UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to
Commission file number 1-9810
OWENS & MINOR, INC.
(Exact name of Registrant as specified in its charter)
Virginia 54-1701843
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4800 Cox Road, Glen Allen, Virginia 23060
(Address of principal executive offices) (Zip Code)
Post Office Box 27626, Richmond, Virginia 23261-7626
(Mailing address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 747-9794
(Former name, former address and former fiscal year, if changed
since last report)
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 _____
The number of shares of Owens & Minor, Inc.'s common stock outstanding
as of November 5, 1997 was 32,207,271 shares.
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Index
Page
Part I. Financial Information
Consolidated Balance Sheets - September 30, 1997 and
December 31, 1996 3
Consolidated Statements of Income - Three Months and
Nine Months Ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Part II. Other Information 11-13
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Owens & Minor, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In thousands, except share data) September 30, December 31,
(Unaudited) 1997 1996
------------- ------------
<S> <C>
Assets
Current assets
Cash and cash equivalents $ 671 $ 743
Accounts and notes receivable, net
of allowance of $6,404 and $6,495 180,083 147,243
Merchandise inventories 282,782 281,839
Other current assets 24,235 25,675
--------- --------
Total current assets 487,771 455,500
Property and equipment, net of accumulated
depreciation of $40,186 and $35,242 27,689 29,231
Excess of purchase price over net assets acquired, net
of accumulated amortization of $17,161 and $13,752 163,957 167,366
Other assets, net 25,522 27,404
---------- ---------
Total assets $ 704,939 $ 679,501
========== ==========
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 247,727 $ 224,037
Accrued payroll and related liabilities 7,339 5,001
Other accrued liabilities 36,790 33,472
---------- -----------
Total current liabilities 291,856 262,510
Long-term debt 154,200 167,549
Accrued pension and retirement plans 5,285 7,042
---------- -----------
Total liabilities 451,341 437,101
---------- ------------
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
and outstanding - 1,150 shares 115,000 115,000
Common stock, par value $2 per share;
authorized - 200,000 shares; issued and
outstanding - 32,122 shares and 31,907 shares 64,244 63,814
Paid-in capital 6,818 5,086
Retained earnings 67,536 58,500
---------- ----------
Total shareholders' equity 253,598 242,400
---------- -----------
Total liabilities and shareholders' equity $ 704,939 $ 679,501
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C>
Net sales $ 785,778 $ 744,146 $ 2,312,123 $ 2,265,396
Cost of goods sold 706,897 669,660 2,080,099 2,042,220
------------- ------------- ------------- --------------
Gross margin 78,881 74,486 232,024 223,176
------------- ------------ -------------- --------------
Selling, general and administrative expenses 57,582 57,709 172,616 177,223
Depreciation and amortization 4,507 4,016 13,044 12,017
Interest expense, net 3,928 4,283 11,634 15,057
Discount on accounts receivable securitization 1,649 1,889 5,002 4,484
------------- ------------ ------------- -------------
Total expenses 67,666 67,897 202,296 208,781
------------- ------------ -------------- -------------
Income before income taxes 11,215 6,589 29,728 14,395
Income tax provision 4,737 2,839 12,486 6,195
------------- ------------ --------------- -------------
Net income 6,478 3,750 17,242 8,200
Dividends on preferred stock 1,293 1,293 3,881 3,881
------------- ------------ --------------- -------------
Net income attributable to common stock $ 5,185 $ 2,457 $ 13,361 $ 4,319
============= ================ =============== ==============
Net income per common share $ 0.16 $ 0.08 $ 0.42 $ 0. 14
============= ================ =============== ===============
Cash dividends per common share $ 0.045 $ 0.045 $ 0.135 $ 0.135
============= ================ =============== ================
Weighted average common shares
and common share equivalents 32,250 31,980 32,130 31,700
============= ================= =============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
----------------------------------
1997 1996
---------- ----------
<S> <C>
Operating Activities
Net income $ 17,242 $ 8,200
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation and amortization 13,044 12,017
Provision for LIFO reserve 2,150 1,551
Changes in operating assets and liabilities
Accounts and notes receivable (32,657) 112,999
Merchandise inventories (3,093) 29,985
Accounts payable 38,778 (12,953)
Net change in other current assets
and current liabilities 7,729 15,854
Other, net (819) (1,417)
---------- --------
Cash provided by operating activities 42,374 166,236
---------- ---------
Investing Activities
Additions to property and equipment (6,290) (4,553)
Additions to computer software (3,115) (5,397)
Proceeds from sale of property and equipment 1,838 5,372
----------- ---------
Cash used for investing activities (7,567) (4,578)
----------- ----------
Financing Activities
Additions to long-term debt - 150,000
Reductions of long-term debt (13,358) (282,122)
Other short-term financing, net (15,088) (22,471)
Cash dividends paid (8,205) (8,136)
Exercise of stock options 1,772 1,511
----------- ----------
Cash used for financing activities (34,879) (161,218)
----------- ----------
Net increase (decrease) in cash and cash equivalents (72) 440
Cash and cash equivalents at beginning of year 743 215
---------- ----------
Cash and cash equivalents at end of period $ 671 $ 655
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Accounting Policies
Basis of Presentation
In the opinion of management, the accompanying
unaudited consolidated financial statements contain all adjustments
(which are comprised only of normal recurring accruals and the use of
estimates) necessary to present fairly the consolidated financial
position of Owens & Minor, Inc. and its wholly owned subsidiaries (the
Company) as of September 30, 1997 and the consolidated results of
operations for the three and nine month periods and cash flows for the nine
month periods ended September 30, 1997 and 1996.
Derivative Financial Instruments
The Company enters into off-balance sheet interest rate swap agreements as
part of its interest rate risk management strategy. These swaps are not
held for trading purposes and are classified as synthetic alterations. In
order for the swaps to be accounted for as synthetic alterations they must
satisfy the following criteria: (1) the asset or liability to be converted
creates exposure to interest rate risk, and (2) the off-balance sheet
agreement is designated and effective as a synthetic alteration of the
balance sheet item. Accrual accounting is applied for these agreements and
the net payments or receipts are accrued as other accrued liabilities and
are recorded as adjustments to interest expense. If the outstanding
financing were to drop below the notional amount of the related swap, the
excess portion of the related swap would be marked to market and the
resulting gain or loss included in income. If a swap were to be terminated,
the gain or loss would be deferred and amortized over the remaining life of
the agreement.
2. Interim Results of Operations
The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year.
3. Interim Gross Margin Reporting
The Company uses estimated gross margin rates to determine the cost of
goods sold during interim periods. To improve the accuracy of its estimated
gross margins for interim reporting purposes, the Company takes physical
inventory counts at selected distribution centers. Reported results of
operations for the three and nine month periods ended September 30, 1997
and 1996 reflect the results of such counts, to the extent that they are
materially different from estimated amounts. Management will continue a
program of interim physical inventories at selected distribution centers to
the extent it deems appropriate to ensure the accuracy of interim reporting
and to minimize year-end adjustments.
<PAGE>
4. Long Term Debt and Off Balance Sheet Financing
In September, 1997 the Company renegotiated the terms of its Senior Credit
Facility (Facility). The Facility expires in May, 2001 with interest based
on, at the Companys discretion, the London Interbank Offered Rate (LIBOR)
or the Prime Rate. The Company is charged a commitment fee of between 0.15%
and 0.25%, depending upon the Companys capitalization ratio, on the unused
portion of the Facility. The terms of the Facility limit the amount of
indebtedness that the Company may incur, require the Company to maintain
certain levels of tangible net worth, current ratio, leverage ratio and
fixed charge coverage, and restrict the ability of the Company to
materially alter the character of the business through consolidation,
merger or purchase or sale of assets.
In October, 1997 the Companys accounts receivable financing facility
(Receivables Financing Facility) was modified to reduce the term of the
agreement from May, 1999 to October, 1998. The remaining terms of the
Receivables Financing Facility are substantially the same as those in the
agreement entered into in December, 1995 and modified in May, 1996.
5. Condensed Consolidating Financial Information
The following table presents condensed consolidating financial information
for: Owens & Minor, Inc.; on a combined basis, the guarantors of Owens &
Minor, Inc.s Senior Subordinated 10-year Notes (Notes) (all of the wholly
owned subsidiaries of Owens & Minor, Inc. except for O&M Funding Corp.
(OMF)); and OMF, Owens & Minor, Inc.s only non-guarantor subsidiary of the
Notes. Separate financial statements of the guarantor subsidiaries are not
presented because the guarantors are jointly, severally and unconditionally
liable under the guarantees and the Company believes the condensed
consolidating financial statements are more meaningful in understanding the
financial position of the guarantor subsidiaries.
<TABLE>
<CAPTION>
(In thousands)
As of and for the Owens
nine months ended & Minor, Guarantor
September 30, 1997 Inc. Subsidiaries OMF Eliminations Consolidated
<S> <C>
Current assets $ 155,220 $ 468,959 $ 85,784 $ (222,192) $ 487,771
Noncurrent assets 306,129 225,898 - (314,859) 217,168
----------- ----------- ----------- -------------- ---------------
Total assets $ 461,349 $ 694,857 $ 85,784 $ (537,051) $ 704,939
=========== =========== =========== ============== ===============
Current liabilities $ 7,440 $ 439,092 $ 68,143 $ (222,819) $ 291,856
Noncurrent liabilities 154,200 5,285 - - 159,485
Shareholders equity 299,709 250,480 17,641 (314,232) 253,598
----------- ----------- ----------- -------------- ----------------
Total liabilities and
shareholders equity $ 461,349 $ 694,857 $ 85,784 $ (537,051) $ 704,939
=========== =========== =========== =============== ================
Net sales $ 11,646 $ 2,312,123 $ 10,591 $ (22,237) $ 2,312,123
Expenses 12,784 2,295,956 9,007 (22,866) 2,294,881
----------- ----------- ----------- --------------- ----------------
Net income (loss) $ (1,138) $ 16,167 $ 1,584 $ 629 $ 17,242
=========== =========== =========== =============== ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of and for the Owens
nine months ended & Minor, Guarantor
September 30, 1996 Inc. Subsidiaries OMF Eliminations Consolidated
- ------------------ ---- ------------ --- ------------ ------------
<S> <C>
Current assets $ 191,572 $ 446,930 $ 53,892 $ (227,236) $ 465,158
Noncurrent assets 306,791 237,486 - (314,859) 229,418
----------- ------------ ------------ --------------- ----------------
Total assets $ 498,363 $ 684,416 $ 53,892 $ (542,095) $ 694,576
=========== ============ ============ ============== =================
Current liabilities $ 6,261 $ 436,425 $ 38,451 $ (227,860) $ 253,277
Noncurrent liabilities 181,900 19,187 - - 201,087
Shareholders equity 310,202 228,804 15,441 (314,235) 240,212
----------- ------------ ------------ --------------- ----------------
Total liabilities and
shareholders equity $ 498,363 $ 684,416 $ 53,892 $ (542,095) $ 694,576
=========== ============ ============ ============== =================
Net sales $ 18,014 $ 2,265,396 $ 7,911 $ (25,925) $ 2,265,396
Expenses 17,937 2,258,732 7,076 (26,549) 2,257,196
----------- ------------ ------------ --------------- ----------------
Net income $ 77 $ 6,664 $ 835 $ 624 $ 8,200
=========== ============ ============ ============== =================
</TABLE>
Item 2. Owens & Minor, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following management discussion and analysis describes material changes in
the Companys financial condition since December 31, 1996. Trends of a material
nature are discussed to the extent known and considered relevant. This
discussion should be read in conjunction with the consolidated financial
statements, related notes thereto and managements discussion and analysis of
financial condition and results of operations included in the Companys 1996
Annual Report to Shareholders and Annual Report on Form 10-K for the year ended
December 31, 1996.
Certain statements in this discussion constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, including, but not
limited to, general economic and business conditions, competition, changing
trends in customer profiles, outcome of outstanding litigation, and changes in
government regulations. Although the Company believes that its expectations with
respect to the forward-looking statements are based upon reasonable assumptions
within the bounds of its knowledge of its business and operations, there can be
no assurance that actual results, performance or achievements of the Company
will not differ materially from any future results, performance or achievements
expressed or implied by such forward-looking statements.
Results of Operations
Third quarter and first nine months of 1997 compared with 1996
Net sales. Net sales increased 5.6% to $785.8 million in the third quarter of
1997 from $744.1 million in the third quarter of 1996. Net sales increased 2.1%
to $2,312.1 million in the first nine months of 1997 from $2,265.4 million in
the first nine months of 1996. The increase in sales was a result of several new
sales agreements signed during the first half of 1997, and penetration of
existing accounts. The Company continues its emphasis on initiatives to increase
profitable sales while continuing its efforts to reduce unprofitable sales and
therefore increase the overall profitability of the Company. The Company will
continue this commitment to profitable sales growth and has entered into several
new agreements in 1997 that will provide an opportunity for such future growth,
although such growth cannot be assured.
<PAGE>
In August, 1997 the Company entered into a new three-year contract with VHA Inc.
(VHA) to provide distribution services to VHAs member hospitals and primary care
facilities. Net sales to member hospitals under contract with VHA Inc. totaled
approximately $926 million and $910 million for the nine month periods ended
September 30, 1997 and 1996, approximately 40% of the Companys total net sales.
Under this contract, the Company will distribute medical and surgical supplies
and pursue growth opportunities with VHAs member hospitals and primary care
facilities.
Gross margin. Gross margin as a percentage of net sales of 10.0% in the third
quarter of 1997 is unchanged from the third quarter of 1996. Gross margin as a
percentage of net sales increased to 10.0% in the first nine months of 1997 from
9.9% in the first nine months of 1996. The improvement has been a result of the
Companys efforts to reduce unprofitable sales by negotiating price increases
where appropriate or reducing sales to unprofitable customers. Also, the
improvement has been the result of product and supplier standardization. The
Company will continue to focus on maintaining margin levels through its
continued emphasis on profitable sales and standardization of suppliers and
products.
Selling, general and administrative expenses. Selling, general and
administrative (SG&A) expenses as a percentage of net sales decreased to 7.3% in
the third quarter of 1997 from 7.8% in the third quarter of 1996 and decreased
to 7.5% in the first nine months of 1997 from 7.8% in the first nine months of
1996. This decline was a result of many cost-saving initiatives, including the
reduction of over 100 full-time equivalent employees since September 30, 1996;
the reduction in the cost of employee retirement plans; the more cost effective
utilization of computer resources; the implementation of improved inventory
management systems; the continuing automation of administrative functions
through the utilization of electronic data interchange; and the refocus on best
practices within the Company. The results of these initiatives will be partially
offset by costs associated with computer system changes required to accommodate
the year 2000.
Depreciation and amortization. Depreciation and amortization increased by 12.2%
in the third quarter of 1997 compared to the third quarter of 1996 and increased
by 8.5% in the first nine months of 1997 compared to the first nine months of
1996. This increase was due primarily to the Company's continued investment in
information technology. The Company anticipates similar increases in
depreciation and amortization for the remainder of 1997 associated with
additional capital investment in this area.
Interest expense, net and discount on accounts receivable securitization
(financing costs). Financing costs, net of finance charge income of $0.5 million
and $1.1 million in the third quarter of 1997 and 1996, respectively, decreased
to $5.6 million in the third quarter of 1997 from $6.2 million in the third
quarter of 1996. Financing costs, net of finance charge income of $2.3 million
and $3.5 million in the first nine months of 1997 and 1996, respectively,
decreased to $16.6 million in the first nine months of 1996 from $19.5 million
in the first nine months of 1996. The decline in financing costs has been a
result of the Companys ability to reduce working capital requirements by
substantially completing the implementation of its client/server-based inventory
forecasting system and strengthening its accounts receivable collection
procedures. As a result of the reduction in working capital requirements, the
Company has reduced outstanding borrowing by approximately $75.8 million since
September 30, 1996. Additionally, during 1996, the Company completed a
refinancing plan that, in addition to the Companys improved financial
performance, reduced the effective rate of its outstanding financing. The
Company will continue to take action to reduce financing costs by continuing its
working capital reduction initiatives, although the future results of these
initiatives cannot be assured.
<PAGE>
Income taxes. The Company had an income tax provision of $12.5 million in the
first nine months of 1997 (representing an effective tax rate of 42.0%) compared
with $6.2 million in the first nine months of 1996 (representing an effective
tax rate of 43.0%). The decline in the effective tax rate is due primarily to
increased income before taxes reducing the impact of nondeductible goodwill
amortization.
Net income. Net income increased $2.7 million in the third quarter of 1997
compared to the third quarter of 1996. Net income increased $9.0 million in the
first nine months of 1997 compared to the first nine months of 1996. The
increase was primarily due to the initiatives previously discussed related to
gross margin, SG&A expenses and financing costs. Although the trend has been
favorable and the Company continues to pursue these and other initiatives, the
future impact on net income cannot be assured.
