase and Sale Agreement and
this Receivables Purchase Agreement.
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EXHIBIT IV
TERMINATION EVENTS
Each of the following shall be a "Termination Event":
(a) (i) The Servicer (if Owens & Minor Medical, Inc. or any of
its Affiliates) shall fail to perform or observe any term, covenant or agreement
under any Transaction Document to which it is a party and such failure shall
continue for two Business Days or (ii) any Person which is the Servicer shall
fail to make when due any payment or deposit to be made by it under any
Transaction Document to which it is a party and such failure shall continue for
two Business Days; or
(b) The Servicer shall fail (i) to transfer to any successor
Servicer when required any rights, pursuant to the Agreement, which the Servicer
then has, or (ii) to make any payment required under the Agreement; or
(c) Any representation or warranty made or deemed made by the
Seller, the Servicer or the Parent (or any of their respective officers) under
or in connection with the Agreement or any information or report delivered by
the Seller, the Servicer or the Parent pursuant to the Agreement shall prove to
have been incorrect or untrue in any material respect when made or deemed made
or delivered; or
(d) The Seller, the Servicer or the Parent shall fail to
perform or observe any other term, covenant or agreement contained in the
Agreement on its part to be performed or observed and any such failure shall
remain unremedied for 10 days (or, with respect to a failure to deliver the
Seller Report pursuant to the Agreement, such failure shall remain unremedied
for five days); or
(e) Any O&M Party shall fail to pay any principal of or
premium or interest on any of its Debt (including Debt owing pursuant to the O&M
Credit Agreement) which is outstanding in a principal amount of at least
$10,000,000 in the aggregate when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any, specified
in the agreement, mortgage, indenture or instrument relating to such Debt; or
any other event shall occur or condition shall exist under any agreement,
mortgage, indenture or instrument relating to any such Debt and shall continue
after the applicable grace period, if any, specified in such agreement,
mortgage, indenture or instrument, if the effect of such event or condition is
to accelerate, or to permit the acceleration of, the
IV-1
<PAGE>
maturity of such Debt; or any such Debt shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to repay, redeem,
purchase or defease such Debt shall be required to be made, in each case prior
to the stated maturity thereof; or
(f) The Agreement or any purchase or any reinvestment pursuant
to the Agreement shall for any reason (other than pursuant to the terms hereof)
cease to create, or the Purchased Interest shall for any reason cease to be, a
valid and enforceable perfected undivided percentage ownership interest to the
extent of the Purchased Interest in each Pool Receivable and the Related
Security and Collections and other proceeds with respect thereto, free and clear
of any Adverse Claim; or
(g) Any O&M Party shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against any O&M Party seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 30 days, or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of its
property) shall occur; or any O&M Party shall take any corporate action to
authorize any of the actions set forth above in this paragraph (g); or
(h) Any event occurs which materially adversely affects the
collectibility of the Eligible Receivables or there shall have occurred any
other event which materially adversely affects the ability of the Servicer to
collect Eligible Receivables; or
(i) As of the last day of any calendar month, either (i) the
Six Month Default Ratio shall exceed 4% or (ii) the Six Month Dilution Ratio
shall exceed 5% or (iii) the Six Month Loss- to-Liquidation Ratio shall exceed
1.0% or (iv) the average of the Delinquency Ratios for the six consecutive Month
End Dates ending with such last day shall exceed 25%; or
IV-2
<PAGE>
(j) The Purchased Interest shall exceed 100%.
(k) Any O&M Party shall contract, create, incur, assume or permit to
exist any Lien with respect to any of its property of assets of any kind
(whether real or personal, tangible or intangible), whether now owned or after
acquired, except for Permitted Liens.
(l) The Tangible Net Worth of Initial Purchaser shall at any time be
less than $5,000,000.
(m) Any Change of Control shall occur.
(n) A Termination Event of the type described in Exhibit IV to the
Purchase and Sale Agreement shall have occurred.
IV-3
<PAGE>
SCHEDULE I
TRADE NAMES AND LOCATIONS
IV-4
<PAGE>
SCHEDULE II
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
IV-5
<PAGE>
ANNEX A
Assignment of Parallel Asset Purchase Commitment
with respect to
O&M Funding Corp.
Parallel Asset Purchase Agreement
Dated ___________, 199__
Section 1.
Purchaser Percentage assigned: ________%
Assignor's remaining Purchaser Percentage: ________%
Capital allocable to Percentage Interests
assigned: $_________
Capital allocable to Assignor's remaining
Percentage Interests: $_________
Discount (if any) allocable to Percentage
Interests assigned: $_________
Discount (if any) allocable to Assignor's
remaining Percentage Interests: $_________
Section 2.
Assignee's Maximum Liquidity Purchase: $_________
Assignor's remaining Maximum
Parallel Purchase: $_________
Section 3.
Effective Date of this Assignment: ________, 19__
Upon execution and delivery of this Assignment by Assignor and Assignee,
satisfaction of the other conditions to assignment specified in Section 6.3 of
the Parallel Asset Purchase Agreement referred to below and acceptance and
recording of this Assignment by Bank of America National Trust and Savings
Association, as Administrative Agent, from and after the effective date
specified above, Assignee shall become a party to, and have the rights and
obligations of a Parallel Purchaser under, the Parallel Asset Purchase Agreement
dated as of December 28, 1995 among O&M Funding Corp., as Seller, Owens & Minor
Medical, Inc., as Servicer, Owens & Minor, Inc., as Parent and Guarantor, the
Parallel Purchasers referred to therein and Bank of America National Trust and
Savings Association, as Administrative Agent.
ASSIGNOR: [NAME OF ASSIGNOR]
By:
Title:
IV-6
<PAGE>
ASSIGNEE: [NAME OF ASSIGNEE]
By:
Name:
Title:
Address:
Attention:
Telephone:
Telecopy:
Accepted this _____ day of
__________________, 199___
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:
Name:
Title:
IV-7
<PAGE>
ANNEX B
FORM OF O&M INTERCREDITOR AGREEMENT
IV-8
<PAGE>
ANNEX C
FORM OF OFFICER'S CERTIFICATE
IV-9
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION> PAGE
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
<S> <C> <C>
SECTION 1.1. Parallel Purchase Facility........................................................... 2
SECTION 1.2. Making Purchases..................................................................... 2
SECTION 1.3. Purchased Interest Computation....................................................... 5
SECTION 1.4. Settlement Procedures................................................................ 5
SECTION 1.5. [Reserved.]........................................................................... 9
SECTION 1.6. Payments and Computations, Etc........................................................ 9
SECTION 1.7. Dividing or Combining Portions of the
Capital of the Purchased Interest.................................................... 9
SECTION 1.8. Increased Costs...................................................................... 10
SECTION 1.9. Additional Discount on Portions of Purchased
Interest Bearing a Eurodollar Rate................................................... 11
SECTION 1.10. Requirements of Law.................................................................. 11
SECTION 1.11. Inability to Determine Eurodollar Rate................................................12
ARTICLE II
REPRESENTATIONS AND WARRANTIES;
COVENANTS; TERMINATION EVENTS
SECTION 2.1. Representations and Warranties;
Covenants............................................................................ 13
SECTION 2.2. Termination Events................................................................... 13
ARTICLE III
INDEMNIFICATION
SECTION 3.1. Indemnities by the Seller............................................................ 14
Section 3.2. Parent's Performance Guaranty........................................................ 19
ARTICLE IV
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of Servicer.............................................................. 22
Section 4.2. Duties of Servicer................................................................... 23
Section 4.3. Lock-Box Arrangements................................................................ 24
Section 4.4. Enforcement Rights................................................................... 25
Section 4.5. Responsibilities of the Seller....................................................... 26
Section 4.6. Servicing Fee........................................................................ 27
ARTICLE V
ADMINISTRATIVE AGENT
SECTION 5.1. Authorization and Action............................................................. 27
SECTION 5.2. Reliance, Etc........................................................................ 27
SECTION 5.3. Purchase Decisions................................................................... 28
SECTION 5.4. Indemnification...................................................................... 30
i
<PAGE>
PAGE
SECTION 5.5. Bank of America and its Affiliates................................................... 30
SECTION 5.6. Resignation of Administrative Agent.................................................. 31
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Amendments, Etc...................................................................... 32
SECTION 6.2. Notices, Etc......................................................................... 33
SECTION 6.3. Binding Effect; Assignability;
Restrictions on Assignment........................................................... 33
SECTION 6.4. Participations....................................................................... 36
SECTION 6.5. Change in Purchase Limit............................................................. 36
SECTION 6.6. Parallel Purchase Termination Date;
Extension of Parallel Purchase
Termination Date.................................................................... 36
SECTION 6.7. Rights of Program Support Providers.................................................. 36
SECTION 6.8. Costs and Expenses................................................................... 37
SECTION 6.9. No Proceedings; Limitation on Payments............................................... 38
SECTION 6.10. Confidentiality...................................................................... 38
SECTION 6.11 Governing Law and Jurisdiction....................................................... 39
SECTION 6.12. Execution in Counterparts............................................................ 39
SECTION 6.13. Survival of Termination.............................................................. 39
SECTION 6.14. WAIVER OF JURY TRIAL................................................................. 39
SECTION 6.15. Entire Agreement..................................................................... 40
SECTION 6.16. Headings............................................................................. 40
SECTION 6.17. Purposes............................................................................. 40
SECTION 6.18. Acknowledgment of Benefits Under Surety Bond......................................... 40
</TABLE>
EXHIBIT I - CONDITIONS OF PURCHASES
EXHIBIT II - REPRESENTATIONS AND WARRANTIES OF SELLER,
THE SERVICER
EXHIBIT III - COVENANTS
EXHIBIT IV - TERMINATION EVENTS
ANNEX A - ASSIGNMENT OF PARALLEL ASSET PURCHASE
COMMITMENT
ANNEX B - FORM OF INTERCREDITOR AGREEMENT
ANNEX C - FORM OF OFFICER'S CERTIFICATE
SCHEDULE I - TRADE NAMES AND LOCATIONS
SCHEDULE II - LOCK-BOX BANK AND LOCK-BOX ACCOUNTS
ii
<PAGE>
Exhibit 11
OWENS & MINOR, INC. AND SUBSIDIARIES
CALCULATION OF NET INCOME (LOSS) PER COMMON SHARE
(In thousands, except per share amounts)
Year ended December 31,
1995 1994 1993
Income (loss) from continuing operations $(11,308) $ 7,919 $18,517
Discontinued operations - - 911
Cumulative effect of change in accounting
principle - - 706
Net income (loss) (11,308) 7,919 20,134
Dividends on preferred stock 5,175 3,309 -
Net income (loss) attributable to
common shares $(16,483) $ 4,610 $20,134
Weighted average common shares 30,820 30,764 30,428
Common share equivalents-dilutive
stock options - 344 585
Weighted average common shares
and common share equivalents 30,820 31,108 31,013
Net income (loss) per common share:
Continuing operations $ (.53) $ .15 $ .60
Discontinued operations - - .03
Cumulative effect of change
in accounting principle - - .02
Net income (loss) per common share $ (.53) $ .15 $ .65
SELECTED FINANCIAL DATA(1) (in thousands, except ratios and per share data)
Owens & Minor, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Statement of Operations:
Net sales $2,976,486 $2,395,803 $1,396,971
Cost of sales 2,708,668 2,163,459 1,249,660
- ------------------------------------------------------------------------------------------------------------------------
Gross margin 267,818 232,344 147,311
Selling, general and administrative expenses 225,897 165,564 107,771
Depreciation and amortization 15,416 13,034 7,593
Interest expense, net 25,538 10,155 1,530
Discount on accounts receivable securitization 641 - -
Nonrecurring restructuring expenses (2) 16,734 29,594 -
- ------------------------------------------------------------------------------------------------------------------------
Total expenses 284,226 218,347 116,894
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (16,408) 13,997 30,417
Income tax provision (benefit) (5,100) 6,078 11,900
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations (11,308) 7,919 18,517
Discontinued operations - - 911
Cumulative effect of change in accounting principles - - 706
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) (11,308) 7,919 20,134
Dividends on preferred stock 5,175 3,309 -
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) attributable to common stock $ (16,483) $ 4,610 $ 20,134
- ------------------------------------------------------------------------------------------------------------------------
Common Share Data:
Net income (loss) per common share:
Continuing operations $ (.53) $ .15 $ .60
Discontinued operations - - .03
Cumulative effect of change in accounting principles - - .02
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share $ (.53) $ .15 $ .65
- ------------------------------------------------------------------------------------------------------------------------
Cash dividends per common share $ .180 $ .170 $ .140
- ------------------------------------------------------------------------------------------------------------------------
Weighted average common shares and common share equivalents 30,820 31,108 31,013
- ------------------------------------------------------------------------------------------------------------------------
Price range of common stock per share:
High $ 14.88 $ 18.13 $ 15.59
Low $ 11.63 $ 13.25 $ 8.42
- ------------------------------------------------------------------------------------------------------------------------
Selected Ratios of Continuing Operations:
Gross margin as a percent of net sales 9.0% 9.7% 10.5%
Selling, general and administrative expenses as a percent of net sales 7.6% 6.9% 7.7%
Average receivable days sales outstanding (3) 37.7 35.9 34.2
Average inventory turnover 8.3 8.8 11.5
Return on average total equity (4.6%) 3.7% 14.6%
Current ratio 2.1 1.8 2.0
- ------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
Working capital $ 331,663 $ 281,788 $ 139,091
Total assets 857,803 868,560 334,322
Long-term debt 323,308 248,427 50,768
Capitalization ratio 57.9% 49.2% 27.1%
Shareholders' equity 235,271 256,176 136,943
Shareholders' equity per common share outstanding $ 3.90 4.59 $ 4.50
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
SELECTED FINANCIAL DATA (1) (continued)
<TABLE>
<CAPTION>
Year ended December 31, 1992 1991 1990 1989
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Statement of Operations:
Net sales $1,177,298 $1,021,014 $916,709 $708,089
Cost of Sales 1,052,998 918,304 827,441 641,011
- ---------------------------------------------------------------------------------------------------------------------------------
Gross Margin 124,300 102,710 89,268 67,078
- ---------------------------------------------------------------------------------------------------------------------------------
Selling, general and adminsitrative expenses 91,371 78,191 67,171 57,943
Depreciation and amortization 5,861 4,977 4,210 2,795
Interest expense, net 1,128 3,192 5,858 5,078
Discount on acounts receivable securitization - - - -
Nonrecurring restructuring expenses (2) - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 98,360 86,360 77,239 65,816
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 25,940 16,350 12,029 1,262
Income tax provision (benefit) 10,505 6,681 4,634 628
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 15,435 9,669 7,395 634
Discontinued operations 5,687 2,358 1,380 1,855
Cumulative effect of change in accounting principals (730) - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) 20,392 12,027 8,775 2,489
Dividends on preferred stock - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) attributable to common stock $ 20,392 $ 12,027 $ 8,775 $ 2,489
- ---------------------------------------------------------------------------------------------------------------------------------
Common Share Data:
Net income (loss) per common share:
Continuing operations $ .52 $ .33 $ .26 $ .02
Discontinued operations .20 .08 .05 .07
Cumulative effect of change in accounting principals (.03) - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share $ .69 $ .41 $ .31 $ .09
- ---------------------------------------------------------------------------------------------------------------------------------
Cash dividends per common share $ .110 $ .088 $ .077 $ .077
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares and common share equivalents 29,682 29,462 28,755 28,412
- ---------------------------------------------------------------------------------------------------------------------------------
Price range of common stock per share:
High $ 10.11 $ 10.78 $ 4.45 $ 4.71
Low $ 7.33 4.17 $ 3.19 $ 3.37
- ---------------------------------------------------------------------------------------------------------------------------------
Selected Ratios of Continuing Operations:
Gross margin as a percent of net sales 10.6% 10.1% 9.7% 9.5%
Selling, general and administrative expenses as a percent of net sales 7.8% 7.7% 7.3% 8.2%
Average receivable days sales outstanding (3) 35.7 38.1 39.2 41.4
Average inventory turnover 11.4 11.1 10.8 8.5
Return on average total equity 14.4% 10.6% 9.1% .8%
Current ratio 1.8 1.9 1.9 2.4