Financial Condition, Liquidity and Capital Resources
Liquidity. The Company's liquidity position improved significantly during the
first nine months of 1997 compared to the first nine months of 1996. Outstanding
financing was reduced $75.8 million to $249.8 million at September 30, 1997 from
$325.6 million at September 30, 1996 and $43.7 million from $293.5 million on
December 31, 1996. The capitalization ratio (excluding the impact of the off
balance sheet accounts receivable securitization) decreased to 49.6% at
September 30, 1997 from 57.5% at September 30, 1996 and from 54.8% at December
31, 1996. The improvement was the result of reduced working capital requirements
and increased earnings.
The Company expects that its available financing will be sufficient to fund its
working capital needs and long-term strategic growth plans, although this cannot
be assured. At September 30, 1997, the Company had approximately $220.8 million
of unused credit under its revolving credit facility and $30.6 million under its
accounts receivable financing facility.
Working Capital Management. During the first nine months of 1997, the Companys
working capital management improved significantly compared to the first nine
months of 1996. Inventory turnover improved to 9.6 in the third quarter of 1997
from 9.0 in the third quarter of 1996 and from 9.4 in the fourth quarter of
1996. This improvement was due to the implementation of the Com-pany's
client/server-based inventory forecasting system and the initiative to reduce
the number of items from multiple manufacturers distributed by the Company. The
Company has also reduced accounts receivable days sales outstanding (excluding
the impact of the off balance sheet accounts receivable securitization) to 31.6
days in the third quarter of 1997 from 33.9 days in the fourth quarter of 1996.
This reduction has been achieved through strengthening the Company's methods of
monitoring and enforcing contract payment terms and basing a portion of its
sales force incentives on reducing days sales outstanding. The Company will
focus on maintaining these working capital management measurements, although the
results of its efforts cannot be assured.
<PAGE>
Capital Expenditures. Capital expenditures were approximately $9.4 million in
the first nine months of 1997, of which approximately $5.9 million was for
computer systems. The Company expects to continue to invest in technology for
the foreseeable future as the most cost effective method of reducing operating
expenses. These capital expenditures are expected to be funded through cash flow
from operations.
Recent Accounting Pronouncements
In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), Earnings per
Share. SFAS 128 prescribes the computation, presentation and disclosure
requirements for earnings per share. This standard is effective for reporting
periods ending after December 15, 1997. Management believes the adoption of this
new standard will not have a material impact on the results of operations of the
Company.
Part II. Other Information
Item 1. Legal Proceedings
As of October 31, 1997, Stuart Medical, Inc. (Stuart), which was acquired by the
Company in May, 1994, had been named as a defendant along with product
manufacturers, distributors, healthcare providers, trade associations and others
in approximately 136 lawsuits, filed in various federal and state courts (the
Cases). The Cases represent the claims of approximately 143 plaintiffs claiming
personal injuries and approximately 73 spouses asserting claims for loss of
consortium. The Cases seek damages for personal injuries allegedly attributable
to spinal fixation devices. The great majority of the Cases seek compensatory
and punitive damages in unspecified amounts.
Prior to December 1992, Stuart distributed spinal fixation devices manufactured
by Sofamor SNC, a predecessor of Sofamor Danek Group, Inc. (Sofamor Danek).
Approximately a third of the claims involve plaintiffs implanted with spinal
fixation devices manufactured by Sofamor Danek. Such plaintiffs allege that
Stuart is liable to them under applicable products liability law for injuries
caused by such devices distributed and sold by Stuart. In addition, such
plaintiffs allege that Stuart distributed and sold the spinal fixation devices
through deceptive and misleading means and in violation of applicable law. In
the remaining Cases, plaintiffs seek to hold Stuart liable for injuries caused
by other manufacturers devices that were neither distributed nor sold by Stuart.
Such plaintiffs allege that Stuart engaged in a civil conspiracy and concerted
action with manufacturers, distributors and others to promote the sale of spinal
fixation devices through deceptive and misleading means and in violation of
applicable law. Stuart never manufactured any spinal fixation devices. The
Company believes that affirmative defenses are available to Stuart. All Cases
filed against Stuart have been, and will continue to be, vigorously defended.
<PAGE>
A majority of the Cases have been transferred to, and consolidated for pretrial
proceedings, in the Eastern District of Pennsylvania in Philadelphia under the
style MDL Docket No. 1014: In re Orthopedic Bone Screw Products Liability
Litigation. Discovery proceedings, including the taking of depositions have been
ongoing in certain of the Cases, and, in a number of Cases, discovery has been
completed and these Cases have been remanded back for trial to those
jurisdictions where they were originally filed. As no Case has yet been prepared
for trial involving the Company, the Company is unable at this time to determine
with certainty whether or not Stuart may be held liable.
In October 1997, the presiding judge entered an order approving a settlement
agreement between one manufacturer of spinal fixation devices, AcroMed
Corporation (AcroMed), and the plaintiffs legal committee in the multi-district
litigation. Under the proposed terms of the settlement, AcroMed would establish
a settlement fund consisting of $100 million in cash and the proceeds of its
product liability insurance coverage. Stuart did not distribute devices
manufactured by AcroMed and is not a party to the AcroMed settlement. It is
anticipated that nonsettling defendants, including other manufacturers and
distributors, will appeal the approval of the settlement.
The Company believes that Stuart may be named as a defendant in additional
similar cases in the future as a result of the pending AcroMed settlement or as
statutes of limitations approach expiration.
Based upon managements analysis of indemnification agreements between Stuart and
Sofamor Danek, the manufacturer of the devices distributed by Stuart, the
Company believes that Stuart is entitled to indemnification by Sofamor Danek at
least with respect to claims brought by plaintiffs implanted with devices
manufactured by Sofamor Danek. Such Cases are being defended by Stuarts
insurance carriers. Regarding those Cases filed by plaintiffs implanted with
other manufacturers devices, one of Stuarts primary insurance carriers has
notified a representative of the former shareholders of Stuart that it will
withdraw its provision of defense of such Cases and another one of Stuarts
primary insurance carriers has notified a representative of the former
shareholders of Stuart that it has declined to provide a defense for such Cases,
in both instances asserting that such Cases involve only conspiracy and
concerted action claims. The former shareholders of Stuart are contesting the
insurance companies withdrawal and declination of the defense of such Cases. The
Company and Stuart are also contractually 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. The
Company believes that Stuarts available insurance coverage together with the
indemnification rights discussed above are adequate to cover any losses should
they occur, and accordingly has accrued no liability therefor. Except as set
forth above, the Company is not aware of any uncertainty as to the availability
and adequacy of such insurance or indemnification, although there can be no
assurance that Sofamor Danek and the former shareholders will have sufficient
financial resources in the future to meet such obligations.
<PAGE>
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 Companys financial condition or
results of operation.
Item 6. Exhibits and Reports on Form 8-K
(a) Item 601 Exhibits
Those exhibits required to be filed by Item 601 of Regulation S-K are
listed in the Exhibit Index immediately preceding the exhibits filed
herewith and such listing is incorporated herein by reference.
(b) Report on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter for
which this Report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
(Registrant)
Date November 13, 1997 /s/ Ann Greer Rector
-------------------
Ann Greer Rector
Senior Vice President &
Chief Financial Officer
Date November 13, 1997 /s/ Olwen B. Cape
-----------------
Olwen B. Cape
Vice President & Controller
Chief Accounting Officer
<PAGE>
Exhibit Index
Exhibit #
4 Credit Agreement dated as of September 15, 1997 by and among Owens &
Minor, Inc., certain of its subsidiaries, the various banks and lending
institutions identified on the signature pages hereto, NationsBank,
N.A., as agent, Bank of America NT and SA and Crestar Bank, as
co-agents, and NationsBank, N.A., as administrative agent
10(a) Owens & Minor, Inc. Management Equity Ownership Program
10(b) First Amendment dated as of October 17, 1997 to the Amended and
Restated Receivables Purchase Agreement among O&M Funding Corp., Owens
& Minor Medical, Inc., Owens & Minor, Inc., Receivables Capital
Corporation and Bank of America National Trust and Savings Association
10(c) First Amendment dated as of October 17, 1997 to the Amended and
Restated Parallel Asset Purchase Agreement among O&M Funding Corp.,
Owens & Minor Medical, Inc., Owens & Minor, Inc., Parallel Purchasers
and Bank of America National Trust and Savings Association
10(d) Form of Enhanced Authorized Distribution Agency Agreement dated as
of August 20, 1997 between VHA, Inc. and Owens & Minor*
27 Financial Data Schedule
* 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.
Exhibit 4
CREDIT AGREEMENT
Dated as of September 15, 1997
among
OWENS & MINOR, INC.
as Borrower,
AND
CERTAIN OF ITS SUBSIDIARIES IDENTIFIED HEREIN
as Guarantors
THE BANKS IDENTIFIED HEREIN,
NATIONSBANK, N.A.,
as Agent,
BANK OF AMERICA NT & SA
and
CRESTAR BANK,
as Co-Agents,
AND
NATIONSBANK, N.A.,
as Administrative Agent
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TABLE OF CONTENTS
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS..............................1
1.01 Definitions................................................1
1.02 Computation of Time Periods...............................20
1.03 Accounting Terms..........................................20
SECTION 2 CREDIT FACILITIES............................................20
2.01 Revolving Loan Commitment.................................20
2.02 Revolving Loan Advances...................................21
2.03 Conversion................................................23
2.04 Repayment of the Revolving Loans..........................23
2.05 Interest on Revolving Loans...............................23
2.06 Revolving Notes...........................................24
2.07 Swingline Loan Subfacility................................24
2.08 Competitive Loan Subfacility..............................26
2.09 Conditions of Lending.....................................29
2.10 Termination of Commitments................................29
2.11 Fees......................................................30
2.12 Prepayments...............................................30
2.13 Increased Costs, Illegality, etc..........................31
2.14 Capital Adequacy..........................................32
2.15 Compensation..............................................33
2.16 Net Payments..............................................33
2.17 Change of Lending Office; Right to Substitute Lender......34
2.18 Payments and Computations.................................35
2.19 Pro Rata Treatment........................................36
2.20 Sharing of Payments.......................................36
2.21 Foreign Lenders...........................................36
SECTION 3 GUARANTEE....................................................37
3.01 The Guarantee.............................................37
3.02 Obligations Unconditional.................................38
3.03 Reinstatement.............................................39
3.04 Certain Additional Waivers................................39
3.05 Remedies..................................................39
3.06 Rights of Contribution....................................39
3.07 Continuing Guarantee......................................40
SECTION 4 CONDITIONS PRECEDENT.........................................40
4.01 Conditions to Closing.....................................40
4.02 Conditions to Initial Loan Advance........................41
SECTION 5 REPRESENTATIONS AND WARRANTIES...............................42
5.01 Organization and Good Standing............................42
5.02 Due Authorization.........................................42
5.03 No Conflicts..............................................42
5.04 Consents..................................................42
5.05 Enforceable Obligations...................................43
5.06 Financial Condition.......................................43
5.07 No Default................................................43
5.08 Liens.....................................................43
5.09 Indebtedness..............................................43
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5.10 Litigation................................................43
5.11 Material Agreements.......................................44
5.12 Taxes.....................................................44
5.13 Compliance with Law.......................................44
5.14 ERISA.....................................................44
5.15 Subsidiaries..............................................44
5.16 Use of Proceeds; Margin Stock.............................45
5.17 Government Regulation.....................................45
5.18 Hazardous Substances......................................45
5.19 Patents, Franchises, etc..................................46
5.20 Solvency..................................................46
5.21 Investment................................................46
SECTION 6 AFFIRMATIVE COVENANTS.........................................46
6.01 Information Covenants.....................................46
6.02 Preservation of Existence and Franchises..................49
6.03 Books, Records and Inspections............................49
6.04 Compliance with Law.......................................49
6.05 Payment of Taxes and Other Indebtedness...................49
6.06 Insurance.................................................50
6.07 Maintenance of Property...................................50
6.08 Performance of Obligations................................50
6.09 ERISA.....................................................50
6.10 Use of Proceeds...........................................51
6.11 Financial Covenants.......................................51
6.12 Additional Credit Parties.................................52
SECTION 7 NEGATIVE COVENANTS...........................................53
7.01 Indebtedness..............................................53
7.02 Liens.....................................................54
7.03 Guaranty Obligations......................................54
7.04 Nature of Business........................................54
7.05 Consolidation, Merger, Sale or Purchase of Assets, etc....54
7.06 Advances, Investments and Loans...........................55
7.07 Prepayments and Amendments Relating to Other Debt.........56
7.08 Transactions with Affiliates..............................56
7.09 Ownership of Subsidiaries.................................57
7.10 Fiscal Year...............................................57
7.11 Subsidiary Dividends......................................57
7.12 Dividends.................................................57
7.13 Securitization Transaction................................57
SECTION 8 EVENTS OF DEFAULT............................................58
8.01 Events of Default.........................................58
8.02 Acceleration; Remedies....................................60
SECTION 9 AGENCY PROVISIONS............................................61
9.01 Appointment...............................................61
9.02 Delegation of Duties......................................62
9.03 Exculpatory Provisions....................................62
9.04 Reliance on Communications................................62
9.05 Notice of Default.........................................63
9.06 Non-Reliance on Agents and Other Banks....................63
9.07 Indemnification...........................................64
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9.08 Agents in their Individual Capacity.......................64
9.09 Successor Agent...........................................64
SECTION 10 MISCELLANEOUS...............................................65
10.01 Notices..................................................65
10.02 Right of Set-Off.........................................66
10.03 Benefit of Agreement.....................................66
10.04 No Waiver; Remedies Cumulative...........................69
10.05 Payment of Expenses, etc.................................69
10.06 Amendments, Waivers and Consents.........................70
10.07 Counterparts.............................................71
10.08 Headings.................................................71
10.09 Survival of Indemnification..............................71
10.10 Governing Law; Submission to Jurisdiction; Venue.........71
10.10 Severability.............................................72
10.11 Entirety.................................................72
10.12 Survival of Representations and Warranties...............72
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SCHEDULES
Schedule 2.01(a) Schedule of Banks and Commitments
Schedule 2.02(1) Form of Notice of Borrowing
Schedule 2.02(2) Form of Notice of Conversion
Schedule 2.06 Form of Revolving Note
Schedule 2.08(b)-1 Form of Competitive Bid Request
Schedule 2.08(b)-2 Form of Notice of Receipt of Competitive Bid Request
Schedule 2.08(c) Form of Competitive Bid
Schedule 2.08(e) Form of Competitive Bid Accept/Reject Letter
Schedule 4.01(b)(1) Form of Legal Opinion of Drew St. J. Carneal
Schedule 4.01(b)(2) Form of Legal Opinion of Hunton & Williams
Schedule 5.09 Schedule of Outstanding Indebtedness
Schedule 5.10 Schedule of Legal Proceedings
Schedule 5.15 Schedule of Subsidiaries
Schedule 5.18 Schedule of Environmental Exceptions
Schedule 6.01(c) Schedule of Borrowing Base Certificate
Schedule 6.01(d) Form of Officer's Compliance Certificate
Schedule 6.06 Schedule of Insurance
Schedule 6.12 Form of Joinder Agreement
Schedule 7.02 Schedule of Permitted Liens
Schedule 10.03 Form of Assignment and Acceptance Agreement
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of September 15, 1997 (the "Credit
Agreement"), is by and among OWENS & MINOR, INC., a Virginia corporation (the
"Borrower"), CERTAIN OF ITS SUBSIDIARIES identified as a "Guarantor" in the
definition thereof and on the signature pages hereto (hereinafter sometimes
referred to individually as a "Guarantor" and collectively as the "Guarantors"),
the various banks and lending institutions identified on the signature pages
hereto (each a "Bank" and collectively, the "Banks"), NATIONSBANK, N.A. as agent
(in such capacity, the "Agent" or "Administrative Agent"), BANK OF AMERICA NT &
SA and CRESTAR BANK as co-agents (in such capacity, the "Co-Agents") and
NATIONSBANK, N.A., as administrative agent for the Banks (in such capacity, the
"Administrative Agent").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Banks provide a
$225,000,000 senior revolving credit facility for the purposes hereinafter
provided;
WHEREAS, the Banks have agreed to provide the requested credit facility
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
1.01 Definitions.
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural the singular:
"Additional Credit Party" means each Person that becomes a Guarantor
after the Closing Date.