- ---------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
Working capital $ 99,826 $ 122,675 $ 117,983 $133,309
Total assets 274,540 311,786 290,233 258,683
Long-term debt 24,986 67,675 71,339 85,324
Capitalization ratio 17.6% 41.1% 45.6% 52.4%
Shareholders' equity 116,659 97,091 85,002 77,560
Shareholders' equity per common share outstanding $ 3.97 3.34 $ 2.99 $ 2.75
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SELECTED FINANCIAL DATA (1) (continued)
<TABLE>
<CAPTION>
Year ended December 31, 1988 1987 1986 1985
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Statement of Operations:
Net sales $500,435 $367,034 $272,222 $199,294
Cost of Sales 445,456 326,651 239,170 171,099
- ---------------------------------------------------------------------------------------------------------------------------------
Gross Margin 54,979 40,383 33,052 28,195
- ---------------------------------------------------------------------------------------------------------------------------------
Selling, general and adminsitrative expenses 42,668 31,302 26,204 23,196
Depreciation and amortization 2,416 1,922 1,319 1,050
Interest expense, net 2,230 2,006 1,789 1,303
Discount on acounts receivable securitization - - - -
Nonrecurring restructuring expenses (2) - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 47,314 35,230 29,312 25,549
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 7,665 5,153 3,740 2,646
Income tax provision (benefit) 3,032 2,148 1,806 1,224
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 4,633 3,005 1,934 1,422
Discontinued operations 3,734 3,481 2,968 2,986
Cumulative effect of change in accounting principals - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) 8,367 6,486 4,902 4,408
Dividends on preferred stock - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) attributable to common stock $ 8,367 $ 6,486 $ 4,902 $ 4,408
- ---------------------------------------------------------------------------------------------------------------------------------
Common Share Data:
Net income (loss) per common share:
Continuing operations $ .16 $ .11 $ .07 $ .06
Discontinued operations .13 .12 .11 .12
Cumulative effect of change in accounting principals - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share $ .29 $ .23 $ .18 $ .18
- ---------------------------------------------------------------------------------------------------------------------------------
Cash dividends per common share $ .075 $ .065 $ .059 $ .053
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares and common share equivalents 28,263 28,187 27,702 24,245
- ---------------------------------------------------------------------------------------------------------------------------------
Price range of common stock per share:
High $ 4.52 $ 4.37 $ 4.00 $ 3.61
Low $ 2.62 $ 2.32 $ 2.62 $ 1.75
- ---------------------------------------------------------------------------------------------------------------------------------
Selected Ratios of Continuing Operations:
Gross margin as a percent of net sales 11.0% 11.0% 12.1% 14.1
Selling, general and administrative expenses as a percent of net sales 8.5% 8.5% 9.6% 11.6
Average receivable days sales outstanding (3) 41.0 41.0 40.6 45.9
Average inventory turnover 7.6 8.0 8.3 7.9
Return on average total equity 6.3% 5.4% 5.0% 4.2
Current ratio 2.7 2.8 2.7 2.6
- ---------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
Working capital $106,545 $ 89,056 $ 71,317 $ 54,248
Total assets 189,916 154,390 126,779 96,825
Long-term debt 46,819 33,713 42,562 27,546
Capitalization ratio 37.8% 32.3% 51.0% 43.4
Shareholders' equity 77,170 70,761 40,878 35,914
Shareholders' equity per common share outstanding $ 2.75 $ 2.52 $ 2.05 $ 1.85
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See Note 2 of Notes to Consolidated Financial Statements for a discussion of
acquisitions and divestitures that may affect comparability of data.
(2) The Company incurred $16.7 and $29.6 million in 1995 and 1994, respectively,
or $.33 and $.57, respectively, per common share, of nonrecurring
restructuring expenses related to its restructuring plans developed in
conjunction with its combination with Stuart Medical, Inc. See further
discussion in Note 3 of Notes to Consolidated Financial Statements.
(3) Excludes impact of off balance sheet receivables securitization agreement.
See further discussion in Note 7 of Notes to Consolidated Financial
Statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Owens & Minor, Inc. and Subsidiaries
GENERAL
Owens & Minor, Inc. and subsidiaries (the Company or O&M) is one of the two
largest distributors of medical/surgical supplies in the United States. The
Company distributes approximately 300,000 finished medical/surgical products
produced by approximately 3,000 manufacturers to over 4,000 customers from 49
distribution centers nationwide. The Company's customers are primarily hospitals
and also include alternate care facilities, such as physicians' offices,
clinics, nursing homes and surgery centers. The majority of the Company's sales
consists of dressings, endoscopic products, intravenous products, needles and
syringes, sterile procedure trays, surgical products and gowns, sutures and
urological products.
In May 1994, the Company acquired Stuart Medical, Inc. (Stuart), then the
third largest distributor of medical/surgical supplies in the United States with
1993 pro forma net sales of approximately $934.0 million. In addition to
expanding its customer base, the Stuart acquisition significantly enhanced the
Company's distribution capabilities in the Northeastern and Midwestern regions
of the United States, thus strengthening the Company's national distribution
capabilities.
In conjunction with the Stuart acquisition, the Company implemented a
restructuring plan designed to eliminate duplicate costs and increase
efficiencies within the combined company. During 1994 and 1995, the Company
incurred approximately $42.8 million of nonrecurring restructuring expenses in
connection with the restructuring plan. These expenses were comprised primarily
of costs associated with eliminating, consolidating, relocating or expanding 12
distribution centers (which were specifically associated with the Stuart
acquisition), eliminating Stuart's headquarters operations, redesigning and
implementing processes to adopt the best practices and systems of O&M and Stuart
within the combined company and outsourcing the operation of the Company's
mainframe computer system. The implementation of the restructuring plan was
completed during the fourth quarter of 1995.
During 1995, the Company experienced a decline in profitability due to a
decrease in gross margin and an increase in selling, general and administrative
(SG&A) expenses as a percentage of net sales. The decline in the gross margin
percentage was primarily attributable to increased sales to larger accounts that
were offered reduced pricing in return for the expectation of increased volume.
To mitigate the decline in the gross margin percentage, the Company implemented
price increases in December 1995 and January 1996 that included both direct
price increases as well as the introduction of charges for certain enhanced
delivery and management services that were previously provided to certain
customers at no additional cost. These increases were implemented with the goal
of achieving an overall increase in the gross margin percentage equal to at
least one percent of net sales. Virtually all of the group purchasing
organizations representing the majority of the Company's customers have agreed
to the new price levels. The Company believes that sales growth from new
accounts and penetration of existing accounts will more than offset any business
lost as a result of the price increases, but such growth cannot be assured.
The increase in SG&A expenses as a percentage of net sales was primarily a
result of increased personnel costs caused by new contracts providing for
enhanced service levels and services not previously provided by the Company, a
significant increase in the number of SKUs distributed by the Company, system
conversions, opening or expanding 11 distribution centers and reconfiguring
warehouse systems. In an effort to reduce SG&A expenses, O&M is reducing
overtime and temporary employee costs, reducing distribution center costs
further through the closure of two and the downsizing of five distribution
centers, which resulted in $3.5 million of the Company's nonrecurring
restructuring charges in the fourth quarter of 1995, and improving inventory
management systems.
(Chart showing the Gross Margin as a % of Net Sales
vs SG&A as a % of Net Sales appears here)
1991 1992 1993 1994 1995
2.4% 2.8% 2.8% 2.8% 1.4%
(Chart showing the Number of Distribution Centers appears here)
1991 1992 1993 1994 1995
27 29 36 53 49
(Chart showing the Number of Facility Relocations,
Expansions, Closures and Openings appears here)
1991 1992 1993 1994 1995
6 8 10 12 22
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
NET SALES
Net sales increased 24.2% to $3.0 billion in 1995 from $2.4 billion in
1994. Assuming the Stuart acquisition had occurred January 1, 1994, the increase
would have been approximately 8.2% due to the additional sales volume from
contracts entered into in 1993 and 1994 with large healthcare providers, such as
Columbia/HCA Healthcare Corporation (Columbia/HCA), the largest investor owned
healthcare organization in the country, the United States Department of Defense
and AmHS/Premier/ SunHealth (Premier), a major group purchasing organization,
and price increases from manufacturers which are normally passed on to
customers.
GROSS MARGIN
Gross margin as a percentage of net sales declined to 9.0% in 1995 from
9.7% in 1994. The decrease was a result of the increase in sales to larger
accounts that were offered reduced pricing in return for the expectation of
increased volume. To address this issue, the Company has initiated several plans
to offset the gross margin percentage decline, including recent price increases
and the increasing utilization of an activity-based cost system designed to
identify costs associated with certain delivery and management services to
ensure that the Company charges its customers appropriately for incremental
services, such as more frequent deliveries and distribution of products in small
units of measure. Virtually all of the group purchasing organizations
representing the majority of the Company's customers have agreed to the new
price levels.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses as a percentage of net sales increased to 7.6% in 1995 from
6.9% in 1994. The increase in SG&A expenses as a percentage of net sales was
primarily a result of increased personnel costs caused by new contracts
providing for enhanced service levels and services not previously provided by
the Company, a significant increase in the number of SKUs distributed by the
Company, system conversions, opening or expanding 11 distribution centers and
reconfiguring warehouse systems. SG&A expenses as a percentage of net sales also
increased as a result of the Company's sales, marketing and operational efforts
designed to maintain the customer base of VHA Inc. (VHA), the second largest
national healthcare network, and the concentration of management's effort to
integrate the operations of Stuart. In an effort to reduce SG&A expenses, O&M is
implementing the following measures: (i) reduction of overtime and temporary
employee costs by improving productivity through performance tracking systems
and functional best practices training programs; (ii) further reduction of
distribution center costs through the closure of two and the downsizing of five
distribution centers, which resulted in $3.5 million of the Company's
nonrecurring restructuring charges in the fourth quarter of 1995; and (iii)
improvement of inventory management by completing the implementation of a new
inventory forecasting system, reconfiguring warehouse systems and limiting the
number of SKUs from multiple manufacturers distributed by the Company through
the standardization of products.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by 18.3% in 1995 compared to 1994.
This increase was due primarily to the Company's continued investment in
improved information technology (IT) and the amortization of goodwill and
depreciation associated with the Stuart acquisition. The Company anticipates
similar increases in depreciation and amortization in 1996 associated with
additional capital investment in IT.
INTEREST EXPENSE, NET
Interest expense, net of finance charge income of $3.8 million and $2.0
million in 1995 and 1994, respectively, increased from $10.2 million in 1994 to
$25.5 million in 1995 primarily due to an increase in debt to finance the Stuart
acquisition, high inventory levels, the Company's restructuring plan and
technology initiatives, as well as due to higher interest rates. Finance charge
income represents payments from customers for past due balances on their
accounts. Management has taken action to reduce interest expense, by completing
the implementation of the Company's new inventory forecasting system in all
distribution centers by mid-1996, limiting the number of SKUs from multiple
manufacturers distributed by the Company and reducing its effective interest
rate through alternative financing such as the off balance sheet receivables
securitization, discussed in the liquidity section that follows.
NONRECURRING RESTRUCTURING EXPENSES
During 1995, the Company incurred $13.2 million of nonrecurring
restructuring expenses related to the Company's restructuring plan developed in
connection with the Stuart acquisition and its related decision to outsource the
management and operation of its mainframe computer system. This restructuring
plan was completed during the fourth quarter of 1995. Also during the fourth
quarter of 1995, the Company incurred additional nonrecurring restructuring
charges of $3.5 million associated with its decision to close or downsize seven
distribution centers in 1996.
(Chart showing Net Sales (in billions) appears here)
1991 1992 1993 1994 1995
$1.0 $1.2 $1.4 $2.4 $3.0
INCOME TAXES
The Company had an income tax provision of $6.1 million in 1994
(representing an effective tax rate of 43.4%), compared with an income tax
benefit of $5.1 million in 1995. A complete reconciliation of the statutory
income tax rate to the Company's effective income tax rate is provided in Note
11 of Notes to Consolidated Financial Statements.
NET INCOME (LOSS)
The Company incurred a net loss of $11.3 million in 1995 compared to net
income of $7.9 million in 1994. Excluding the nonrecurring restructuring
expenses and the related tax benefit, the Company incurred a net loss of $1.0
million in 1995. As previously discussed, the loss incurred during 1995 was due
to the combination of a decline in gross margin percentage, an increase in SG&A
expenses and an increase in interest expense. Although the initiatives
previously discussed have been undertaken in an effort to improve the earnings
of the Company, their impact cannot be assured.
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
NET SALES
Net sales increased 71.5% to $2.4 billion in 1994 from $1.4 billion in
1993. Assuming the Stuart acquisition occurred January 1, 1993, the increase
would have been approximately 16.6%. The 16.6% increase was due primarily to new
contracts with large healthcare providers, such as Columbia/HCA, the United
States Department of Defense and Premier; a new distribution agreement with VHA,
the Company's largest contract, which provided incentives to member hospitals to
increase purchases from the Company; and the continued product line expansion by
the Company. Sales under the VHA agreement grew to approximately $959.0 million,
or 40.0% of net sales, in 1994 from approximately $459.6 million, or 32.9% of
net sales, in 1993.
GROSS MARGIN
Gross margin as a percentage of net sales decreased to 9.7% in 1994 from
10.5% in 1993. The decrease was a result of the sales increases from large lower
margin contracts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses decreased to 6.9% of net sales in 1994 from 7.7% in 1993.
This decrease was primarily the result of the initial synergies obtained from
the Stuart acquisition and the sales volume increases from large customers, such
as VHA, Columbia/HCA and Premier.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by 71.7% in 1994 as compared to
1993, due primarily to the additional goodwill amortization and depreciation
expenses related to the Stuart acquisition and the depreciation of the Company's
continued investment in new and improved IT.
INTEREST EXPENSE, NET
Interest expense, net of finance charge income of $2.0 million, increased
$8.6 million to $10.2 million in 1994. The increase was due primarily to the
debt increase related to the Stuart acquisition and the increase in the
Company's average interest rate on its variable rate Senior Credit Facility from
3.8% in 1993 to 5.6% in 1994. The rate increase was due to the overall rate
increases in the lending markets. During 1994, the Company entered into interest
rate swap and cap agreements to fix the interest rate on a portion of the Senior
Credit Facility.
NONRECURRING RESTRUCTURING EXPENSES
As a result of the Stuart acquisition and the Company's 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. During 1994, the Company incurred approximately $29.6
million of nonrecurring expenses related to the plan. These expenses were
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).
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
acquisition. A complete reconciliation of the statutory income tax rate to the
Company's effective income tax rate is provided in Note 11 of Notes to
Consolidated Financial Statements.
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations decreased by $10.6 million due to the
nonrecurring restructuring expenses previously discussed. Excluding these
expenses, the Company's income from continuing operations increased by $7.3
million or 39.3%.
FINANCIAL CONDITION
LIQUIDITY
During 1995, several factors unfavorably impacted the Company's liquidity,
including (i) increased working capital requirements, (ii) decreased earnings,
(iii) restructuring expenses and (iv) increased capital expenditures. The
Company funded a majority of these cash requirements through bank borrowings
under the Senior Credit Facility; consequently, the Company's capitalization
ratio increased to 57.9% at December 31, 1995 from 49.2% at December 31, 1994.
At December 31, 1995, the Company had approximately $111.7 million of unused
credit under the Senior Credit Facility.
On December 28, 1995, the Company entered into a Receivables Financing
Facility to diversify its financing sources and to reduce its cost of funds.
Pursuant to the Receivables Financing Facility, O&M Funding Corp. (OMF), a
special-purpose, wholly owned, non-operating subsidiary of the Company, is
entitled to receive up to $75.0 million from an unrelated third party purchaser
for consideration that reflects a cost of funds at commercial paper rates plus a
charge for administrative and credit support services. As of December 31, 1995,
the Company had received approximately $59.3 million under the Receivables
Financing Facility, the proceeds of which were used to reduce amounts
outstanding under the Senior Credit Facility. The Company believes that the
Senior Credit Facility will provide the Company with adequate financing
resources through the expiration of the Facility in 1999.
During 1995 and early 1996, the Company sought and obtained waivers of
non-compliance with, and amendments to, certain financial covenants included in
the Senior Credit Facility. Prior to the Company's obtaining waivers, such
non-compliance also could have prevented further use by the Company of the
Receivables Financing Facility and certain interest rate swap and cap
agreements. There can be no assurance that in the future the Company will not be
required to seek waivers of non-compliance or amendments to the Senior Credit
Facility or other credit agreements in effect from time to time or, if it is
required to do so, that it will be able to obtain such waivers.
WORKING CAPITAL MANAGEMENT
The Company's working capital turnover declined to 9.7 times in 1995 from
11.6 in 1994. The increase in days sales outstanding to 37.7 days in 1995
(excluding the impact of the Receivables Financing Facility) from 35.9 in 1994
and decrease in inventory turnover to 8.3 times in 1995 from 8.8 in 1994 were
the result of increased service levels, increases in the number of SKUs carried
by the Company, new customers, rationalization of distribution centers and the
development and implementation of new computer systems. The decrease in accounts
payable to $241.0 million in 1995 from $296.9 million in 1994 was primarily due
to successfully negotiated favorable discount terms with vendors, which provide
enhanced gross margin, but shorten payment terms, and to the timing of
purchasing patterns.