"Adjusted Eurodollar Rate" means for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate equal to the rate obtained
by dividing (a) the rate of interest determined by the Administrative Agent to
be the average (rounded upward to the nearest whole multiple of 1/16 of 1% per
annum, if such average is not such a multiple) of the per annum rates at which
deposits in U.S. dollars are offered to the Administrative Agent in the
interbank eurodollar market at 11:00 A.M. (Charlotte, North Carolina time) (or
as soon thereafter as is practicable), in each case two Business Days before the
first day of such Interest Period, in an amount substantially equal to such
Eurodollar Loan comprising part of such borrowing (including conversions,
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extensions and renewals) and for a period equal to such Interest Period by (b) a
percentage equal to 100% minus the Adjusted Eurodollar Rate Reserve Percentage
for such Interest Period. As used herein, "Adjusted Eurodollar Rate Reserve
Percentage" for the Interest Period for each Eurodollar Loan comprising part of
the same borrowing (including conversions, extensions and renewals), means the
percentage applicable two Business Days before the first day of such Interest
Period under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for a member bank of the Federal Reserve
System in New York City with respect to liabilities consisting of or including
"eurocurrency liabilities", as such term is defined in Regulation D (or with
respect to any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Loans is determined) having a
term equal to the Interest Period for which such Adjusted Eurodollar Rate
Reserve Percentage is determined.
"Administrative Agent" means the administrative agent for the Banks
under this Credit Agreement as identified in the recital of parties hereinabove,
and any successors and assigns in such capacity.
"Administrative Agent's Fee Letter" means the letter agreement dated as
of September 15, 1997 between the Administrative Agent and the Borrower, as
amended, modified, supplemented or replaced from time to time.
"Administrative Agent's Fees" means such term as defined in Section
2.11(c).
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power (i) to vote 10% or more
of the securities having ordinary voting power for the election of directors of
such corporation or (ii) to direct or cause direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" means the agent for the Banks under this Credit Agreement as
identified in the recital of parties hereinabove, and any successors and assigns
in such capacity.
"Agents" means, collectively, the Agent, the Co-Agents and the
Administrative Agent.
"Applicable Federal Funds Rate" means, for any day, a per annum rate
equal to the sum of (i) the rate at which Federal funds are offered to the
Swingline Lender on an overnight basis as determined by such Swingline Lender,
plus (ii) one-eighth of one percent (1/8%).
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"Applicable Percentage" means for any day, the rate per annum set forth
below opposite the applicable Leverage Ratio then in effect, it being understood
that the Applicable Percentage for (i) Base Rate Loans shall be the percentage
set forth under the column "Base Rate Margin", (ii) Eurodollar Loans shall be
the percentage set forth under the column "Eurodollar and Fed Funds Swingline
Loan Margin", (iii) Fed Funds Swingline Loans shall be the percentage set forth
under "Eurodollar and Fed Funds Swingline Loan Margin" and (iv) the Commitment
Fee shall be the percentage set forth under the column "Commitment Fee":
Eurodollar and
Leverage Fed Funds Swingline Base Rate Commitment
Ratio Loan Margin Margin Fee
----- ----------- ------ ---
>.60 1.0625% .25% .25%
-
<.60 but >.55 .8125% .25% .225%
-
<.55 but >.50 .6875% 0% .200%
-
<.50 but >.45 .5625% 0% .175%
-
<.45 but >.40 .4375% 0% .150%
-
<.40 .3125% 0% .150%
The Applicable Percentage shall, in each case, be determined and adjusted
quarterly on the date five (5) Business Days after the date of delivery of the
quarterly compliance certificate and financial information provided in
accordance with Sections 6.01(a) and 6.01(b), as appropriate, provided that the
date of determination and adjustment shall not be later than the date 5 days
after the date by which the Borrowers are required to provide such quarterly or
annual compliance certificate and financial information (each an "Interest
Determination Date") based on the information contained in such quarterly or
annual financial information. The Applicable Percentage shall be effective from
an Interest Determination Date until the next such Interest Determination Date.
The Administrative Agent shall determine the appropriate Applicable Percentages
promptly upon receipt of the quarterly or annual financial information and
promptly notify the Borrower and the Banks of any change thereof. Such
determinations by the Administrative Agent shall be conclusive absent manifest
error.
"Assignee" means any bank or financial institution to which all or a
portion of the rights and obligations of a Bank under the terms of this Credit
Agreement have been assigned pursuant to Section 10.03(b) hereof.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
"Base Rate" means, for any day, a rate per annum (rounded upwards, if
necessary, to the nearest whole multiple of 1/16 of 1%) equal to the greater of
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(a) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1% or (b)
the Prime Rate in effect on such day. If for any reason the Administrative Agent
shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective Rate for any
reason, including the inability of the Administrative Agent to obtain sufficient
quotations in accordance with the terms hereof, the Base Rate shall be
determined without regard to clause (a) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist. Any
change in the Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Base Rate Loan" means a Loan which bears interest based on the Base
Rate.
"Borrower" means Owens & Minor, Inc., a Virginia corporation.
"Borrowing Base" means, at any time, the sum of 85% of Eligible
Receivables plus 50% of Eligible Inventory.
"Business Day" means any day other than a Saturday, a Sunday, a legal
holiday or a day on which banking institutions are authorized by law or other
governmental action to close in Richmond, Virginia, Charlotte, North Carolina or
New York, New York; except that in the case of Eurodollar Loans, such day is
also a day on which dealings between banks are carried on in U.S. dollar
deposits in the London interbank market.
"Capital Expenditures" means all expenditures for the purchase of
property, plant and equipment that would be capitalized in accordance with
generally accepted accounting principles, including without limitation
Capitalized Leases.
"Capitalized Lease" means any lease the payments and obligations with
respect to which would be required to be capitalized in accordance with
generally accepted accounting principles.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (ii) U.S. dollar denominated
(or foreign currency fully hedged) time deposits, certificates of deposit,
Eurodollar time deposits and Eurodollar certificates of deposit of (y) any
domestic commercial bank of recognized standing having capital and surplus in
excess of $250,000,000 or (z) any bank whose short-term commercial paper rating
from S&P is at least A-1 or the equivalent thereof or from Moody's is at least
P-1 or the equivalent thereof (any such bank being an "Approved Bank"), in each
case with maturities of not more than 364 days from the date of acquisition,
(iii) commercial paper and variable or fixed rate notes issued by any Approved
Bank (or by the parent company thereof) or any variable rate notes issued by, or
guaranteed by any domestic corporation rated A-1 (or the equivalent thereof) or
better by S&P or P-1 (or the equivalent thereof) or better by Moody's and
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maturing within six months of the date of acquisition and (iv) repurchase
agreements with a bank or trust company (including a Bank) or a recognized
securities dealer having capital and surplus in excess of $500,000,000 for
direct obligations issued by or fully guaranteed by the United States of America
in which the Borrower shall have a perfected first priority security interest
(subject to no other liens or encumbrances) and having, on the date of purchase
thereof, a fair market value of at least 100% of the amount of the repurchase
obligations.
"Change of Control" means (i) any Person or two or more Persons acting
in concert shall have acquired beneficial ownership, directly or indirectly, of
Voting Stock of the Borrower (or other securities convertible into such Voting
Stock) representing 35% or more of the combined voting power of all Voting Stock
of the Borrower, (ii) during any period of up to 24 consecutive months,
commencing after the Closing Date, individuals who at the beginning of such 24
month period were directors of the Borrower cease to constitute a majority of
the board of directors of the Borrower and such event is a result (directly or
indirectly) of the acquisition of 5% or more of the combined voting power of the
Voting Stock by a Person or Persons who did not own at least 5% or more of the
combined voting power of the Voting Stock as of the Closing Date (specifically
excluding for purposes of this clause (ii) the effect of conversion of all or
any portion of the convertible preferred stock held by the Hillman family on the
Closing Date), or (iii) any Person or two or more Persons acting in concert
shall have acquired by contract or otherwise, or shall have entered into a
contract or arrangement that, upon consummation, will result in its or their
acquisition of, control over Voting Stock of the Borrower (or other securities
convertible into such securities) representing 35% or more of the combined
voting power of all Voting Stock of the Borrower. As used herein, "beneficial
ownership" shall have the meaning provided in Rule 13d-3 of the Securities and
Exchange Commission under the Securities and Exchange Act of 1934.
"Closing Date" means the date on which the conditions set forth in
Section 4.01 shall have been fulfilled.
"Co-Agent" means the co-agents for the Banks under this Credit
Agreement as identified and defined in the recital of the parties hereinabove,
and any successors and assigns in such capacity.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" means the commitments of the Banks to make Revolving
Loans, of the Swingline Lender to make Swingline Loans and of the Banks to
purchase participation interests in the Swingline Loans.
"Commitment Fee" means such term as defined in Section 2.11(b).
"Commitment Period" means the period from and including the Closing
Date to but not including the earlier of (i) the Termination Date, or (ii) the
date on which the Revolving Commitments shall terminate in accordance with the
provisions of this Credit Agreement.
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"Competitive Bid" means an offer by a Bank to make a Competitive Loan
pursuant to the terms of Section 2.08.
"Competitive Bid Rate" means, as to any Competitive Bid made by a Bank
in accordance with the provisions of Section 2.08, the fixed rate of interest
offered by the Bank making the Competitive Bid.
"Competitive Bid Request" means a request by the Borrower for
Competitive Bids in accordance with the provisions of Section 2.08(b).
"Competitive Bid Request Fee" means such fee, if any, agreed upon by
the Borrower and the Administrative Agent payable in connection with each
Competitive Bid Request.
"Competitive Loan" means a loan made by a Bank in its discretion
pursuant to the provisions of Section 2.08.
"Competitive Loan Banks" means, at any time, those Banks which have
Competitive Loans outstanding.
"Competitive Loan Maximum Amount" shall have the meaning assigned to
such term in Section 2.08(a).
"Consistent Basis" or "consistent basis" means, with regard to the
application of accounting principles, accounting principles consistent in all
material respects with the accounting principles used and applied in preparation
of the financial statements previously delivered to the Banks and referred to in
Section 5.06.
"Consolidated Borrower Group" means the Borrower and its Restricted
Subsidiaries.
"Consolidated Current Assets" means as of the date of determination
thereof the total amount of current assets of the Borrower and its Subsidiaries
on a consolidated basis determined in accordance with generally accepted
accounting principles.
"Consolidated Current Liabilities" means as of the date of
determination thereof the total amount of current liabilities of the Borrower
and its Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles.
"Consolidated Current Ratio" means, at any time, the ratio of
Consolidated Current Assets to Consolidated Current Liabilities.
"Consolidated Fixed Charges" means, for the applicable period ending as
of a Determination Date, the sum of (i) all Interest Expense on all Indebtedness
during such period, (ii) all Rentals (other than Rentals on Capitalized Leases
to the extent such Rentals are included in Interest Expense or as a current
maturity of a Capitalized Lease under subsection (iii) hereof) payable during
such period, (iii) current maturities of Funded Debt and current maturities of
Capitalized Leases as of such Determination Date, and (iv) all dividends paid in
cash or property and redemptions made of capital stock (other than dividends
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paid to, or redemptions of capital stock owned by, the Borrower or a
wholly-owned Subsidiary) during such period, in each case for the Borrower and
its Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles.
"Consolidated Net Income" means, for the applicable period ending as of
a Determination Date, the net income of the Borrower and its Subsidiaries for
such period, determined on a consolidated basis in accordance with generally
accepted accounting principles, but excluding for purposes of determining
compliance with the Fixed Charge Coverage Ratio in Section 6.11(d) hereof:
(a) any extraordinary gains or losses on the sale or
other disposition of assets, and any taxes on such excluded gains and
any tax deductions or credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy;
(c) net earnings of any business entity (other than a
Subsidiary) in which the Borrower or any Subsidiary has an ownership
interest unless such net earnings shall have actually been received by
the Borrower or such Subsidiary in the form of cash distributions; and
(d) any portion of the net earnings of any Subsidiary
which for any reason is unavailable for payment of dividends to the
Borrower or any other Subsidiary.
"Consolidated Net Income Available for Fixed Charges" means, for the
applicable period ending as of a Determination Date, the sum of Consolidated Net
Income
plus (to the extent deducted in determining
Consolidated Net Income) (i) all provisions for any federal, state or
other income taxes, (ii) depreciation, amortization and other non-cash
charges, including without limitation any accrual necessary for
purposes of conforming with Financial Accounting Standards Board
Statement Number 106 (as defined by generally accepted accounting
principles) to the extent that the accrued portion thereof constitutes
a non-cash charge, (iii) Interest Expense, and (iv) all Rentals,
minus (v) all Capital Expenditures,
for the Borrower and its Subsidiaries on a consolidated basis determined in
accordance with generally accepted accounting principles.
"Consolidated Net Worth" means total stockholders' equity for the
Borrower and its Subsidiaries on a consolidated basis as determined in
accordance with generally accepted accounting principles.
"Consolidated Tangible Net Worth" means total stockholders' equity
minus goodwill, patents, trade names, trade marks, copyrights, franchises,
organizational expense, deferred assets other than prepaid insurance and prepaid
taxes and such other assets as are properly classified as "intangible assets",
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for the Borrower and its Subsidiaries on a consolidated basis as determined in
accordance with generally accepted accounting principles.
"Consolidated Total Assets" means, at any time, all items, which would
be classified as assets of the Borrower and its Subsidiaries on a consolidated
basis determined in accordance with generally accepted accounting principles.
"Consolidated Total Capitalization" means the sum of (i) Consolidated
Total Debt plus (ii) Consolidated Net Worth.
"Consolidated Total Debt" means all Indebtedness of the Borrower and
its Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles plus to the extent not included under generally
accepted accounting principles, items referenced in the definition of
"Indebtedness".
"Controlled Group" means (i) the controlled group of corporations as
defined in Section 414(b) of the Code and the applicable regulations thereunder,
or (ii) the group of trades or businesses under common control as defined in
Section 414(c) of the Code and the applicable regulations thereunder, of which
the Borrower is a part or may become a part.
"Credit Documents" means this Credit Agreement, the Notes, any Joinder
Agreement and all other related agreements and documents issued or delivered
hereunder or thereunder or pursuant hereto or thereto.
"Credit Party" means any of the Borrower and the Guarantors.
"Default" means any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Defaulting Bank" means, at any time, any Bank that, at such time, (i)
has failed to make an Extension of Credit required pursuant to the terms of this
Credit Agreement, (ii) has failed to pay to the Agent or any Bank an amount owed
by such Bank pursuant to the terms of the Credit Agreement or any other of the
Credit Documents, or (iii) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or to a receiver, trustee or similar
official.
"Determination Date" means the last day of each quarterly fiscal period
of the Borrower.
"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).
8
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"Eligible Assignee" means any Bank or Affiliate or subsidiary of a
Bank; and any other commercial bank, financial institution or "accredited
investor" (as defined in Regulation D of the Securities and Exchange Commission)
with combined capital surplus in excess of $500,000,000 reasonably acceptable to
the Administrative Agent and the Borrower.
"Eligible Inventory" means, as of any date of determination, the
aggregate book value (based on a FIFO valuation) of all inventory of the Credit
Parties on a consolidated basis after deducting allowances or reserves relating
thereto, as shown on the books and records of the Credit Parties.
"Eligible Receivables" means as of any date of determination, the
aggregate net book value of all accounts, accounts receivable, receivables, and
obligations for payment created or arising from the sale of inventory or the
rendering of services in the ordinary course of business, owned by or owing to
the Credit Parties on a consolidated basis after deducting allowances or
reserves relating thereto, as shown on the books and records of such Credit
Parties.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"ERISA Affiliate" means each person (as defined in Section 3(9) of
ERISA) which together with the Borrower, any Subsidiary of the Borrower or
member of the Consolidated Borrower Group would be deemed to be a member of the
same "controlled group" within the meaning of Section 414(b), (c), (m) or (o) of
the Code.
"Eurodollar Loan" means a Loan which bears interest based on the
Adjusted Eurodollar Rate.
"Event of Default" has the meaning specified in Section 8.
"Extension of Credit" means any Loan advance.
"Fed Funds Swingline Loan" means a Loan which bears interest based on
the Applicable Federal Funds Rate.
"Federal Funds Effective Rate" means, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve Bank of New York, or, if such rate is not so released for any day which
is a Business Day, the arithmetic average (rounded upwards to the next 1/100th
of 1%), as determined by the Administrative Agent, of the quotations for the day
of such transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Fees" means all fees payable pursuant to Section 2.11.
"Fitch" means Fitch Investors Service, Inc., and any successor thereof.
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"Fixed Charge Coverage Ratio" means the ratio of Consolidated Net
Income Available for Fixed Charges to Consolidated Fixed Charges.
"Funded Debt" means, for any Person, (i) all Indebtedness of such
Person for borrowed money or which has been incurred in connection with the
acquisition of assets, in each case having a final maturity of one or more years
from the date of origin thereof (or which is renewable or extendible at the
option of the obligor for a period or periods more than one year from the date
of origin), (ii) all Capitalized Lease obligations for such Person, and (iii)
all Guaranty Obligations by such Person of Funded Debt of others. Funded Debt
shall include, without duplication, payments in respect of Funded Debt which
constitute current liabilities of the obligor under generally accepted
accounting principles.