Subsequent to the completion of the restructuring plan related to the
Stuart acquisition in the fourth quarter of 1995, the Company refocused its
efforts on working capital management. In an effort to reduce inventory levels,
the Company plans on completing the implementation of its client/server-based
forecasting system by the middle of 1996 and limiting the number of SKUs from
multiple manufacturers distributed by the Company. In an effort to reduce
accounts receivable levels the Company has strengthened its methods of
monitoring and enforcing contract payment terms and has tied a portion of its
new salesforce incentive program to reducing days sales outstanding.
CAPITAL EXPENDITURES
Capital expenditures were approximately $21.3 million in 1995, of which
approximately $12.7 million was for computer systems, including the continued
conversion from a mainframe computer system to a client/server, local area
network system, and approximately $5.6 million was for warehousing equipment.
The Company expects capital expenditures to continue at this level in 1996 as it
continues system conversions. These capital expenditures are expected to be
funded through cash flow from operations.
(Chart showing Working Capital Turnover
vs Capitalization Ratio appears here)
1991 1992 1993 1994 1995
Working Capital Turnover 12.0 12.5 11.5 11.6 9.7
Capitalization Ratio 41% 18% 27% 49% 58%
INFLATION AND CHANGING PRICES
Inflation has not had a significant effect on the Company's results of
operations or financial condition.
RECENT ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based
Compensation, in October 1995. SFAS 123 prescribes accounting and reporting
standards for all stock-based compensation plans. The new standard allows
companies to continue to follow present accounting rules which often result in
no compensation expense being recorded or to adopt the SFAS 123 fair-value-based
method. The fair-value-based method will generally result in higher compensation
expense based on the estimated fair value of stock-based awards on the grant
date. Companies electing to continue following present accounting rules will be
required to provide pro forma disclosures of net income and earnings per share
as if the fair-value-based method had been adopted. The Company intends to
continue following present accounting rules and to implement the new disclosure
requirements in 1996 as required. The adoption of SFAS 123, therefore, will not
impact the financial condition and results of operations of the Company.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Owens & Minor, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,976,486 $2,395,803 $1,396,971
Cost of sales 2,708,668 2,163,459 1,249,660
- ---------------------------------------------------------------------------------------------------------------------------
Gross margin 267,818 232,344 147,311
Selling, general and administrative expenses 225,897 165,564 107,771
Depreciation and amortization 15,416 13,034 7,593
Interest expense, net 25,538 10,155 1,530
Discount on accounts receivable securitization 641 - -
Nonrecurring restructuring expenses 16,734 29,594 -
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 284,226 218,347 116,894
Income (loss) before income taxes (16,408) 13,997 30,417
Income tax provision (benefit) (5,100) 6,078 11,900
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations (11,308) 7,919 18,517
Discontinued operations - - 911
Cumulative effect of change in accounting principle - - 706
- ---------------------------------------------------------------------------------------------------------------------------
Net income (loss) (11,308) 7,919 20,134
Dividends on preferred stock 5,175 3,309 -
- ---------------------------------------------------------------------------------------------------------------------------
Net income (loss) attributable to common stock $ (16,483) $ 4,610 $ 20,134
Net income (loss) per common share:
Continuing operations $ (.53) $ .15 $ .60
Discontinued operations - - .03
Cumulative effect of change in accounting principle - - .02
- ---------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share $ (.53) $ .15 $ .65
Cash dividends per common share $ .18 $ .17 $ .14
Weighted average common shares and common
share equivalents 30,820 31,108 31,013
- ---------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)
Owens & Minor, Inc. and Subsidiaries
<TABLE>
<CAPTION>
December 31, 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 215 $ 513
Accounts and notes receivable, net of allowance of $6,010 in 1995
and $5,340 in 1994 265,238 290,240
Merchandise inventories 326,380 323,851
Other current assets 32,069 26,222
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 623,902 640,826
Property and equipment, net 39,049 38,620
Excess of purchase price over net assets acquired, net 171,911 175,956
Other assets, net 22,941 13,158
- -----------------------------------------------------------------------------------------------------------------------
Total Assets $857,803 $868,560
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 4,055 $ 236
Accounts payable 241,048 296,878
Accrued payroll and related liabilities 5,534 11,294
Other accrued liabilities 41,602 50,630
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 292,239 359,038
Long-term debt 323,308 248,427
Accrued pension and retirement plans 6,985 4,919
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 622,532 612,384
- ---------------------------------------------------------------------------------------------------------------------------
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 115,000 115,000
Common stock, par value $2 per share; authorized - 200,000 shares;
issued - 30,862 shares in 1995 and 30,764 shares in 1994 61,724 61,528
Paid-in capital 2,144 1,207
Retained earnings 56,403 78,441
- ---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 235,271 256,176
Total Liabilities and Shareholders' Equity $857,803 $868,560
- ---------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Owens & Minor, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income (loss) $(11,308) $ 7,919 $ 20,134
Noncash charges (credits) to income
Depreciation and amortization 15,416 13,034 7,593
Provision for losses on accounts and notes receivable 827 1,149 497
Provision for LIFO reserve 3,700 671 661
Gain on disposals of business segments, net - - (911)
Cumulative effect of change in accounting principle - - (706)
Other, net 2,581 1,093 897
- ---------------------------------------------------------------------------------------------------------------------------
Cash provided by net income (loss) and noncash charges 11,216 23,866 28,165
Changes in operating assets and liabilities,
net of effects from acquisitions
Accounts and notes receivable 24,175 (144,917) (23,424)
Merchandise inventories (6,229) (81,318) (28,232)
Accounts payable (17,107) 22,375 13,307
Net change in other current assets and current liabilities (18,753) 25,323 (258)
Other, net (4,732) 790 431
- ---------------------------------------------------------------------------------------------------------------------------
Cash used for operating activities (11,430) (153,881) (10,011)
- ---------------------------------------------------------------------------------------------------------------------------
Investing Activities
Business acquisitions, net of cash acquired - (40,608) (2,416)
Additions to property and equipment (13,876) (6,634) (6,288)
Additions to computer software (7,396) (1,586) (3,453)
Other, net 3,597 73 76
- ---------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities (17,675) (48,755) (12,081)
Financing Activities
Additions to long-term debt 77,970 197,088 37,000
Reductions of long-term debt (242) (55,032) (17,471)
Other short-term financing, net (38,723) 65,426 765
Cash dividends paid (10,730) (7,664) (4,222)
Exercise of options 532 1,283 1,000
- ---------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 28,807 201,101 17,072
Net decrease in cash and cash equivalents (298) (1,535) (5,020)
Cash and cash equivalents at beginning of year 513 2,048 7,068
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 215 $ 513 $ 2,048
- -----------------------------------------------------------------------------------------------------------------------------
</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
Basis of Presentation
Owens & Minor, Inc. and subsidiaries (the Company) is one of the two largest
distributors of medical/surgical supplies in the United States. 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. The preparation of the consolidated financial statements in
accordance with generally accepted accounting principles requires management
assumptions and estimates that affect amounts reported. Actual results may
differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash and marketable securities with an
original maturity of three months or less. Cash and cash equivalents are stated
at cost, which approximates market value.
Merchandise Inventories
As of December 31, 1995, the Company's merchandise inventories were
valued on a last-in, first-out (LIFO) basis. At December 31, 1994, 64% of the
Company's inventories was valued on a LIFO basis with the remainder valued on
a first-in first-out (FIFO) basis.
Property and Equipment
Property and equipment are stated at cost or, if acquired under capital
leases, at the lower of the present value of minimum lease payments or fair
market value at the inception of the lease. Normal maintenance and repairs are
expensed as incurred, and renovations and betterments are capitalized.
Depreciation and amortization are provided for financial reporting purposes on
the straight-line method over the estimated useful lives of the assets or, for
capital leases and leasehold improvements, over the terms of the lease, if
shorter. In general, the estimated useful lives for computing depreciation and
amortization are: 40 years for buildings and improvements; 4 to 8 years for
warehouse equipment; and 3 to 8 years for computer, office and other equipment.
Accelerated methods of depreciation are used for income tax purposes.
Excess of Purchase Price Over Net Assets
Acquired The excess of purchase price over net assets acquired (goodwill) is
amortized on a straight-line basis over 40 years from the dates of
acquisition. As of December 31, 1995 and 1994, goodwill was $181,118 and
$180,615, respectively, and the related accumulated goodwill amortization
was $9,207 and $4,659, respectively. Based upon management's assessment of
future cash flows of acquired businesses, the carrying value of goodwill at
December 31, 1995 has not been impaired. The assessment of the
recoverability of goodwill will be impacted if estimated future cash flows are
not achieved.
Computer Software
Computer software purchased in connection with major system development 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 from
3 to 5 years. Computer software costs are included in other assets, net, in
the Consolidated Balance Sheets.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing the net income
(loss) attributable to common stock by the weighted average number of shares of
common stock and common stock equivalents outstanding during the period. 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.
<PAGE>
Derivative Financial Instruments
The Company enters into interest rate swap and cap agreements to manage
interest rate risk of variable rate debt and not for trading purposes.
The differences paid or received on the interest rate swaps and the
amortization of the cap fees are included in interest expense.
Reclassifications
Certain amounts in prior years' consolidated financial statements and related
notes have been reclassified to conform to the 1995 presentation.
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 acquisition 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 Stuart acquisition had been in effect for the entire years
presented. In addition, they are not intended to be a projection of future
results. As part of the Stuart acquisition, the Company initiated a plan to
close certain facilities and terminate certain employees of the former Stuart
operations. The costs of this plan were included as a liability assumed from the
acquisition and included in the allocation of the purchase price. During 1995,
the Company incurred substantially all of the costs of exiting the former Stuart
operations and charged approximately $6,500 against established acquisition
liabilities.
On October 1, 1994, the Company acquired substantially all the assets of
Emery Medical Supply, Inc. (Emery) of Denver, Colorado for cash. The acquisition
was accounted for as a purchase with the 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.
In 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. Also in 1993, the Company acquired all 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 assets acquired 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.
The Company periodically re-evaluates the adequacy of its accruals
associated with the 1992 discontinued operations related to its wholesale drug
and specialty packaging segments. Accordingly, in 1993, the Company decreased
its loss provision for discontinued operations by $911, net of taxes, based on
settlement of previously established liabilities and changes in prior estimates
of expenses.
<PAGE>
Note 3 - Nonrecurring Restructuring Expenses
During 1995 and 1994, the Company incurred $16,734 and $29,594,
respectively, of nonrecurring restructuring expenses related to two
restructuring plans. Under the first plan, the Company incurred $13,189 and
$29,594 in 1995 and 1994, respectively, of nonrecurring restructuring expenses
in connection with the Stuart acquisition and the Company's related decision to
contract out the management and operation of its mainframe computer system.
These expenses were comprised primarily of duplicate facility costs
(approximately $9,300 and $15,200 in 1995 and 1994, respectively) costs
associated with redesigning and implementing operating processes to increase
efficiencies within the combined company (approximately $3,900 and $7,100 in
1995 and 1994, respectively) and costs associated with the contracting out of
the Company`s mainframe computer operations (approximately $7,300 in 1994). The
nonrecurring expenses include non-cash asset write-downs of approximately $3,200
in 1994 and accrued liabilities of $1,418 and $2,100 at December 31, 1995 and
1994, respectively.
Under the second plan, which was implemented in December 1995, the Company
incurred $3,545 of nonrecurring restructuring expenses in connection with the
closing of two distribution centers and the downsizing of five distribution
centers. These expenses were comprised primarily of costs associated with a
reduction of employees (approximately $1,700), the write-down of non-cash assets
(approximately $900) and other related exit costs (approximately $900). At
December 31, 1995, the associated accrued liability balance was $2,631.
Note 4 - Merchandise Inventories
As of December 31, 1995, all of the Company's merchandise inventories were
valued on a last-in, first-out (LIFO) basis. If LIFO inventories had been valued
on a current cost, or first-in, first-out (FIFO) basis, they would have been
greater by $21,991, $18,291 and $17,620 in 1995, 1994 and 1993, respectively.
Note 5 - Property and Equipment
The Company's investment in property and equipment consists of the
following:
December 31, 1995 1994
- --------------------------------------------------------------------------------
Warehouse equipment $22,489 $17,375
Computer equipment 19,056 14,056
Office equipment and other 11,138 10,234
Land and buildings 9,891 13,589
Leasehold improvements 7,100 6,891
- --------------------------------------------------------------------------------
69,674 62,145
Less: Accumulated depreciation and amortization (30,625) (23,525)
- --------------------------------------------------------------------------------
Property and equipment, net $39,049 $38,620
- --------------------------------------------------------------------------------
Depreciation expense for property and equipment for 1995, 1994 and 1993 was
$8,523, $7,704 and $6,368, respectively.
Note 6 - Accounts Payable
Accounts payable balances were $241,048 and $296,878 as of December 31,
1995 and 1994, respectively, of which $192,742 and $209,849, respectively, were
trade accounts payable and $48,306 and $87,029, respectively, were drafts
payable.
<PAGE>
Note 7 - Long-Term Debt and Refinancing
The Company's long-term debt consists of the following:
December 31, 1995 1994
- ----------------------------------------------------------------------------
Revolving credit notes under
Senior Credit Agreement $313,300 $235,300
0% Subordinated Note 10,008 9,067
Convertible Subordinated Debenture 3,333 3,333
Other 722 963
- ----------------------------------------------------------------------------
327,363 248,663
Current maturities (4,055) (236)
- ----------------------------------------------------------------------------
Long-term debt $323,308 $248,427
Concurrently with the Stuart acquisition in 1994, the Company entered into
a $350,000 Senior Credit Agreement with interest based on, at the Company's
discretion, the London Interbank Offering Rate (LIBOR) or the Prime Rate. The
proceeds were used to fund the $40,200 cash paid in the acquisition, repay
certain long-term indebtedness of Stuart and fund working capital requirements.
On February 28, 1995, the Senior Credit Agreement was amended to provide an
increase in principal amount up to $425,000. The proceeds from the increase were
used primarily to fund the Company's working capital and capital expenditure
needs. Under certain provisions of the Senior Credit Agreement, the Company is
required to maintain tangible net worth, liquidity and cash flow at specified
levels. The Senior Credit Agreement also limits the amount of indebtedness the
Company may incur. The Senior Credit Agreement expires in April 1999. In October
1995 and in the first quarter of 1996, the Company sought and obtained waivers
of non-compliance with, and amendments to, certain financial covenants included
in the Senior Credit Agreement.
During 1995 and 1994, the Company entered into interest rate swap and cap
agreements to reduce the potential impact of increases in interest rates under
the Senior Credit Agreement. Under the swap agreements, the Company pays the
counterparties a fixed interest rate, ranging from 6.35%-7.72%, and the
counterparties pay the Company interest at a variable rate based on either the
three-month or the six-month LIBOR. The differences paid or received on the
interest rate swaps and the amortization of the cap fees are included in
interest expense. The total notional amount of the interest rate swaps was
$105,000 at December 31, 1995 and $55,000 at December 31, 1994, and the term of
the agreements ranged from two to three years. Under the interest rate cap
agreements, the Company receives from the counterparties amounts by which the
three-month LIBOR exceeds 6.5% based on the notional amounts of the cap
agreements which totaled $20,000 at December 31, 1995 and 1994. The term of
these agreements is two years. The Company is exposed to certain losses in the
event of nonperformance by the counterparties to these agreements. However, the
Company's exposure is not material and nonperformance is not anticipated. Based
on estimates of the prices obtained from a dealer at which the interest rate
swap and cap agreements could be settled, the Company had unrealized losses of
approximately $2,984 and $48, respectively, as of December 31, 1995, and
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
acquisition of National Healthcare and Hospital Supply Corporation. The 0%
Subordinated Note due May 31, 1997 was discounted for financial reporting
purposes at an effective rate of 10.4% to $5,215 on the date of issuance. In
1994, the 6.5% Convertible Subordinated Debenture was exchanged for a $3,333,
9.1% Convertible Subordinated Debenture due May 1996 which is convertible into
approximately 867 common shares. The Company can redeem all or any portion of
the convertible debenture without penalty.
<PAGE>
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, was approximately $327,977 as of December 31, 1995.