"Generally Accepted Accounting Principles" or "generally accepted
accounting principles" means generally accepted accounting principles at the
time in the United States. Except as otherwise expressly provided, all
references to generally accepted accounting principles shall be applied on a
consistent basis.
"Governmental Authority" means any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantor" means those corporations and entities identified as a
"Guarantor" on the signature pages hereto, being Owens & Minor Medical, Inc., a
Virginia corporation, National Medical Supply Corporation, a Delaware
corporation, Owens & Minor West, Inc., a California corporation, Koley's Medical
Supply, Inc., a Nebraska corporation, Lyons Physician Supply Company, an Ohio
corporation, A. Kuhlman & Company, a Michigan corporation, and Stuart Medical,
Inc., a Pennsylvania corporation; and each Additional Credit Party which has
executed a Joinder Agreement.
"Guaranty Obligations" means any obligations (other than (i)
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection and (ii) Standard Securitization Obligations relating to
Qualified Securitization Transactions) guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations of any other Person in any
manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (i) to purchase any such Indebtedness or
other obligation or any property constituting security therefor, (ii) to advance
or provide funds or other support for the payment or purchase of such
indebtedness or obligation or to maintain working capital, solvency or other
balance sheet condition of such other Person (including without limitation keep
well agreements and capital maintenance agreements), (iii) to lease or purchase
property, securities or services primarily for the purpose of assuring the owner
of such Indebtedness or obligation, or (iv) to otherwise assure or hold harmless
the owner of such Indebtedness or obligation against loss in respect thereof.
The amount of Guaranty Obligations hereunder shall be deemed to be an amount
equal to the stated or determinable amount of the Indebtedness or obligation in
respect of which such Guaranty Obligation is made or, if not stated or
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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) all obligations evidenced by bonds, debentures, notes or
similar instruments, or upon which interest payments are customarily made, (iii)
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), (iv) all Guaranty Obligations, (v) the
maximum stated amount of all letters of credit issued or acceptance facilities
established for the account of such Person and, without duplication, all drafts
drawn thereunder (other than letters of credit (x) supporting other Indebtedness
of the Borrower or a Subsidiary or (y) offset by a like amount of cash or
government securities pledged or held in escrow to secure such letter of credit
and draws thereunder), (vi) all Capitalized Lease obligations, (vii) all
Indebtedness of another Person secured by any Lien on any property of the
Borrower or a Restricted Subsidiary, whether or not such Indebtedness has been
assumed, in an amount not to exceed the fair market value of the property of the
Borrower or Restricted Subsidiary securing such Indebtedness, (viii) all
obligations under take-or-pay or similar arrangements or under interest rate,
currency, or commodities agreements, (ix) indebtedness created or arising under
any conditional sale or title retention agreement, (x) all preferred stock which
by its terms requires redemption, mandatory sinking fund payments or the like,
by a fixed date prior to the Termination Date, (xi) the aggregate net amount of
indebtedness or obligations relating to the sale, contribution or other
conveyance of accounts receivable (or similar transaction) (exclusive of
intercompany obligations owing between the Securitization Subsidiary and a
Credit Party pursuant to a Qualified Securitization Transaction permitted
hereunder) 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 generally accepted accounting principles, (xii) the principal balance
outstanding under any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product, where
such transaction is considered borrowed money indebtedness for tax purposes but
is classified as an operating lease in accordance with generally accepted
accounting principles; but specifically excluding from the foregoing trade
payables and accrued expenses arising or incurred in the ordinary course of
business.
"Initial Funding Date" means the date on which the conditions to
initial funding set forth in Section 4.02 hereof shall have been fulfilled (or
waived) and on which the initial Loan advance shall have been made.
"Interest Expense" means, for any period, all interest expense,
including the amortization of debt discount and premium and the interest
component under Capitalized Leases, determined in accordance with generally
accepted accounting principles plus the discount in connection with the sale of
Receivables and Receivables Related Assets in connection with a Qualified
Securitization Transaction.
"Interest Payment Date" means (i) as to Base Rate Loans and Fed Funds
Swingline Loans, the last day of each month and on the Termination Date and (ii)
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as to Eurodollar Loans and Competitive Loans, on the last day of each Interest
Period for such Loan, the date of repayment and on the Termination Date, and in
addition where the applicable Interest Period is more than 3 months, then also
on the date 3 months from the beginning of the Interest Period, and each 3
months thereafter. If an Interest Payment Date falls on a date which is not a
Business Day, such Interest Payment Date shall be deemed to be the next
succeeding Business Day, except that in the case of Eurodollar Loans where the
next succeeding Business Day falls in the next succeeding calendar month, then
on the next preceding day.
"Interest Period" means (i) as to Eurodollar Loans, a period of one,
two, three or six months' duration, and also as to Eurodollar Loans of up to
$30,000,000, a period of 7-days' duration (provided that no more than one such
Revolving Loan with a 7-day Interest Period may be outstanding at any time), as
the Borrower may elect, commencing in each case, on the date of the borrowing
(including conversions, extensions and renewals), and (ii) as to Competitive
Loans, a period of not less than 7 nor more than 180 days' duration, as the
Borrower may request and the Competitive Bank may agree in accordance with the
provisions of Section 2.08; provided, however, (A) if any Interest Period would
end on a day which is not a Business Day, such Interest Period shall be extended
to the next succeeding Business Day (except that where the next succeeding
Business Day falls in the next succeeding calendar month, then on the next
preceding Business Day), (B) no Interest Period shall extend beyond the
Termination Date and (C) in the case of Eurodollar Loans, where an Interest
Period begins on a day for which there is no numerically corresponding day in
the calendar month in which the Interest Period is to end, such Interest Period
shall end on the last day of such calendar month.
"Interest Rate Protection Agreement" means any interest rate swap,
collar or other interest protection agreement.
"Joinder Agreement" means a Joinder Agreement substantially in the form
of Schedule 6.12 hereto executed and delivered by an Additional Credit Party in
accordance with the provisions of Section 6.12.
"Leverage Ratio" means the ratio of Consolidated Total Debt to
Consolidated Total Capitalization.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance, lien (statutory or otherwise) or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any financing or similar
statement or notice filed under the Uniform Commercial Code as adopted and in
effect in the relevant jurisdiction or other similar recording or notice
statute, and any lease in the nature thereof) securing or purporting to secure
any Indebtedness.
"Loan" means a Revolving Loan, Swingline Loan and/or Competitive Loan,
as appropriate.
"Material Adverse Effect" means a material adverse effect on (i) the
operations or financial condition of the Borrower and its Restricted
Subsidiaries, or of the Borrower and its Subsidiaries, in each case taken as a
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whole, (ii) the ability of the Borrower or Guarantors to perform their
respective obligations under this Credit Agreement, or (iii) the validity or
enforceability of this Credit Agreement, or any of the other Credit Documents,
in each case as to the obligations of the Borrower or the Guarantors hereunder
or thereunder, or the rights and remedies of the Banks hereunder or thereunder.
"Moody's" means Moody's Investors Service, Inc., and any successor
thereof.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the Controlled Group
during such five year period.
"NationsBank" means NationsBank, N.A. or its successor.
"Non-Guarantor Subsidiaries" means Subsidiaries of the Borrower which
are not Guarantors, as referenced in Section 6.12(a).
"Non-U.S. Person" means any Person that is not a United States person
within the meaning of Section 7701(a)(30) of the Code.
"Note" or "Notes" means the Revolving Notes, individually or
collectively, as appropriate.
"Notice of Borrowing" shall have such meaning as provided in Sections
2.02(a) and Section 2.07(b).
"Notice of Conversion" shall have such meaning as provided in Section
2.03.
"Obligations" means, without duplication, all of the obligations of the
Borrower or other Credit Party to the Banks, the Administrative Agent and the
Co-Agents (including the obligations to pay principal of and interest on the
Loans, to pay and satisfy guaranty obligations in respect of the Loans, to pay
all Fees, to pay certain expenses and the obligations arising in connection with
various indemnities) whenever arising, under this Credit Agreement, the Notes or
any of the other Credit Documents to which the Borrower or other Credit Party is
a party.
"PBGC" means the Pension Benefit Guaranty Corporation established under
ERISA, and any successor thereto.
"Participant" means any Person to which a participation in all or any
part of a Bank's interests and obligations under the terms of this Credit
Agreement have been sold, transferred, granted, or assigned pursuant to Section
10.03(c) hereof.
"Participation Interest" means the extension of credit by a Bank by way
of purchase of a participation hereunder in Revolving Loans as provided in
Section 2.20 or in Swingline Loans as provided in Section 2.07(b)(iii).
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"Permitted Investments" means (i) cash and Cash Equivalents, (ii)
receivables owing to the Borrower or its Restricted Subsidiaries or any of its
receivables and advances to suppliers, in each case if created, acquired or made
in the ordinary course of business and payable or dischargeable in accordance
with customary trade terms, (iii) subject to the limitations set out in Section
7.05(b), investments by the Borrower and its Restricted Subsidiaries in and to a
Credit Party, including any investment in a corporation which, after giving
effect to such investment, will become an Additional Credit Party (provided such
Additional Credit Party shall execute a Joinder Agreement), (iv) loans and
advances in the usual and ordinary course of business to officers, directors and
employees for expenses (including moving expenses related to a transfer)
incidental to carrying on the business of the Borrower or any Restricted
Subsidiary in an aggregate amount not to exceed $1,500,000 at any time
outstanding, (v) investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business, (vi) investments in a
Securitization Subsidiary or Special Purpose Vehicle relating to a Qualified
Securitization Transaction and (vii) additional loan advances and/or investments
of a nature not contemplated by the foregoing clauses hereof, provided that such
loans, advances and/or investments made pursuant to this clause (vii) shall not
exceed $3,000,000 in aggregate amount at any time outstanding. As used herein,
"investment" means all investments, in cash or by delivery of property made,
directly or indirectly in any Person, whether by acquisition of shares of
capital stock, indebtedness or other obligations or securities or by loan
advance, capital contribution or otherwise.
"Permitted Liens" means (i) Liens created by, under or in connection
with this Credit Agreement or the other Credit Documents in favor of the Banks;
(ii) Liens described on Schedule 7.02 attached hereto; (iii) Liens for taxes not
yet delinquent or Liens for taxes being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with generally
accepted accounting principles have been established (and as to which the
property subject to such lien is not yet subject to foreclosure, sale or loss on
account thereof); (iv) Liens in respect of property imposed by law arising in
the ordinary course of business such as materialmen's, mechanics',
warehousemen's and other like Liens provided that such Liens secure only amounts
not more than 30 days past due or are being contested in good faith by
appropriate proceedings for which adequate reserves determined in accordance
with generally accepted accounting principles have been established (and as to
which the property subject to such lien is not yet subject to foreclosure, sale
or loss on account thereof); (v) pledges or deposits made to secure payment of
worker's compensation insurance, unemployment insurance, pensions or social
security programs; (vi) Liens arising from good faith deposits in connection
with or to secure performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations incurred in the ordinary
course of business (other than obligations in respect of the payment of borrowed
money); (vii) easements, rights-of-way, restrictions (including zoning
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restrictions), minor defects or irregularities in title and other similar
charges or encumbrances not, in any material respect, impairing the use of such
property for its intended purposes or interfering with the ordinary conduct of
business of the Borrower and its Subsidiaries taken as a whole; (viii) Liens
regarding operating or financing leases permitted by this Credit Agreement; (ix)
leases or subleases granted to others in the ordinary course of business not
interfering in any material respect with the business or operations of the
Borrower or its Subsidiaries; (x) purchase money Liens securing purchase money
indebtedness to the extent permitted under Section 7.01; (xi) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; (xii) any judgment
lien which does not create an Event of Default under Section 8.01(h) of this
Credit Agreement, (xiii) Liens related to a Qualified Securitization Transaction
and (xiv) Liens in favor of a Bank or Affiliate of a Bank hereunder, but only
(A) to the extent such Liens secure obligations under Interest Rate Protection
Agreements permitted under Section 7.01, (B) to the extent such Liens are on the
same collateral as to which the Banks also have a Lien and (C) to the extent
such provider of an Interest Rate Protection Agreement and the Banks hereunder
share pari passu in collateral subject to such Liens.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
(whether or not incorporated), or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means any single-employer plan as defined in Section 4001 of
ERISA, which is maintained, or at any time during the five calendar years
preceding the date of this Credit Agreement was maintained, for employees of the
Borrower, any Subsidiary or an ERISA Affiliate.
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by NationsBank as its prime rate in effect at its
principal office in Charlotte, North Carolina; each change in the Prime Rate
shall be effective on the date such change is publicly announced as effective.
The Prime Rate is not necessarily the best or lowest rate offered by
NationsBank.
"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.
"Qualified Securitization Transaction" means any transaction or series
of transactions that has been or may be entered into by the Borrower or any of
its Subsidiaries in connection with which the Borrower or any of its
Subsidiaries may sell, convey or otherwise transfer to (i) a Securitization
Subsidiary or (ii) any other Person, or may grant a security interest in, any
Receivables or interests therein (whether such Receivables are then existing or
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arising in the future) of the Borrower or any of its Subsidiaries, and any
assets related thereto including, without limitation, all security interests in
merchandise or services financed thereby, the proceeds of such Receivables, and
other assets which are customarily sold or in respect of which security
interests are customarily granted in connection with securitization transactions
involving such assets; provided that (A) in connection therewith, there shall be
no recourse to the Borrower or any Restricted Subsidiary other than pursuant to
Standard Securitization Obligations, (B) such Qualified Securitization
Transaction shall not be supported by Guaranty Obligations of the Borrower or
any of its Restricted Subsidiaries other than pursuant to Standard
Securitization Obligations, (C) the Administrative Agent and the Required Banks
shall be reasonably satisfied with the structure thereof and documentation
therefor, including the discount at which such accounts receivable are sold or
the advance rate against which borrowings are advanced and the applicable
termination events which shall, in any event, be consistent with those
prevailing in the market for similar transactions, and (D) the accounts
receivable purchase agreement or other similar agreements relating thereto shall
not be amended or modified in a manner materially adverse to the Banks and their
interests hereunder as determined by the Agent in its reasonable discretion
(including any change in (w) the amount of Receivables and Receivables Related
Assets covered thereby, (x) the discount rate at which such Receivables and
Receivables Related Assets are sold, (y) the advance rate against which amounts
are advanced, (z) the applicable termination events, and any other items
materially adverse to the interests of the Banks) except with the prior written
consent of the Administrative Agent and the Required Banks. The series of
transactions contemplated in the Securitization Agreements are Qualified
Securitization Transactions.
"Receivables" means any right of payment whether constituting an
account, chattel paper, instrument, general intangible or otherwise, arising
from the sale, lease or financing by the Borrower or any Subsidiary of the
Borrower of merchandise or rendering of services, and monies due thereunder.
"Receivables Related Assets" means (i) any rights arising under the
documentation governing or relating to such Receivables (including rights in
respect of Liens securing such Receivables and other credit support in respect
of such Receivables), (ii) any proceeds of such Receivables and any lockboxes or
accounts in which such proceeds are deposited, (iii) spread accounts and other
similar accounts (and any amounts on deposit therein) established in connection
with a Qualified Securitization Transaction, (iv) any warranty, indemnity,
dilution and other intercompany claim arising out of the documentation
evidencing such Qualified Securitization Transaction, and (v) other assets that
are customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
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"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Rentals" means, as of the date of determination thereof, all fixed
payments (including as such all payments which the lessee is obligated to make
to the lessor on termination of the lease or surrender of the leased property)
payable by a Person, as lessee or sublessee under a lease of real or personal
property, but shall be exclusive of any amounts required to be paid by such
Person (whether designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
"Required Banks" means Banks holding in the aggregate at least 51% of
the Commitments (other than with respect to Swingline Loans) or, if the
aggregate Commitments have been terminated, Banks in the aggregate holding at
least 51% of the principal amount of the Loans then outstanding (taking into
account Participation Interests therein); provided that the Commitments of, or
outstanding Loans owing to, a Defaulting Bank shall be excluded for purposes of
making determinations hereunder.
"Responsible Officer" means, with respect to the subject matter of any
representation, warranty, covenant, agreement, obligation or certificate of any
Credit Party contained in or delivered pursuant to any of the Credit Documents,
the President, any Executive Vice President, Senior Vice President, Vice
President, Chief Financial Officer, Treasurer, Controller, or any other officer
of the Consolidated Borrower Group who in the normal performance of his
operational responsibilities would have knowledge of such matter and the
requirements with respect thereto.
"Restricted Subsidiary" means any Subsidiary other than a
Securitization Subsidiary (i) which is organized under the laws of the United
States or any State thereof; (ii) which conducts substantially all of its
business and has substantially all of its assets within the United States; and
(iii) of which more than 50% (by number of votes) of the Voting Stock is
beneficially owned, directly or indirectly, by the Borrower.
"Revolving Committed Amount" means collectively the aggregate amount of
all of the Banks' commitments, and individually the amount of each such Bank's
commitment to make Revolving Loans specified in Schedule 2.01, as such amounts
may from time to time be reduced in accordance with the provisions of Sections
2.10 and 2.12(b) hereof.
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"Revolving Loan" means a revolving credit loan made by the Banks
pursuant to the provisions of Section 2.01.
"Revolving Note" means the promissory notes of the Borrower in favor of
each of the Banks provided pursuant to Section 2.06, individually or
collectively, as appropriate, as such promissory notes may be amended, modified,
supplemented, extended, renewed or replaced from time to time.
"S&P" means Standard & Poor's Corporation, and any successor thereof.
"Securitization Agreements" means (i) the Amended and Restated Purchase
and Sale Agreement among Owens & Minor Medical, Inc., Stuart Medical, Inc., the
Borrower and O&M Funding Corp., dated May 28, 1996, and (ii) the Amended and
Restated Receivables Purchase Agreement among O&M Funding Corp., Owens & Minor
Medical, Inc., Owens & Minor, Inc. Receivables Capital Corporation and Bank of
America National Trust and Savings Association, dated as of May 28, 1996, (iii)
the Amended and Restated Parallel Asset Purchase Agreement among O&M Funding
Corp., Owens & Minor Medical, Inc., the Borrower, the Parallel Purchasers from
time to time parties thereto and Bank of America National Trust and Savings
Association, dated as of May 28, 1996 and (iv) such other agreements and
documents executed or delivered under or in connection with the aforementioned
agreements, as any such agreement referred to in clauses (i) through (iv) may be
amended, supplemented or otherwise modified from time to time.
"Securitization Subsidiary" means (x) O&M Funding Corp. and (y) any
other wholly owned Subsidiary of the Borrower which engages in no activities
other than those reasonably related to or in connection with the entering into
of securitization transactions and which is designated by the Board of Directors
of the Borrower (as provided below) as a Securitization Subsidiary (a) no
portion of the Indebtedness or any other obligations (contingent or otherwise)
of which (i) is guaranteed by the Borrower or any other Subsidiary of the
Borrower other than pursuant to Standard Securitization Obligations, (ii) is
recourse to or obligates the Borrower or any other Subsidiary of the Borrower in
any way other than pursuant to Standard Securitization Obligations or (iii)
subjects any property or asset of the Borrower or any other Subsidiary of the
Borrower, directly or indirectly, contingently or otherwise, to any Lien or to
the satisfaction thereof, other than pursuant to Standard Securitization
Obligations, (b) to or with which neither the Borrower nor any other Subsidiary
of the Borrower (i) provides credit support or (ii) has any contract, agreement,
arrangement or understanding other than on terms that are fair and reasonable
and that are no less favorable to the Borrower or such Subsidiary than could be
obtained from an unrelated Person (other than, in the case of subclauses (i) and
(ii) of this clause (b), representations, warranties and covenants (including
those relating to servicing) entered into in the ordinary course of business in
connection with a Qualified Securitization Transaction and intercompany notes
relating to the sale of Receivables to such Securitization Subsidiary) and (c)
to which neither the Borrower nor any Subsidiary of the Borrower has any
obligation to maintain or preserve such Securitization Subsidiary's financial
condition or to cause such Securitization Subsidiary to achieve certain levels
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of operating results. Any such designation by the Board of Directors of the
Borrower (other than with respect to O&M Funding Corp.) shall be evidenced to
the Administrative Agent by filing with the Administrative Agent a certified
copy of the resolutions of the Board of Directors of the Borrower giving effect
to such designation.
"Senior Subordinated Notes" means those $150,000,000 10.875% Senior
Subordinated Notes of the Borrower due 2006.
"Special Purpose Vehicle" means a trust, partnership or other entity
established by the Borrower or its Subsidiaries to implement a Qualified
Securitization Transaction.
"Standard Securitization Obligations" means representations,
warranties, covenants, indemnities and other obligations entered into by the
Borrower or any Subsidiary which are reasonably customary in asset
securitization transactions involving accounts receivable.
"Subordinated Debt" means (i) the indebtedness evidenced by the Senior
Subordinated Notes and (ii) any other Indebtedness which by its terms is
specifically subordinated in right of payment to the prior payment of the Loans
and obligations hereunder and under the other Credit Documents on terms and
conditions satisfactory to the Required Banks.
"Subsidiary" means, as to any Person, (i) any corporation more than 50%
of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time, any class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time owned by such Person directly or indirectly
through Subsidiaries, and (ii) any partnership, association, joint venture or
other entity in which such person directly or indirectly through Subsidiaries
has more than 50% equity interest at any time. Except as otherwise expressly
provided, all references herein to "Subsidiary" shall mean a Subsidiary of the
Borrower; provided, however, that any Special Purpose Vehicle shall not be
considered to be a Subsidiary of the Company for purposes of this Credit
Agreement.
"Swingline Committed Amount" means the amount of the Swingline Lender's
commitment to make Swingline Loans as specified in Section 2.07(a), as such
amount may from time to time be reduced in accordance with the provisions of
Section 2.10 hereof.
"Swingline Lender" means NationsBank, or such other Bank as the
Borrower has requested and as to which such requested successor Swingline Lender
and the Required Banks may agree, and their respective successors and assigns.
There shall be no more than one Swingline Lender at any time.
"Swingline Loan" means a swingline revolving credit loan made by the
Swingline Lender pursuant to the provisions of Section 2.07.
"Taxes" shall have such meaning as provided in Section 2.16.
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"Termination Date" means May 24, 2001, or if extended in the sole
discretion of the Banks as provided in Section 2.01, such later date as to which
the Termination Date may be extended.
"Threshold Requirement" means such term as defined in Section 6.12.
"Upfront Fee" means such term as defined in Section 2.11(a).
"Voting Stock" means the voting stock or other securities of any class
or classes, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
1.02 Computation of Time Periods.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
1.03 Accounting Terms.
Accounting terms used but not otherwise defined herein shall have the
meanings provided by, and be construed in accordance with, generally accepted
accounting principles. References herein to "consolidating" financial statements
shall mean and include financial statements for each business segment of the
subject Person.
SECTION 2
CREDIT FACILITIES
2.01 Revolving Loan Commitment.
During the Commitment Period, subject to the terms and conditions
hereof, each Bank severally agrees to make credit loans (each a "Revolving Loan"
and, collectively, the "Revolving Loans") to the Borrower for the purposes
hereinafter set forth; provided, however, that (i) with regard to the Banks
collectively, the amount of the Revolving Loans outstanding shall not at any
time exceed TWO HUNDRED TWENTY-FIVE MILLION DOLLARS ($225,000,000) in the
aggregate (as such aggregate maximum amount may be reduced from time to time as
hereinafter provided, the "Revolving Committed Amount"), and (ii) with regard to
each Bank individually, each such Bank's pro rata share of outstanding Revolving
Loans shall not at any time exceed such Bank's Revolving Committed Amount; and
provided, further, that notwithstanding anything herein to the contrary, the sum
of Revolving Loans plus Swingline Loans plus Competitive Loans shall not at any
time exceed the lesser of the aggregate Revolving Committed Amount or the
Borrowing Base. Revolving Loans hereunder may consist of Base Rate Loans or
Eurodollar Loans (or a combination thereof) as the Borrower may request, and may
be repaid and reborrowed in accordance with the provisions hereof.
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The Borrower may, not more than 90 days but not less than 60 days prior
to the third anniversary date of the Closing Date and each anniversary date
thereafter, by notice to the Administrative Agent, make written request of the
Banks to extend the Termination Date for an additional period of one year. The
Administrative Agent will give prompt notice to each of the Banks of its receipt
of any such request for extension of the Termination Date. Each Bank shall make
a determination not later than 30 days prior to the then applicable anniversary
date as to whether or not it will agree to extend the Termination Date as
requested; provided, however, that failure by any Bank to make a timely response
to the Borrower's request for extension of the Termination Date shall be deemed
to constitute a refusal by the Bank to extend the Termination Date. If, in
response to a request for an extension of the Termination Date, one or more
Banks shall fail to agree to the requested extension (the "Disapproving Banks"),
then provided that the requested extension is approved by Banks holding at least
75% of the Commitments hereunder (the "Approving Banks"), the Borrower may, at
its own expense with the assistance of the Administrative Agent, within a period
of 30 days thereafter, make arrangements for another bank or financial
institution agreeable to the extension of such Termination Date and reasonably
acceptable to the Administrative Agent, to acquire, in whole or in part, the
Loans and Commitments of the Disapproving Banks, whereupon after giving effect
to the assignment of the Disapproving Banks' Loans and Commitments in accordance
with the terms hereof the Termination Date shall be extended and the credit
facility continued hereunder at existing levels. If on the other hand the
Borrower is unable to make arrangements for the replacement of the Disapproving
Banks in accordance with the terms hereof, then the Borrower shall have the
option of (i) continuing the credit facility hereunder at existing levels until
the Termination Date then in effect without extension, or (ii) upon payment to
the Disapproving Banks of the amount of Loans and other amounts owing to them
and termination of their Commitments hereunder, extending and continuing the
credit facility hereunder at a lower aggregate amount equal to the Commitments
held by the Approving Banks until the new Termination Date as extended. Where
any such arrangements are made for another bank or financial institution to
acquire the Loans and Commitments of a Disapproving Bank, or any portion
thereof, then upon payment of the Loans and other amounts owing to it and
termination of its Commitments relating thereto, such Disapproving Bank shall
promptly transfer and assign, in whole or in part, as requested, without
recourse (in accordance with and subject to the provisions of Section 10.03),
all or part of its interests, rights and obligations under this Credit Agreement
to such bank or financial institution which shall assume such assigned
obligations and become a "Bank" under this Credit Agreement (which assignee may
be another Bank, if a Bank accepts such assignment); provided, that such
assignment shall not conflict with any law, rule or regulation or order of any
court or other Governmental Authority.
2.02 Revolving Loan Advances.
(a) Notices. Whenever the Borrower desires a Revolving Loan advance
hereunder, it shall give written notice (or telephone notice promptly confirmed
in writing) to the Administrative Agent (a "Notice of Borrowing") not later than
12:00 Noon (Charlotte, North Carolina time) on the Business Day of the requested
advance in the case of Base Rate Loans and on the third Business Day prior to
the requested advance in the case of Eurodollar Loans. Each such notice shall be
irrevocable and shall specify (i) that a Revolving Loan is requested, (ii) the
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date of the requested advance (which shall be a Business Day), (iii) the
aggregate principal amount of Revolving Loans requested, and (iv) whether the
Loan requested shall consist of Base Rate Loans, Eurodollar Loans or a
combination thereof, and if Eurodollar Loans are requested, the Interest Periods
with respect thereto. If the Borrower shall fail to specify in any Notice of
Borrowing (A) an applicable Interest Period in the case of a Eurodollar Loan,
then such notice shall be deemed to be a request for an Interest Period of one
month, or (B) the type of Revolving Loan requested, then such notice shall be
deemed to be a request for a Base Rate Loan hereunder. The Administrative Agent
shall as promptly as practicable give each Bank notice of each requested
Revolving Loan advance, of such Bank's pro rata share thereof and of the other
matters covered in the Notice of Borrowing.
(b) Minimum Amounts. Revolving Loan advances shall be in a
minimum aggregate amount of $5,000,000 and integral multiples of $1,000,000 in
excess thereof.
(c) Advances. Each Bank will make its pro rata share of each Revolving
Loan advance available to the Administrative Agent by 2:00 P.M. (Charlotte,
North Carolina time) on the date specified in the Notice of Borrowing by deposit
in U.S. dollars of immediately available funds at the offices of the
Administrative Agent in Charlotte, North Carolina, or at such other address in
the United States as the Administrative Agent may designate in writing. All
Revolving Loan advances shall be made by the Banks pro rata on the basis of each
Bank's respective share of the aggregate Revolving Committed Amount. No Bank
shall be responsible for the failure or delay by any other Bank in its
obligation to make Revolving Loan advances hereunder; provided, however, that
the failure of any Bank to fulfill its commitments hereunder shall not relieve
any other Bank of its commitments hereunder. Unless the Administrative Agent
shall have been notified by any Bank prior to the date of any such Revolving
Loan advance that such Bank does not intend to make available to the
Administrative Agent its portion of the Revolving Loan advance to be made on
such date, the Administrative Agent may assume that such Bank has made such
amount available to the Administrative Agent on the date of such Revolving Loan
advance, and the Administrative Agent, in reliance upon such assumption, may (in
its sole discretion without any obligation to do so) make available to the
Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by a Bank, the Administrative Agent
shall be entitled to recover such corresponding amount from such Bank. If such
Bank does not pay such corresponding amount forthwith upon the Administrative
Agent's demand therefor, the Administrative Agent will promptly notify the
Borrower and the Borrower shall immediately pay such corresponding amount to the
Administrative Agent. The Administrative Agent shall also be entitled to recover
from such Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to the Borrower to the
date such corresponding amount is recovered by the Administrative Agent, at a
per annum rate equal to (i) if paid by such Bank, within two (2) Business Days
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of making such corresponding amount available to the Borrower, the overnight
Federal Funds Effective Rate, and thereafter the Base Rate, and (ii) if paid by
the Borrower, the then applicable rate calculated in accordance with Section
2.05.
2.03 Conversion.
The Borrower shall have the option, on any Business Day, to extend
existing Eurodollar Loans into a subsequent Interest Period or to convert
Revolving Loans of one type into Revolving Loans of another type; provided,
however, that (i) except as provided in Section 2.13(iii), Eurodollar Loans may
be converted into Base Rate Loans only on the last day of an Interest Period
applicable thereto, (ii) Eurodollar Loans may be extended, and Base Rate Loans
may be converted into Eurodollar Loans, only if no Default or Event of Default
is in existence on the date of extension or conversion, (iii) Revolving Loans
extended as, or converted into, Eurodollar Loans shall be in such minimum
amounts as provided in Section 2.02(b), and (iv) any request for extension of or
conversion to a Eurodollar Loan which shall fail to specify an Interest Period
shall be deemed to be a request for an Interest Period of one month. Each such
extension or conversion shall be effected by the Borrower by giving written
notice (or telephone notice promptly confirmed in writing) to the Administrative
Agent (including requests for extensions and renewals, a "Notice of Conversion")
prior to 10:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in
the case of Base Rate Loans, and on the third Business Day prior to, in the case
of Eurodollar Loans, the date of the proposed extension or conversion,
specifying the date of the proposed extension or conversion, the Revolving Loans
to be so extended or converted, the types of Revolving Loans into which such
Revolving Loans are to be converted and, if appropriate, the applicable Interest
Periods with respect thereto. Each request for extension or conversion shall be
deemed to be a reaffirmation by the Borrower that no Default or Event of Default
then exists and is continuing and that the representations and warranties set
forth in Section 5 are true and correct in all material respects (except to the
extent they relate to an earlier period). In the event the Borrower fails to
request extension of or conversion to any Eurodollar Loan in accordance with
this Section, or any such conversion or extension is not permitted or required
by this Section, then such Revolving Loans shall be automatically converted into
Base Rate Loans at the end of their Interest Period or remain as Base Rate
Loans, as the case may be. The Administrative Agent shall give each Bank notice
as promptly as practicable of any such proposed conversion affecting any
Revolving Loans.
2.04 Repayment of the Revolving Loans.
The Revolving Loans shall be due and payable in full on the Termination
Date.
2.05 Interest on Revolving Loans.
The Revolving Loans shall bear interest at a per annum rate equal to:
(a) Base Rate Loans. During such periods as Revolving Loans shall
consist of Base Rate Loans, the sum of the Base Rate plus the Applicable
Percentage; and
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(b) Eurodollar Loans. During such periods as Revolving Loans
shall consist of Eurodollar Loans, the sum of the Adjusted Eurodollar Rate plus
the Applicable Percentage;
provided, however, that from and after any failure to make any payment of
principal or interest in respect of any of the Loans hereunder when due, whether
at scheduled or accelerated maturity or on account of any mandatory prepayment,
the principal of and, to the extent permitted by law, interest on, the Revolving
Loans shall bear interest, payable on demand, at a per annum rate two percent
(2%) in excess of the rate otherwise applicable hereunder. Interest on Revolving
Loans shall be payable in arrears on each Interest Payment Date.
2.06 Revolving Notes.
Revolving Loans by each Bank shall be evidenced by a duly executed
promissory note of the Borrower to each such Bank dated as of the Closing Date
substantially in the form of Schedule 2.06 (such promissory note, as amended,
modified, extended, renewed or replaced from time to time is hereinafter
referred to individually as a "Revolving Note" and collectively as the
"Revolving Notes").
2.07 Swingline Loan Subfacility.
(a) Swingline Commitment. During the Commitment Period, subject to the
terms and conditions hereof, the Swingline Lender, in its individual capacity,
agrees to make certain revolving credit loans to the Borrower (each a "Swingline
Loan" and, collectively, the "Swingline Loans") for the purposes hereinafter set
forth; provided, however, (i) the aggregate amount of Swingline Loans
outstanding at any time shall not exceed THIRTY MILLION DOLLARS ($30,000,000)
(the "Swingline Committed Amount"), and (ii) the sum of Revolving Loans plus
Swingline Loans plus Competitive Loans outstanding at any time shall not exceed
the lesser of the Revolving Committed Amount or the Borrowing Base. Swingline
Loans hereunder may consist of Base Rate Loans or Fed Funds Swingline Loans (or
a combination thereof) as the Borrower may request, and may be repaid and
reborrowed in accordance with the provisions hereof.
(b) Swingline Loan Advances.
(i) Notices; Disbursement. Whenever the Borrower desires a
Swingline Loan advance hereunder it shall give written notice (or
telephone notice promptly confirmed in writing) to the Swingline Lender
and to the Administrative Agent not later than 12:00 Noon (Charlotte,
North Carolina time) on the Business Day of the requested Swingline
Loan advance. Each such notice shall be irrevocable and shall specify
(A) that a Swingline Loan advance is requested, (B) the date of the
requested Swingline Loan advance (which shall be a Business Day), (C)
the aggregate principal amount of the Swingline Loan advance requested
and (D) whether the Swingline Loan shall consist of Base Rate Loans,
Fed Funds Swingline Loans or a combination thereof. The Swingline
Lender shall initiate the transfer of funds representing the Swingline
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Loan advance to the Borrower by 1:30 p.m. (Charlotte, North Carolina
time) on the Business Day specified by the Borrower in the applicable
Notice of Borrowing.
(ii) Minimum Amounts. Each Swingline Loan advance shall
be in a minimum principal amount of $250,000 and integral multiples of
$100,000 in excess thereof.
(iii) Repayment of Swingline Loans. Each Swingline Loan
advance shall be due and payable on the earliest of (A) 30 days from
the date of advance thereof, (B) the date of the next Revolving Loan
advance hereunder, if sooner, or (C) the Termination Date. If, and to
the extent, any Swingline Loan advances shall be outstanding on the
date of any Revolving Loan advance, such Swingline Loans shall first be
repaid from the proceeds of such Revolving Loan advance prior to
distribution to the Borrower. If, and to the extent, Revolving Loans
are not requested prior to the Termination Date or the end of any such
30 day period from the date of any such Swingline Loan advance, the
Borrower shall be deemed to have requested a Revolving Loan comprised
solely of Base Rate Loans in the amount of such Swingline Loan advance
then outstanding, the proceeds of which shall be used to repay the
Swingline Lender for such Swingline Loan. In addition, the Swingline
Lender may, at any time, in its sole discretion, by written notice to
the Borrower and the Administrative Agent, demand repayment of its
Swingline Loans by way of a Revolving Loan advance, in which case the
Borrower shall be deemed to have requested a Revolving Loan advance
comprised solely of Base Rate Loans in the amount of such Swingline
Loans; provided, however, that any such demand shall be deemed to have
been given one Business Day prior to the Termination Date and upon the
occurrence of any Event of Default described in Section 8.01(f) and
also upon acceleration of the Obligations hereunder, whether on account
of an Event of Default described in Section 8.01(f) or any other Event
of Default, and the exercise of remedies in accordance with the
provisions of Section 8.02 hereof (each such Revolving Loan advance
made on account of any such deemed request therefor as provided herein
being hereinafter referred to as a "Mandatory Borrowing"). Each Bank
hereby irrevocably agrees to make such Revolving Loans promptly upon
any such request or deemed request on account of each Mandatory
Borrowing in the amount and in the manner specified in the preceding
sentence and on the same such date notwithstanding (I) the amount of
Mandatory Borrowing may not comply with the minimum amount for advances
of Revolving Loans otherwise required hereunder, (II) whether any
conditions specified in Section 2.09 are then satisfied, (III) whether
a Default or an Event of Default then exists, (IV) failure for any such
request or deemed request for Revolving Loan to be made by the time
otherwise required in Section 2.02(a), (V) the date of such Mandatory
Borrowing, or (VI) any reduction in the Revolving Committed Amount or
termination of the Commitments relating thereto immediately prior to
such Mandatory Borrowing or contemporaneous therewith. In the event
that any Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of
the commencement of a proceeding under the Bankruptcy Code with respect
to the Borrower or any other Credit Party), then each Bank hereby
agrees that it shall forthwith purchase (as of the date the Mandatory
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Borrowing would otherwise have occurred, but adjusted for any payments
received from the Borrower on or after such date and prior to such
purchase) from the Swingline Lender such participations in the
outstanding Swingline Loans as shall be necessary to cause each such
Bank to share in such Swingline Loans ratably based upon its respective
Revolving Committed Amount (determined before giving effect to any
termination of the Commitments pursuant to Section 8.02), provided that
(A) all interest payable on the Swingline Loans shall be for the
account of the Swingline Lender until the date as of which the
respective participation is purchased, and (B) at the time any purchase
of participations pursuant to this sentence is actually made, the
purchasing Bank shall be required to pay to the Swingline Lender
interest on the principal amount of participation purchased for each
day from and including the day upon which the Mandatory Borrowing would
otherwise have occurred to but excluding the date of payment for such
participation, at the rate equal to, if paid within two (2) Business
Days of the date of the Mandatory Borrowing, the Federal Funds
Effective Rate, and thereafter at a rate equal to the Base Rate.
(c) Interest on Swingline Loans. Swingline Loans shall bear interest
at a per annum rate equal to:
(i) Base Rate Loans. During such periods as a Swingline Loan
shall consist of Base Rate Loans, the sum of the Base Rate plus the
Applicable Percentage; and
(ii) Fed Funds Swingline Loans. During such period as a
Swingline Loan shall consist of Fed Funds Swingline Loans, the sum of
the Applicable Federal Funds Rate plus the Applicable Percentage;
provided, however, that from and after any failure to make any payment of
principal or interest in respect of any of the Loans hereunder when due, whether
at scheduled or accelerated maturity or on account of any mandatory prepayment,
the principal of and, to the extent permitted by law, interest on, Swingline
Loans shall bear interest, payable on demand, at a per annum rate two percent
(2%) in excess of the rate otherwise applicable hereunder. Interest on Swingline
Loans shall be payable in arrears on each Interest Payment Date.
(d) Swingline Note. The Swingline Loans shall be evidenced by the
Revolving Note.
2.08 Competitive Loan Subfacility.
(a) Competitive Loans. Subject to the terms and conditions hereof and
in reliance upon the representations and warranties set forth herein, so long as
the Leverage Ratio is not greater than .45:1.0, the Borrower may, during the
Commitment Period, request and each Bank may, in its sole discretion, agree to
make, Competitive Loans to the Borrower; provided, however, that (i) the
aggregate principal amount of outstanding Competitive Loans shall not at any
time exceed the aggregate Revolving Committed Amount (the "Competitive Loan
Maximum Amount"), and (ii) the sum of Revolving Loans plus Swingline Loans plus
Competitive Loans shall not at any time exceed the lesser of the aggregate
Revolving Committed Amount or the Borrowing Base. Each Competitive Loan shall be
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not less than $5,000,000 in the aggregate and integral multiples of $1,000,000
in excess thereof (or the remaining portion of the Competitive Loan Maximum
Amount, if less).
(b) Competitive Bid Requests. The Borrower may solicit Competitive Bids
by delivery of a Competitive Bid Request substantially in the form of Exhibit
2.08(b)-1 to the Agent by 12:00 Noon (Charlotte, North Carolina time) on a
Business Day not less than one (1) nor more than four (4) Business Days prior to
the date of a requested Competitive Loan borrowing. A Competitive Bid Request
shall specify (i) the date of the requested Competitive Loan borrowing (which
shall be a Business Day), (ii) the amount of the requested Competitive Loan
borrowing and (iii) the applicable Interest Periods requested and shall be
accompanied by payment of the Competitive Bid Request Fee. The Agent shall,
promptly following its receipt of a Competitive Bid Request under this
subsection (b), notify the Banks of its receipt and the contents thereof and
invite the Banks to submit Competitive Bids in response thereto. A form of such
notice is provided in Exhibit 2.08(b)-2. No more than three (3) Competitive Bid
Requests (e.g., the Borrower may request Competitive Bids for no more than three
(3) different Interest Periods at a time) shall be submitted at any one time and
Competitive Bid Requests may be made no more frequently than once every five (5)
Business Days.
(c) Competitive Bid Procedure. Each Bank may, in its sole discretion,
make one or more Competitive Bids to the Borrower in response to a Competitive
Bid Request. Each Competitive Bid must be received by the Agent not later than
10:00 A.M. (Charlotte, North Carolina time) on the Business Day next succeeding
the date of receipt by the Agent of the related Competitive Bid Request. A Bank
may offer to make all or part of the requested Competitive Loan borrowing and
may submit multiple Competitive Bids in response to a Competitive Bid Request.
The Competitive Bid shall specify (i) the particular Competitive Bid Request as
to which the Competitive Bid is submitted, (ii) the minimum (which shall be not
less than $1,000,000 and integral multiples of $500,000 in excess thereof) and
maximum principal amounts of the requested Competitive Loan or Loans as to which
the Bank is willing to make, and (iii) the applicable interest rate or rates and
Interest Period or Periods therefor. A form of such Competitive Bid is provided
in Exhibit 2.08(c). A Competitive Bid submitted by a Bank in accordance with the
provisions hereof shall be irrevocable. The Agent shall promptly notify the
Borrower of all Competitive Bids made and the terms thereof. The Agent shall
send a copy of each of the Competitive Bids to the Borrower for its records as
soon as practicable.
(d) Submission of Competitive Bids by Agent. If the Agent, in its
capacity as a Bank, elects to submit a Competitive Bid in response to any
Competitive Bid Request, it shall submit such Competitive Bid directly to the
Borrower one-half of an hour earlier than the latest time at which the other
Banks are required to submit their Competitive Bids to the Agent in response to
such Competitive Bid Request pursuant to subsection (c) above.
(e) Acceptance of Competitive Bids. The Borrower may, in its sole and
absolute discretion, subject only to the provisions of this subsection (e),
accept or refuse any Competitive Bid offered to it. To accept a Competitive Bid,
the Borrower shall give written notification (or telephonic notice promptly
confirmed in writing) substantially in the form of Exhibit 2.08(e) of its
acceptance of any or all such Competitive Bids to the Agent by 11:00 A.M.
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(Charlotte, North Carolina time) on the date on which notice of election to make
a Competitive Bid is to be given to the Agent by the Banks; provided, however,
(i) the failure by the Borrower to give timely notice of its acceptance of a
Competitive Bid shall be deemed to be a refusal thereof, (ii) the Borrower may
accept Competitive Bids only in ascending order of rates, (iii) the aggregate
amount of Competitive Bids accepted by the Borrower shall not exceed the
principal amount specified in the Competitive Bid Request, (iv) the Borrower may
accept a portion of a Competitive Bid in the event, and to the extent,
acceptance of the entire amount thereof would cause the Borrower to exceed the
principal amount specified in the Competitive Bid Request, subject however to
the minimum amounts provided herein (and provided that where two or more Banks
submit such a Competitive Bid at the same Competitive Bid Rate, then pro rata
between or among such Banks) and (v) no bid shall be accepted for a Competitive
Loan unless such Competitive Loan is in a minimum principal amount of $1,000,000
and integral multiples of $500,000 in excess thereof, except that where a
portion of a Competitive Bid is accepted in accordance with the provisions of
subsection (iv) hereof, then in a minimum principal amount of $500,000 and
integral multiples of $100,000 in excess thereof (but not in any event less than
the minimum amount specified in the Competitive Bid), and in calculating the pro
rata allocation of acceptances of portions of multiple bids at a particular
Competitive Bid Rate pursuant to subsection (iv) hereof, the amounts shall be
rounded to integral multiples of $100,000 in a manner which shall be in the
discretion of the Borrower. A notice of acceptance of a Competitive Bid given by
the Borrower in accordance with the provisions hereof shall be irrevocable. The
Agent shall, not later than 12:00 Noon (Charlotte, North Carolina time) on the
date of receipt by the Agent of a notification from the Borrower of its
acceptance and/or refusal of Competitive Bids, notify each affected Bank of its
receipt and the contents thereof. Upon its receipt from the Agent of
notification of the Borrower's acceptance of its Competitive Bid in accordance
with the terms of this subsection (e), each successful bidding Bank will
thereupon become bound, subject to the other applicable conditions hereof, to
make the Competitive Loan in respect of which its bid has been accepted.
(f) Funding of Competitive Loans. Each Bank which is to make a
Competitive Loan shall make its Competitive Loan borrowing available to the
Agent for the account of the Borrower at the office of the Agent specified in
Schedule 2.1(a), or at such other office as the Agent may designate in writing,
by 1:30 P.M. (Charlotte, North Carolina time) on the date specified in the
Competitive Bid Request in Dollars and in funds immediately available to the
Agent. Such borrowing will then be made available to the Borrower by crediting
the account of the Borrower on the books of such office with the aggregate of
the amount made available to the Agent by the applicable Competitive Loan Banks
and in like funds as received by the Agent.
(g) Maturity of Competitive Loans. Each Competitive Loan shall mature
and be due and payable in full on the last day of the Interest Period applicable
thereto, unless accelerated sooner pursuant to Section 9.2. Unless the Borrower
shall give notice to the Agent otherwise, the Borrower shall be deemed to have
requested a Revolving Loan borrowing in the amount of the maturing Competitive
Loan, the proceeds of which will be used to repay such Competitive Loan.
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(h) Interest on Competitive Loans. Subject to the provisions of
Section 3.1, Competitive Loans shall bear interest in each case at the
Competitive Bid Rate applicable thereto. Interest on Competitive Loans shall be
payable in arrears on each Interest Payment Date.
(i) Competitive Loan Notes. The Competitive Loans made by each Bank
shall be evidenced by the Revolving Note.
2.09 Conditions of Lending.
(a) Conditions. The obligation to make any Extension of Credit
hereunder is subject to satisfaction of the following conditions:
(i) receipt of a Notice of Borrowing pursuant to Section
2.02(a) or 2.07(b)(i) or a Competitive Bid Request pursuant to Section
2.8(b);
(ii) the representations and warranties set forth in Section 5
hereof shall be true and correct in all material respects as of such
date (except for those which expressly relate to an earlier date);
(iii) immediately after giving effect to the requested
Extension of Credit, (A) with regard to each Bank individually, the
Bank's pro rata share of the outstanding Revolving Loans and Swingline
Loans shall not exceed such Bank's Revolving Committed Amount, and (B)
with regard to the Banks collectively, (I) the sum of Revolving Loans
plus Swingline Loans plus Competitive Loans then outstanding shall not
exceed the lesser of the aggregate Revolving Committed Amount or the
Borrowing Base, and (II) the aggregate amount of Swingline Loans shall
not exceed the Swingline Committed Amount and (III) the aggregate
amount of Competitive Loans shall not exceed the Competitive Loan
Maximum Amount; and
(iv) no Default or Event of Default shall exist and be
continuing either prior to or after giving effect thereto.
(b) Reaffirmation. Each request for a Revolving Loan advance or
Swingline Loan advance pursuant to a Notice of Borrowing or a Notice of
Conversion and each Competitive Bid Request shall be deemed to be representation
and warranty by the Borrower of the correctness of the matters specified in this
subsections (a)(ii), (iii) and (iv) hereof.
2.10 Termination of Commitments.
The Borrower may from time to time permanently reduce the Revolving
Committed Amount and/or the Swingline Committed Amount in whole or in part (in
minimum aggregate amounts of $10,000,000 and integral multiples of $1,000,000 in
excess thereof) upon 3 Business Days' prior written notice to the Administrative
Agent and, in the case of a reduction in the Swingline Commitment, also to the
Swingline Lender.
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2.11 Fees.
(a) Upfront Fee. The Borrower agrees to pay in immediately available
funds to the Administrative Agent for the benefit of the Banks on or before the
Closing Date an upfront fee (the "Upfront Fee") in the amounts provided in the
Administrative Agent's Fee Letter between the Borrower and the Administrative
Agent.
(b) Commitment Fees. In consideration for the Commitments by the Banks
hereunder, the Borrower agrees to pay to the Administrative Agent quarterly in
arrears on the 15th day 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") equal to the Applicable Percentage per annum on the
average daily unused amount of the Revolving Committed Amount for the prior
quarter. For purposes of computation of the Commitment Fee, neither Swingline
Loans nor Competitive Loans shall be counted toward or considered usage under
the Revolving Loan facility.
(c) Administrative Agent's Fee. The Borrower agrees to pay to the
Administrative Agent, for its own account, the administrative and other fees
referred to in the Administrative Agent's Fee Letter other than the Upfront Fee
(the "Administrative Agent's Fees").
2.12 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right to prepay
Loans and Competitive Loans in whole or in part from time to time without
premium or penalty; provided, however, that (A) Eurodollar Loans and Competitive
Loans may only be prepaid (y) on the last day of an Interest Period applicable
thereto or (z) on a day that is not the last day of an Interest Period
applicable thereto if the Borrower pays to the applicable Banks any amounts due
under Section 2.15(ii) (and, in the case of Competitive Loans, with the consent
of the Bank affected thereby), and (B) each such partial prepayment shall be a
minimum principal amount of $5,000,000 and integral multiples of $1,000,000 in
excess thereof (or the amount then outstanding, if less). Amounts prepaid on the
Loans may be reborrowed in accordance with the provisions hereof. If the
Borrower shall fail to specify the manner of application, prepayments shall be
applied first to Base Rate Loans and Fed Funds Swingline Loans, then to
Eurodollar Loans and Competitive Loans.
(b) Mandatory Prepayments. If at any time (i) the sum of Revolving
Loans plus Swingline Loans plus Competitive Loans shall exceed the lesser of the
aggregate Revolving Committed Amount or the Borrowing Base, (ii) the aggregate
amount of Swingline Loans shall exceed the Swingline Committed Amount, or (iii)
the aggregate amount of Competitive Loans shall exceed the Competitive Loan
Maximum Amount, then in any such instance the Borrower shall immediately make
payment on the Loans in an amount sufficient to eliminate the difference. In the
case of a mandatory payment required on account of subsection (ii), the amount
required to be paid hereby shall serve to temporarily reduce the Revolving
Committed Amount (for purposes of borrowing availability hereunder, but not for
purposes of computation of fees) by the amount of the payment required until
such time as the situation described in subsection (ii) shall no longer exist.
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Payments made under this subsection 2.12(b) shall be applied first to Revolving
Loans, then to Swingline Loans, then to Competitive Loans, and with respect to
the types of Loans, first to Base Rate Loans and Fed Funds Swingline Loans, then
to Eurodollar Loans and then to Competitive Loans. The Administrative Agent
will, to the extent it may have knowledge, as a courtesy and not as a
requirement, give prompt notice to the Borrower of any situation which may give
rise to a mandatory prepayment under this Section 2.12(b); provided, however,
delivery of any such notice by the Administrative Agent shall not constitute any
kind of condition to the Borrower's obligation to make such mandatory
prepayment, which obligation shall exist and be immediately owing
notwithstanding the failure or inability of the Administrative Agent to give
such notice.
(c) Notice. The Borrower will provide notice to the Administrative
Agent of any prepayment by 10:00 a.m. (Charlotte, North Carolina time) on the
date of prepayment.
2.13 Increased Costs, Illegality, etc.
In the event any Bank shall determine (which determination shall be
final and conclusive and binding on all the parties hereto absent manifest
error) that:
(i) Unavailability. On any date for determining the appropriate
Adjusted Eurodollar Rate for any Interest Period, that by reason of any changes
arising on or after the date of this Credit Agreement affecting the interbank
Eurodollar market, dollar deposits in the principal amount requested are not
generally available in the interbank Eurodollar Market, or adequate and fair
means do not exist for ascertaining the applicable interest rate on the basis
provided for in the definition of Adjusted Eurodollar Rate; then Eurodollar
Loans will no longer be available, and request for a Eurodollar Loan shall be
deemed requests for Base Rate Loans, until such time as such Bank shall notify
the Borrower that the circumstances giving rise thereto no longer exist.
(ii) Increased Costs. At any time that such Bank shall incur increased
costs or reductions in the amounts received or receivable hereunder with respect
to any Eurodollar Loans because of (x) any change since the date of this Credit
Agreement in any applicable law, governmental rule, regulation, guideline or
order (or in the interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, guideline or
order) including without limitation the imposition, modification or deemed
applicability of any reserves, deposits or similar requirements (excluding
taxes) as related to Eurodollar Loans (such as, for example, but not limited to,
a change in official reserve requirements, but, in all events, excluding
reserves required under Regulation D to the extent included in the computation
of the Adjusted Eurodollar Rate and/or (y) other circumstances (excluding taxes)
arising after the date of this Credit Agreement affecting such Bank, the
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interbank Eurodollar market or the position of such Bank in such market; then
the Borrower shall pay to such Bank promptly upon written demand therefor, such
additional amounts (in the form of an increased rate of, or a different method
of calculating, interest or otherwise as such Bank may determine in its
reasonable discretion) as may be required to compensate such Bank for such
increased costs or reductions in amounts receivable hereunder (written notice as
to the additional amounts owed to such Bank, showing the basis for calculation
thereof, shall, absent manifest error, be final and conclusive and binding on
all parties hereto; provided, however, that such determinations are made on a
reasonable basis).
(iii) Illegality. At any time after the date of this Credit Agreement,
that the making or continuance of any Eurodollar Loan has become unlawful by
compliance by such Bank in good faith with any law, governmental rule,
regulation, guideline or order (or would conflict with any such governmental
rule, regulation, guideline or order not having the force of law even though the
failure to comply therewith would not be unlawful), or has become impossible as
a result of a contingency occurring after the date of this Credit Agreement
which materially and adversely affects the interbank Eurodollar market; then
Eurodollar Loans will no longer be available, requests for Eurodollar Loans
shall be deemed requests for Base Rate Loans and the Borrower may, and upon
direction of the Bank, shall, as promptly as possible and, in any event within
the time period required by law, have any such Eurodollar Loans then outstanding
converted into Base Rate Loans.
2.14 Capital Adequacy.
If after the date of this Credit Agreement, any Bank has determined
that the adoption or effectiveness of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by such Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Bank's capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which such Bank could
have achieved but for such adoption, effectiveness, change or compliance (taking
into consideration such Bank's policies with respect to capital adequacy), then
from time to time, within 15 days after demand by such Bank, the Borrower shall
pay to such Bank such additional amount or amounts as will compensate such Bank
for such reduction. Upon determining in good faith that any additional amounts
will be payable pursuant to this Section, such Bank will give prompt written
notice thereof to the Borrower, which notice shall set forth the basis of the
calculation of such additional amounts, although the failure to give any such
notice shall not release or diminish any of the Borrower's obligations to pay
additional amounts pursuant to this Section. Determination by any such Bank of
amounts owing under this Section shall, absent manifest error, be final and
conclusive and binding on the parties hereto; provided, however, that such
determinations are made on a reasonable basis. Failure on the part of any Bank
to demand compensation for any period hereunder shall not constitute a waiver of
such Bank's rights to demand any such compensation in such period or in any
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other period; provided, however, that if such demand is made more than 180 days
after the Bank had knowledge of the occurrence of any event described above
regarding capital adequacy, the Borrower shall not be obligated to reimburse the
Bank for amounts incurred prior to the date on which the Borrower receives such
demand for compensation under this Section 2.14.
2.15 Compensation.
The Borrower shall compensate each Bank, upon its written request
(which request shall set forth the basis for requesting such compensation), for
all reasonable losses, expenses and liabilities (including, without limitation,
any loss, expense or liability incurred by reason of the liquidation or
reemployment of deposits or other funds required by the Bank to fund its
Eurodollar Loans and Competitive Loans) which such Bank may sustain:
(i) if for any reason a borrowing of Eurodollar Loans or Competitive
Loans does not occur on a date specified therefor in a Notice of Borrowing, or
Notice of Conversion or Competitive Bid Request (as accepted);
(ii) if any repayment or conversion of any Eurodollar Loan or
Competitive Loan occurs on a date which is not the last day of an Interest
Period applicable thereto including without limitation in connection with any
demand, repayment, acceleration or otherwise;
(iii) if any prepayment of any Eurodollar Loan or Competitive Loan is
not made on any date specified in a notice of prepayment given by the Borrower;
or
(iv) as a consequence of (x) any other default by the Borrower to repay
its Loans when required by the terms of this Credit Agreement or (y) an election
made pursuant to this Section.
Calculation of all amounts payable to a Bank under this Section shall be made as
though the Bank has actually funded its relevant Eurodollar Loan or Competitive
Loan, through the purchase of a Eurodollar deposit bearing interest at the
Adjusted Eurodollar Rate in an amount equal to the amount of that Loan, having a
maturity comparable to the relevant Interest Period and, through the transfer of
such Eurodollar deposit from an offshore office of that Bank to a domestic
office of that Bank in the United States of America; provided, however, that
each Bank may fund each of its Eurodollar Loans and Competitive Loans in any
manner it sees fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this Section.
2.16 Net Payments.
(i) Except as otherwise provided herein, all payments made by the
Borrower hereunder to a Bank will be made without setoff or counterclaim. In
addition, all payments made by the Borrower hereunder to a Bank also 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 Bank or franchise taxes imposed on such Bank by the
jurisdiction under the laws of which such Bank is organized or has its
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applicable lending office or any political subdivision thereof, (B) taxes that
are imposed on such Bank with respect to transactions unrelated to this Credit
Agreement and (C) in the case of a Bank that is a Non-U.S. Person or that has
participated all or any part of its interests and obligations under the terms of
this Credit Agreement to a Participant that is a Non-U.S. Person, taxes imposed
upon income effectively connected with such Bank's or such Participant's conduct
of a business in the United States or taxes that would not have been imposed
absent the failure of such Bank or such Participant to provide the documentation
required by Section 2.21 or Section 10.03(c)(ii) hereof, respectively (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings, and
liabilities collectively or individually referred to herein as "Taxes"). If the
Borrower shall be required to withhold or deduct Taxes from any sum payable to a
Bank hereunder, (i) the sum payable shall be increased as may be necessary so
that the amount received is equal to the sum which would have been received had
no withholdings or deductions been made, (ii) the Borrower shall make such
necessary withholdings or deductions, and (iii) the Borrower shall pay the full
amount withheld or deducted to the relevant authority according to applicable
law so that such Bank shall not be required to make any deduction or payment of
Taxes.
(ii) The Borrower hereby agrees to indemnify each Bank for the full
amount of Taxes and any liability (including penalties, interest, and expenses
(including reasonable attorney's fees and expenses)) arising therefrom or with
respect thereto paid or payable by such Bank, whether or not such Taxes were
correctly or legally asserted by the relevant Governmental Authority; provided,
however, that such Bank made written demand for indemnification within 180 days
after the earlier of (A) the date on which such Bank pays such Taxes and (B) the
date on which the relevant authority makes written demand upon such Bank for
payment of such Taxes. A certificate as to the amount of any Taxes and
liabilities arising therefrom or with respect thereto paid or payable by a Bank
that is prepared by such Bank, absent manifest error, shall be final,
conclusive, and binding for all purposes. Indemnification by the Borrower
hereunder shall be made within a reasonable period after the date the relevant
Bank makes written demand therefor.
If any such Bank receives a refund or credit (against any other tax) of any
Taxes paid by the Borrower hereunder, the Bank shall promptly pay the full
amount of such refund (including any interest received thereon) or credit to the
Borrower.
2.17 Change of Lending Office; Right to Substitute Lender.
(a) Each Bank agrees that, upon the occurrence of any event giving rise
to the operation of Section 2.13(ii) or (iii) or 2.16, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Bank) to designate another lending office for any Loans affected by such
event, provided that such designation is made on such terms that such Bank and
its lending office suffer no economic, legal or regulatory disadvantage, with
the object of avoiding the consequence of the event giving rise to the operation
of any such Section. Except in the case of a change of lending office made at
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the request of the Borrower, no change in lending office will be made if greater
costs and expenses would result under Section 2.13(ii) or (iii) or 2.16 on
account of any such change in designation. Nothing in this Section shall affect
or postpone any of the obligations of the Borrower or the right of any Bank
provided in Section 2.13, 2.14 or 2.16.
(b) In addition to the Borrower's rights under Section 2.17(a), upon
the occurrence of any event giving rise to the operation of Section 2.13(ii) or
(iii) or 2.16, the Borrower may, within a period of sixty (60) days following
the Borrower's obtaining knowledge of the occurrence of the event giving rise to
the operation of such provisions, at its own expense, make arrangements for
another bank or financial institution reasonably acceptable to the
Administrative Agent to purchase and accept the rights and obligations under
this Credit Agreement of any Bank entitled to payment under Section 2.13(ii) or
(iii) or Section 2.16, whereupon such Bank shall assign to the bank or financial
institution designated by the Borrower its rights and obligations hereunder
pursuant to the provisions of Section 10.03(b) of this Credit Agreement.
2.18 Payments and Computations.
Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Administrative Agent in U.S. dollars in
immediately available funds at its offices at NationsBank Plaza, NC1-002-06-19,
Charlotte, North Carolina not later than 2:00 p.m. (Charlotte, North Carolina
time) on the date when due. Payments received after such time shall be deemed to
have been received on the next succeeding Business Day. The Administrative Agent
may (but shall not be obligated to) debit the amount of any such payment which
is not made by such time to any ordinary deposit account of the Borrower
maintained with the Administrative Agent (with notice to the Borrower). The
Borrower shall, at the time it makes any payment under this Credit Agreement,
specify to the Administrative Agent the Loans, Fees or other amounts payable by
the Borrower hereunder to which such payment is to be applied (and in the event
that it fails so to specify, or if such application would be inconsistent with
the terms hereof, the Administrative Agent shall distribute such payment to the
Banks in such manner as the Administrative Agent may determine to be appropriate
in respect of obligations owing by the Borrower hereunder, subject to the terms
of Section 2.20). The Administrative Agent will thereafter cause to be
distributed promptly like funds relating to the payment of principal or interest
or fees ratably to the Banks entitled to receive such payments in accordance
with the terms of this Credit Agreement. Whenever any payment hereunder shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day (subject to accrual of
interest and Fees for the period of such extension), except that in the case of
Eurodollar Loans, if the extension would cause the payment to be made in the
next following calendar month, then such payment shall instead be made on the
next preceding Business Day. Except as expressly provided otherwise herein, all
computations of interest and fees shall be made on the basis of actual number of
days elapsed over a year of 365/366 days, in the case of interest on Base Rate
Loans, and over a year of 360 days in all other instances. Interest shall accrue
from and include the date of advance, but exclude the date of payment.
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2.19 Pro Rata Treatment.
Except to the extent otherwise provided herein, each Revolving Loan
(including without limitation each Mandatory Borrowing), each payment or
prepayment of principal of any Revolving Loan, each payment of interest on the
Revolving Loans, each payment of Commitment Fees, each reduction of the
Revolving Committed Amount, and each conversion or continuation of any Revolving
Loan, shall be allocated pro rata among the relevant Banks in accordance with
the respective applicable Revolving Committed Amount (or, if the Commitments of
such Banks have expired or been terminated, in accordance with the principal
amounts of the outstanding Revolving Loans and Participation Interests of such
Banks).
2.20 Sharing of Payments.
The Banks agree among themselves that, in the event that any Bank shall
obtain payment in respect of any Revolving Loan through the exercise of a right
of set-off, banker's lien, counterclaim or otherwise in excess of its pro rata
share as provided for in this Credit Agreement, such Bank shall promptly
purchase from the other Banks a participation in such Loans and other
obligations in such amounts, and make such other adjustments from time to time,
as shall be equitable to the end that all Banks share such payment in accordance
with their respective ratable shares as provided for in this Credit Agreement.
The Banks further agree among themselves that if payment to a Bank obtained by
such Bank through the exercise of a right of set-off, banker's lien,
counterclaim or otherwise as aforesaid shall be rescinded or must otherwise be
restored, each Bank which shall have shared the benefit of such payment shall,
by repurchase of a participation theretofore sold, return its share of that
benefit to each Bank whose payment shall have been rescinded or otherwise
restored. The Borrower and each other Credit Party agrees that any Bank so
purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including set-off, banker's lien or
counterclaim, with respect to such participation as fully as if such Bank were a
holder of such Revolving Loan or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit Agreement,
if any Bank or the Administrative Agent shall fail to remit to the
Administrative Agent or any other Bank an amount payable by such Bank or the
Administrative Agent to the Administrative Agent or such other Bank pursuant to
this Credit Agreement on the date when such amount is due, such payments shall
be made together with interest thereon for each date from the date such amount
is due until the date such amount is paid to the Administrative Agent or such
other Bank at a rate per annum equal to the Federal Funds Effective Rate.
2.21 Foreign Lenders.
Each Bank (which, for purposes of this Section 2.21, shall include any
Affiliate of a Bank that makes any Eurodollar Loan advance pursuant to the terms
of this Credit Agreement) that is a Non-U.S. Person shall submit to the Borrower
and the Administrative Agent on or before the Closing Date (or, in the case of a
Non-U.S. Person that will become a Bank under the terms of this Credit Agreement
after the Closing Date pursuant to an assignment under Section 10.03(b) hereof,
on or before the date of such assignment), either: (A) two copies of either
United States Internal Revenue Service Form 1001 or Form 4224 (whichever is
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applicable) or (B) in the case of a Bank 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 Bank is not a
bank for purposes of Section 881(C)(3)(A) of the Code, is not a 10% shareholder
(within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower, and is
not a controlled foreign corporation related to the Borrower (within the meaning
of Section 864(d)(4) of the Code), in either case properly completed and duly
executed by such Bank and entitling such Bank to receive a complete exemption
from U.S. federal withholding tax on payments by the Borrower under this Credit
Agreement. Each Bank that is organized under the laws of the United States or
any state thereof or the District of Columbia shall deliver to the Borrower
promptly upon request (or, in the case of a Person that is organized under the
laws of the United States or any state thereof or the District of Columbia and
will become a Bank under the terms of this Credit Agreement after the Closing
Date pursuant to an assignment under Section 10.03(b) hereof, on or before the
date of such assignment) an original copy of Internal Revenue Service Form W-9
(or applicable successor form) properly completed and duly executed by such
Bank. Each Bank also shall, from time to time submit to the Borrower and the
Administrative Agent such additional duly completed and signed copies of such
forms (or such successor forms or other documents as shall be adopted from time
to time by the relevant United States taxing authorities) as may be (1)
reasonably requested in writing by the Borrower or the Administrative Agent, (2)
appropriate under then current United States laws or regulations or (iii)
required due to the obsolescence or invalidity of any form previously delivered
by such Bank. Upon the reasonable request of the Borrower or the Administrative
Agent, each Bank that has not provided the forms or other documents, as provided
above, on the basis of being a United States person shall submit to the Borrower
and the Administrative Agent a certificate to the effect that it is such a
"United States person."
SECTION 3
GUARANTEE
3.01 The Guarantee.
Each of the Guarantors hereby jointly and severally guarantees to each
Bank and the Administrative Agent as hereinafter provided the prompt payment of
the Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise) strictly in accordance with the terms
thereof. The Guarantors hereby further agree that if any of the Obligations are
not paid in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, as a mandatory prepayment, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.
Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents, to the extent the obligations of a Guarantor
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shall be adjudicated to be invalid or unenforceable for any reason (including,
without limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of such Guarantor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation, the
Bankruptcy Code).
3.02 Obligations Unconditional.
The obligations of the Guarantors under Section 3.01 hereof are joint
and several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents, or any
other agreement or instrument referred to therein, or any substitution, release
or exchange of any other guarantee of or security for any of the Obligations,
and, to the fullest extent permitted by applicable law, irrespective of any
other circumstance whatsoever which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor, it being the intent of
this Section 3.02 that the obligations of the Guarantors hereunder shall be
absolute and unconditional under any and all circumstances. Each Guarantor
agrees that such Guarantor shall have no right of subrogation, indemnity,
reimbursement or contribution against the Borrower or any other Guarantor of the
Obligations for amounts paid under this Guaranty until such time as the Banks
have been paid in full, all Commitments under the Credit Agreement have been
terminated and no Person or Governmental Authority shall have any right to
request any return or reimbursement of funds from the Banks in connection with
monies received under the Credit Documents. Without limiting the generality of
the foregoing, it is agreed that, to the fullest extent permitted by law, the
occurrence of any one or more of the following shall not alter or impair the
liability of any Guarantor hereunder which shall remain absolute and
unconditional as described above:
(i) at any time or from time to time, without notice to any Guarantor,
the time for any performance of or compliance with any of the Obligations shall
be extended, or such performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of any of the
Credit Documents or any other agreement or instrument referred to in the Credit
Documents shall be done or omitted;
(iii) the maturity of any of the Obligations shall be accelerated, or
any of the Obligations shall be modified, supplemented or amended in any
respect, or any right under any of the Credit Documents, or any other agreement
or instrument referred to in the Credit Documents shall be waived or any other
guarantee of any of the Obligations or any security therefor shall be released
or exchanged in whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Administrative Agent or
any Bank or Banks as security for any of the Obligations shall fail to attach or
be perfected; or
(v) any of the Obligations shall be determined to be void or voidable
(including, without limitation, for the benefit of any creditor of any
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Guarantor) or shall be subordinated to the claims of any Person (including,
without limitation, any creditor of any Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Bank exhaust any right,
power or remedy or proceed against any Person under any of the Credit Documents
or any other agreement or instrument referred to in the Credit Documents or
against any other Person under any other guarantee of, or security for, any of
the Obligations.
3.03 Reinstatement.
The obligations of the Guarantors under this Section 3 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Obligations is rescinded or must be
otherwise restored by any holder of any of the Obligations, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise, and each
Guarantor agrees that it will indemnify the Administrative Agent and each Bank
on demand for all reasonable costs and expenses (including, without limitation,
fees and expenses of counsel) incurred by the Administrative Agent or such Bank
in connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
3.04 Certain Additional Waivers.
Each Guarantor further agrees that such Guarantor shall have no right
of recourse to security for the Obligations, except through the exercise of the
rights of subrogation pursuant to Section 3.02.
3.05 Remedies.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Administrative Agent and the
Banks, on the other hand, the Obligations may be declared to be forthwith due
and payable as provided in Section 8.02 hereof (and shall be deemed to have
become automatically due and payable in the circumstances provided in said
Section 8.02) for purposes of Section 3.01 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing the
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Obligations being
deemed to have become automatically due and payable), the Obligations (whether
or not due and payable by any other Person) shall forthwith become due and
payable by the Guarantors for purposes of said Section 3.01.
3.06 Rights of Contribution.
The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
succeeding provisions of this Section 3.06), pay to such Excess Funding
Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below
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and determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess Payment
(as defined below). The payment obligation of any Guarantor to any Excess
Funding Guarantor under this Section 3.06 shall be subordinate and subject in
right of payment to the prior payment in full of the obligations of such
Guarantor under the other provisions of this Section 3, and such Excess Funding
Guarantor shall not exercise any right or remedy with respect to such excess
until payment and satisfaction in full of all of such obligations. For purposes
hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any obligations
arising under the other provisions of this Section 3 (hereafter, the
"Obligations"), a Guarantor that has paid an amount in excess of its Pro Rata
Share of the Obligations; (ii) "Excess Payment" shall mean, in respect of any
Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro
Rata Share of such Obligations; and (iii) "Pro Rata Share", for the purposes of
this Section 3.06, shall mean, for any Guarantor, the ratio (expressed as a
percentage) of (a) the amount by which the aggregate present fair saleable value
of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder) to (b) the amount by which the aggregate present fair saleable value
of all assets and other properties of the Borrower and all of the Guarantors
exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of the Borrower and the Guarantors hereunder) of the Borrower and
all of the Guarantors, all as of the Closing Date (if any Guarantor becomes a
party hereto subsequent to the Closing Date, then for the purposes of this
Section 3.06 such subsequent Guarantor shall be deemed to have been a Guarantor
as of the Closing Date and the information pertaining to, and only pertaining
to, such Guarantor as of the date such Guarantor became a Guarantor shall be
deemed true as of the Closing Date).
3.07 Continuing Guarantee.
The guarantee in this Section 3 is a continuing guarantee, and shall
apply to all Obligations whenever arising.
SECTION 4
CONDITIONS PRECEDENT
4.01 Conditions to Closing.
The closing of this credit facility is subject to satisfaction of the
following conditions (in form and substance acceptable to the Administrative
Agent:
(a) Executed Credit Documents. Receipt by the Administrative Agent of
copies of the Credit Agreement, the Notes and the other Credit Documents, if any
(in sufficient numbers to provide a fully executed original to each Bank) as
executed by the Borrower and the other Credit Parties.
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4.02 Conditions to Initial Loan Advance.
The obligation of the Banks to make the initial Loan advance is
subject, at the time of the making of such initial Loan advance, to satisfaction
of the following conditions (in form and substance acceptable to the
Administrative Agent and the Required Banks):
(a) No Default; Representations and Warranties. Both at the time of the
making of such Loan and after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents then in effect shall be true
and correct in all material respects.
(b) Opinions of Counsel. Receipt by the Administrative Agent of the
opinions of Drew St.J. Carneal, Esq., Senior Vice President and General Counsel
of the Borrower, and Hunton & Williams, special counsel to the Borrower and the
Guarantors, substantially in the forms of Schedules 4.01(b)(1) and (2),
respectively, (in sufficient numbers to provide a fully executed original to
each Bank).
(c) Corporate Documents. Receipt by the Administrative Agent of the
following:
(i) Articles of Incorporation. Copies of the articles
of incorporation or charter documents of the Borrower and the
Guarantors certified to be true and complete as of a recent date by the
appropriate governmental authority of the state of its incorporation.
(ii) Resolutions. Copies of resolutions of the Board
of Directors of the Borrower and the Guarantors approving and adopting
the Credit Documents, the transactions contemplated therein and
authorizing execution and delivery thereof, certified by a secretary or
assistant secretary as of the Closing Date to be true and correct and
in force and effect as of such date and containing therein
certification of the incumbency and specimen signatures of the officers
of the Credit Parties executing the Credit Documents.
(iii) Bylaws. A copy of the bylaws of the Borrower
and the Guarantors certified by a secretary or assistant secretary as
of the Closing Date to be true and correct and in force and effect as
of such date.
(iv) Good Standing. Copies of (i) certificates of
good standing, existence or its equivalent with respect to the Borrower
and the Guarantors certified as of a recent date by the appropriate
governmental authorities of the state of incorporation and each other
state in which the failure to so qualify and be in good standing would
have a Material Adverse Effect and (ii) a certificate indicating
payment of all corporate franchise taxes in such states of
incorporation certified as of a recent date by the appropriate
governmental taxing authorities, to the extent generally available from
such authorities.
(d) Termination of Existing Credit Facilities. Receipt by the
Administrative Agent of evidence of repayment and termination of commitments
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under the existing revolving credit facility extended to Owens & Minor, Inc. by
NationsBank, N.A., as Agent, Bank of America NT & SA and Crestar Bank as
Co-Agents and the other lenders party thereto.
SECTION 5
REPRESENTATIONS AND WARRANTIES
Each Credit Party hereby represents and warrants to the Agents and each
Bank that:
5.01 Organization and Good Standing.
Such Credit Party is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of its incorporation, is duly
qualified and in good standing as a foreign corporation authorized to do
business in every jurisdiction where the failure to so qualify would have a
Material Adverse Effect, and has the requisite corporate power and authority to
own its properties and to carry on its business as now conducted and as proposed
to be conducted.
5.02 Due Authorization.
Such Credit Party (i) has the requisite corporate power and authority
to execute, deliver and perform this Credit Agreement and the other Credit
Documents to which it is a party and to incur the obligations herein and therein
provided for, and (ii) is duly authorized to, and has been authorized by all
necessary corporate action, to execute, deliver and perform this Credit
Agreement and the other Credit Documents to which it is a party.
5.03 No Conflicts.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by such Credit Party will (i)
violate or conflict with any provision of its articles of incorporation or
bylaws, (ii) violate, contravene or materially conflict with any law, regulation
(including without limitation Regulation U or Regulation X), order, writ,
judgment, injunction, decree or permit applicable to it, (iii) violate,
contravene or materially conflict with contractual provisions of, or cause an
event of default under, any indenture, loan agreement, mortgage, deed of trust,
contract or other agreement or instrument to which it is a party or by which it
may be bound, the violation of which would have a Material Adverse Effect, (iv)
result in or require the creation of any lien, security interest or other charge
or encumbrance (other than those contemplated in or created in connection with
the Credit Documents) upon or with respect its properties, the creation of which
would have a Material Adverse Effect.
5.04 Consents.
No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or governmental authority or third
party in respect of such Credit Party is required in connection with the
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execution, delivery or performance of this Credit Agreement or any of the other
Credit Documents by the Borrower or any Guarantor, or if required, such consent,
approval and authorization has been obtained.
5.05 Enforceable Obligations.
This Credit Agreement and the other Credit Documents have been duly
executed and delivered and constitute legal, valid and binding obligations of
such Credit Party enforceable against such Credit Party in accordance with their
respective terms, except as may be limited by bankruptcy or insolvency laws or
similar laws affecting creditors' rights generally or by general equitable
principles.
5.06 Financial Condition.
The financial statements and financial information provided to the
Banks, consisting of, among other things, an audited consolidated balance sheet
of the Borrower and its Subsidiaries dated as of December 31, 1996 together with
related consolidated statements of income, stockholders' equity and changes in
financial position or cash flow certified by KPMG Peat Marwick, certified public
accountants, are true and correct in all material respects and fairly represent
the financial condition of the Borrower and its Subsidiaries as of such date;
such financial statements were prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as noted therein);
and since the date of such financial statements there have occurred no changes
or circumstances which have had or are likely to have a Material Adverse Effect.
5.07 No Default.
No Default or Event of Default presently exists.
5.08 Liens.
Except for Permitted Liens, such Credit Party has good and marketable
title to all of its properties and assets free and clear of all liens,
encumbrances, mortgages, pledges, security interests and other adverse claims of
any nature.
5.09 Indebtedness.
Such Credit Party has no Indebtedness (including without limitation
Guaranty Obligations, reimbursement or other contingent obligations) except (a)
as disclosed in the financial statements referenced in Section 5.06 and as set
forth in Schedule 5.09 and (b) Indebtedness related to a Qualified
Securitization Transaction.
5.10 Litigation.
Except as disclosed in Schedule 5.10, there are no actions, suits or
legal, equitable, arbitration or administrative proceedings, pending or, to the
knowledge of a Responsible Officer of such Credit Party, threatened against such
Credit Party or any of its Restricted Subsidiaries which, if adversely
determined, would likely have a Material Adverse Effect. For purposes hereof, in
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the case of proceedings involving only monetary damages, $5,000,000 or more in
any instance shall be considered as having a Material Adverse Effect. Since the
date of this Credit Agreement (or the date of the most recent update hereunder),
there has been no material adverse change in the status of any actions, suits,
investigations, litigation or proceedings disclosed hereunder which is likely to
result in a Material Adverse Effect.
5.11 Material Agreements.
Such Credit Party is not in default in any material respect under any
contract, lease, loan agreement, indenture, mortgage, security agreement or
other material agreement or obligation to which it is a party or by which any of
its properties is bound which default would have a Material Adverse Effect.
5.12 Taxes.
Such Credit Party has filed, or caused to be filed, all material tax
returns (federal, state, local and foreign) required to be filed and paid all
amounts of taxes shown thereon to be due (including interest and penalties) and
has paid all other material taxes, fees, assessments and other governmental
charges (including mortgage recording taxes, documentary stamp taxes and
intangibles taxes) owing (or necessary to preserve any liens in favor of the
Banks) by it, except for such taxes (i) which are not yet delinquent or (ii) as
are being contested in good faith and by proper proceedings, and against which
adequate reserves are being maintained in accordance with generally accepted
accounting principles. Such Credit Party is not aware of any proposed material
tax assessments against it or any other members of the Consolidated Borrower
Group.
5.13 Compliance with Law.
Such Credit Party is in substantial compliance with all laws, rules,
regulations, orders and decrees (including without limitation environmental
laws) applicable to it, or to its properties, the failure to comply with which
would have a Material Adverse Effect.
5.14 ERISA.
(i) No Reportable Event (as defined in ERISA) has occurred and
is continuing with respect to any Plan; (ii) no Plan has an unfunded current
liability (determined under Section 412 of the Code) or an accumulated funding
deficiency, (iii) no proceedings have been instituted, or, to the knowledge of
any Responsible Officer of such Credit Party, planned, to terminate any Plan,
(iv) neither such Credit Party nor any member of a Controlled Group, nor any
duly-appointed administrator of a Plan has instituted or intends to institute
proceedings to withdraw from any Multiemployer Plan; and (v) each Plan has been
maintained and funded in all material respects with its terms and with the
provisions of ERISA applicable thereto.
5.15 Subsidiaries.
Set forth in Schedule 5.15 is a complete and accurate list of all
Subsidiaries of each of such Credit Party. Further, the Non-Guarantor
Subsidiaries (not including any Securitization Subsidiary), as a group, do not
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exceed the Threshold Requirement as provided in Section 6.12. Information on the
attached Schedule includes state of incorporation; the shares of each class of
capital stock or other equity interests outstanding; the number and percentage
of outstanding shares of each class owned (directly or indirectly) by such
Credit Party; and the number and effect, if exercised, of all outstanding
options, warrants, rights of conversion or purchase and similar rights. The
outstanding capital stock and other equity interests of all such Subsidiaries is
validly issued, fully paid and non-assessable and is owned by such Credit Party,
directly or indirectly, free and clear of all liens, security interests and
other charges or encumbrances (other than those arising under or contemplated in
connection with the Credit Documents).
5.16 Use of Proceeds; Margin Stock.
The proceeds of the Loans hereunder will be used solely for the
purposes specified in