On December 28, 1995, the Company entered into a Receivables Financing
Facility (Receivables Financing) pursuant to which a subsidiary of the Company
is entitled to receive up to $75,000 from an unrelated third party purchaser at
a cost of funds at commercial paper rates plus a charge for administrative and
credit support services. As of December 31, 1995, the Company had received
approximately $59,300 under the Receivables Financing, the proceeds of which
were used to reduce amounts outstanding under the Senior Credit Agreement. Prior
to the Company's obtaining waivers in the first quarter of 1996 related to the
Company's non-compliance with certain Senior Credit Agreement covenants, such
non-compliance could have prevented further use by the Company of the
Receivables Financing and certain interest rate swap and cap agreements.
Net interest expense includes finance charge income of $3,800, $2,000 and
$1,400 in 1995, 1994, and 1993 respectively. Finance charge income represents
payments from customers for past due balances on their accounts. Cash payments
for interest during 1995, 1994 and 1993 were $28,955, $9,831 and $2,341,
respectively.
Maturities of long-term debt for the five years subsequent to 1995 are:
1996 - $4,055; 1997 - $10,008; 1998 - $0; 1999 - $313,300; and 2000 - $0.
Note 8 - Retirement Plans
Pension and Retirement Plan
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, 1995 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:
<TABLE>
<CAPTION>
Pension Plan Retirement Plan
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations
Vested $(15,092) $(12,302) $(1,256) $(1,195)
Non-vested (1,580) (939) (1,384) (1,018)
- ---------------------------------------------------------------------------------------------------------------------------
Total accumulated benefit obligations (16,672) (13,241) (2,640) (2,213)
Additional amounts related to projected salary increases (2,298) (1,446) (1,937) (1,366)
- ---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligations for service rendered to date (18,970) (14,687) (4,577) (3,579)
Plan assets at fair market value 14,741 12,696 - -
- ---------------------------------------------------------------------------------------------------------------------------
Plan assets under projected benefit obligations (4,229) (1,991) (4,577) (3,579)
Unrecognized net loss from past experience 1,793 1,058 1,702 1,108
Unrecognized prior service cost (benefit) 334 407 (20) (22)
Unrecognized net (asset) obligation being recognized
over 11 and 17 years, respectively (107) (214) 287 328
Adjustment required to recognize minimum liability
under SFAS 87 - - (31) (49)
- ---------------------------------------------------------------------------------------------------------------------------
Accrued pension liability $ (2,209) $ (740) $(2,639) $(2,214)
</TABLE>
<PAGE>
The components of net periodic pension cost for both plans are as follows:
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
Service cost-benefits earned during the year $1,865 $1,314 $1,146
Interest cost on projected benefit obligations 1,425 1,232 1,056
Actual (return) loss on plan assets (2,521) 436 (1,450)
Net amortization and deferral 1,470 (1,462) 453
- --------------------------------------------------------------------------------
Net periodic pension cost $2,239 $1,520 $1,205
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 were assumed to be 7.5% and 5.5% for 1995,
respectively, and 8.0% and 5.5% for 1994, respectively. The expected long-term
rate of return on plan assets was 8.5% for both 1995 and 1994.
Other Retirement Benefits
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 unfunded and is
contributory with retiree contributions adjusted annually.
The following table sets forth the plan's financial status and the amount
recognized in the Company's Consolidated Balance Sheets:
December 31, 1995 1994
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ (329) $ (246)
Fully eligible active plan participants (837) (590)
Other active plan participants (919) (1,391)
- -------------------------------------------------------------------------------
Accumulated postretirement benefit obligation (2,085) (2,227)
Unrecognized net (gain) loss from past experience (52) 262
- -------------------------------------------------------------------------------
Accrued postretirement benefit liability $(2,137) $(1,965)
- -------------------------------------------------------------------------------
The components of net periodic postretirement benefit cost are as follows:
Year Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------
Service cost-benefits earned during the year $275 $206 $142
Interest cost on accumulated postretirement
benefit obligation 152 160 122
Net amortization (120) 6 -
- -------------------------------------------------------------------------------
Net periodic postretirement benefit cost $307 $372 $264
- -------------------------------------------------------------------------------
For measurement purposes, a 12.0% annual rate of increase in the per capita
cost of covered healthcare benefits was assumed for 1995; the rate was assumed
to decrease gradually to 6.0% for the year 2001 and remain at that level
thereafter. The healthcare cost trend rate assumption has a significant effect
on the amounts reported. To illustrate, increasing the assumed healthcare cost
trend rate by 1 percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1995 by $139 and the
aggregate of the service cost and interest cost components of net periodic
postretirement benefit cost for the year then ended by $42. The weighted average
discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% for 1995 and 8.0% for 1994.
<PAGE>
The Company maintains a voluntary Savings and Protection Plan covering
substantially all full-time employees who have completed six months of service
and have attained age 18. The Company matches a certain percentage of each
employee's contribution. The Company incurred approximately $1,100 and $700 in
1995 and 1994, respectively, of expenses related to this plan.
Note 9 - Shareholders' Equity
On May 10, 1994, the Company issued 1,150 shares of Series B preferred
stock as part of the Stuart acquisition. 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 common 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>
<CAPTION>
Common
Shares Common Paid-in Retained
Outstanding Stock Capital Earnings Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1992 19,596 $39,191 $8,007 $69,461 $116,659
Common stock issued for incentive plan 31 62 387 - 449
Proceeds from exercised stock options,
including tax benefits realized of $495 119 239 1,256 - 1,495
Net income - - - 20,134 20,134
Common stock cash dividends ($.14 per share) - - - (4,222) (4,222)
Acquisition related payout 63 126 797 - 923
Pooling of interests with Lyons Physician
Supply Co. 476 951 (1,189) 1,743 1,505
- ---------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1993 20,285 40,569 9,258 87,116 136,943
Stock split (three-for-two) 10,203 20,407 (12,343) (8,064) -
Common stock issued for incentive plan 24 48 515 - 563
Proceeds from exercised stock options,
including tax benefits realized of $761 189 379 1,665 - 2,044
Net income - - - 7,919 7,919
Common stock cash dividends ($.17 per share) - - - (5,221) (5,221)
Preferred stock cash dividends ($4.50 per share) - - - (3,309) (3,309)
Acquisition related payout 63 125 2,112 - 2,237
- ---------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1994 30,764 61,528 1,207 78,441 141,176
Common stock issued for incentive plan 34 68 416 - 484
Proceeds from exercised stock options,
including tax benefits realized of $117 64 128 521 - 649
Net loss - - - (11,308) (11,308)
Common stock cash dividends ($.18 per share) - - - (5,555) (5,555)
Preferred stock cash dividends ($4.50 per share) - - - (5,175) (5,175)
- ---------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1995 30,862 $61,724 $2,144 $56,403 $120,271
</TABLE>
<PAGE>
A 3-for-2 stock split was distributed on June 8, 1994 to shareholders of
record as of May 24, 1994.
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 April 30,
2004, if not earlier redeemed.
Note 10 - Stock Option Plans
Under the terms of the Company's stock option plans, 3,168 shares of common
stock have been reserved for future issuance at December 31, 1995. Options may
be designated as either Incentive Stock Options (ISOs) 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, 1995, there were 1,745
non-qualified and no ISOs 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, 1995 are as follows:
Shares Grant Price
- -----------------------------------------------------------------------------
Year ended December 31, 1995
Outstanding at beginning of year 1,742 $ 3.55-16.50
Granted 221 12.50-13.56
Exercised (64) 3.55- 9.33
Expired/cancelled (154) 8.33-16.50
- -----------------------------------------------------------------------------
Outstanding at end of year 1,745 $ 5.59-16.50
Exercisable 978
Shares available for additional grants 1,423
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
<PAGE>
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, 1995, 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 Statement of Operations for the
year ended December 31, 1993.
The income tax provision (benefit) for continuing operations consists of
the following:
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax provision (benefit)
Federal $(13,009) $ 6,663 $10,405
State (172) 1,635 2,123
- ----------------------------------------------------------------------------------------------------------------------
Total current provision (benefit) (13,181) 8,298 12,528
Deferred tax provision (benefit)
Federal 7,731 (1,816) (555)
State 350 (404) (73)
- ----------------------------------------------------------------------------------------------------------------------
Total deferred provision (benefit) 8,081 (2,220) (628)
Income tax provision (benefit) $ (5,100) $ 6,078 $11,900
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
A reconciliation of the federal statutory rate to the Company's effective
income tax rate for continuing operations follows:
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate (34.0%) 35.0% 35.0%
Increases (reductions) in the rate resulting from:
State income taxes, net of federal income tax impact (3.3) 4.6 4.4
Nondeductible goodwill amortization 9.5 2.8 .5
Nontaxable income (4.5) - -
Other, net 1.2 1.0 (.8)
- ---------------------------------------------------------------------------------------------------------------------------
Effective rate (31.1%) 43.4% 39.1%
</TABLE>
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 2,794 $ 2,115
Accrued liabilities not currently deductible 6,802 10,912
Employee benefit plans 3,916 4,195
Merchandise inventories 1,836 1,190
Nonrecurring restructuring expenses 1,898 5,011
Property and equipment 318 -
Tax loss carryforward (net of valuation allowance of $650) 1,051 -
Other 612 3,606
- ---------------------------------------------------------------------------------------------------------------------------
Total deferred tax assets 19,227 27,029
Deferred tax liabilities:
Property and equipment - 48
Leased assets - 165
Other 1,589 1,097
- ---------------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities 1,589 1,310
Net deferred tax asset (included in other current assets and other assets, net) $17,638 $25,719
</TABLE>
As of December 31, 1994, the Company had not recognized a valuation
allowance for its gross deferred tax asset. At December 31, 1995, management
determined, based on the Company's carryback and carryforward availability and
other factors, that it is appropriate to recognize a $650 valuation allowance
for state net operating losses. At December 31, 1995, the Company had net
operating losses for federal income tax purposes of $21,009, some of which are
available to offset federal taxable income as reported for tax years 1994, 1993
and 1992, and the remainder of which will be available to offset federal taxable
income for future tax years until such losses expire in 2010. Based on the level
of historical taxable income and projections of future taxable income over the
periods which the deferred tax assets are deductible, management believes it is
more likely than not that the Company will realize the benefits of these
deductible differences, net of existing valuation allowances at December 31,
1995.
Cash payments for income taxes, including taxes on discontinued operations,
for 1995, 1994 and 1993 were $6,058, $8,164 and $12,153, respectively.
<PAGE>
Note 12 - Commitments and Contingencies
The Company has a commitment through September 1998 to outsource the
management and operation of its mainframe computer. This committment is
cancellable at any time on 180 days prior notice and a minimum payment of
$11,515. The Company also has entered into noncancelable agreements to lease
certain office and warehouse facilities with remaining terms ranging from one to
twelve years. Certain leases include renewal options, generally for five-year
increments. At December 31, 1995, future minimum annual payments under
noncancelable agreements with original terms in excess of one year are as
follows:
Total
- ------------------------------------------------------------------
1996 $15,909
1997 14,381
1998 13,287
1999 10,520
2000 7,655
Later years 19,388
- ------------------------------------------------------------------
Total minimum payments $81,140
- ------------------------------------------------------------------
Minimum lease payments have not been reduced by minimum sublease rentals
aggregating $1,817 due in the future under noncancelable subleases.
Rent expense for the years ended December 31, 1995, 1994 and 1993 was
$26,991, $21,264 and $12,857, respectively.
The Company sold transportation equipment with a net book value of
approximately $407 in a sale/leaseback transaction 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. No single customer accounted for 10%
or more of the Company's net sales during 1995. Sales under contract to member
hospitals of VHA Inc., totaled $1,180,000 or approximately 40% of the Company's
net sales in 1995. As members of a national healthcare network, VHA Inc.
hospitals have incentive to purchase from their primary selected distributor;
however, they operate independently and are free to negotiate directly with
distributors and manufacturers.
<PAGE>
Note 13 - Quarterly Financial Data (Unaudited)
The following table presents the summarized quarterly financial data for
1995 and 1994:
<TABLE>
<CAPTION>
1995
- ------------------------------------------------------------------------------------------------------
QUARTER 1ST 2ND 3RD 4TH
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $747,095 $743,718 $739,021 $746,652
Gross margin 72,908 70,501 59,366 65,043
Net income (loss) 4,613 1,688 (8,601) (9,008)
Net income (loss) per common share $ .11 $ .01 $ (.32) $ (.33)
<CAPTION>
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>
<PAGE>
Independent Auditors' Report
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, 1995 and 1994, and the related
consolidated statements of operations and cash flows for each of the years in
the three-year period ended December 31, 1995. 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, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Richmond, Virginia
February 2, 1996 except as to Note 7,
which is as of March 1, 1996
Report of Management
The management of Owens & Minor, Inc. is responsible for the preparation,
integrity and objectivity of the consolidated financial statements and related
information presented in this annual report. The consolidated financial
statements were prepared in conformity with generally accepted accounting
principles applied on a consistent basis and include when necessary, the best
estimates and judgments of management.
The Company maintains a system of internal controls that provide reasonable
assurance that its assets are safeguarded against loss or unauthorized use, that
transactions are properly recorded and that financial records provide a reliable
basis for the preparation of the consolidated financial statements.
The Audit Committee of the Board of Directors, composed entirely of
directors who are not current employees of Owens & Minor, Inc., meets
periodically and privately with the Company's independent auditors and internal
auditors, as well as with Company management, to review accounting, auditing,
internal control and financial reporting matters. The independent auditors and
internal auditors have direct access to the Audit Committee with and without
management present to discuss the results of their activities.
/s/ G. GILMER MINOR, III
G. Gilmer Minor, III
Chairman, President and Chief Executive Officer
/s/ GLENN J. DOZIER /s/ ANN GREER RECTOR
Glenn J. Dozier Ann Greer Rector
Senior Vice President, Finance, Vice President and Controller
and Chief Financial Officer
<PAGE>
STOCK MARKET AND DIVIDEND INFORMATION
Owens & Minor, Inc.'s common stock trades on the New York Stock Exchange
under the symbol OMI. The following table indicates the range of high and low
sales prices per share of the Company's common shares as reported on the New
York Stock Exchange and the quarterly cash dividends paid by the Company:
YEAR 1995
QUARTER 1ST 2ND 3RD 4TH
Market Price
High $14.88 $14.13 $14.75 $13.38
Low $12.25 $11.63 $12.13 $11.63
Dividends per share $ .045 $ .045 $ .045 $ .045
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
At December 31, 1995, there were approximately 14,000 common shareholders.
Exhibit 21
OWENS & MINOR, INC. AND SUBSIDIARIES
SUBSIDIARIES OF REGISTRANT
Subsidiary State of Incorporation
Owens & Minor Medical, Inc. Virginia
National Medical Supply Corporation Delaware
Owens & Minor West, Inc. California
Koley's Medical Supply, Inc. Nebraska
Lyons Physician Supply Company Ohio
A. Kuhlman & Company Michigan
Stuart Medical, Inc. Pennsylvania
O&M Funding Corp. Virginia
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Owens & Minor, Inc.:
We consent to incorporation by reference in the Registration Statements
(Nos33-65606, 33-63248, 33-4536, 33-32497, 33-41402 and 33-41403) on Form S-8
and the Registration Statement (No. 33-44428) on Form S-3 of Owens & Minor, Inc.
of our report dated February 2, 1996, except as to Note 7, which is as of March
1, 1996, relating to the consolidated balance sheets of Owens & Minor, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations and cash flows for each of the years in the three-year
period ended December 31, 1995, which report is incorporated by reference in the
December 31, 1995 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 2, 1996, relating to the financial
statement schedule of the Company, which report appears on page 22 of this Form
10-K.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Richmond, Virginia
March 13, 1996
<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-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 215
<SECURITIES> 0
<RECEIVABLES> 271,248
<ALLOWANCES> 6,010
<INVENTORY> 326,380
<CURRENT-ASSETS> 623,902
<PP&E> 69,674
<DEPRECIATION> 30,625
<TOTAL-ASSETS> 857,803
<CURRENT-LIABILITIES> 292,239
<BONDS> 0
0
115,000
<COMMON> 61,724
<OTHER-SE> 58,547
<TOTAL-LIABILITY-AND-EQUITY> 857,803
<SALES> 2,976,486
<TOTAL-REVENUES> 2,976,486
<CGS> 2,708,668
<TOTAL-COSTS> 2,949,154
<OTHER-EXPENSES> 16,734
<LOSS-PROVISION> 827
<INTEREST-EXPENSE> 26,179
<INCOME-PRETAX> (16,408)
<INCOME-TAX> (5,100)
<INCOME-CONTINUING> (11,308)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,308)
<EPS-PRIMARY> (.53)
<EPS-DILUTED> (.53)
</TABLE>
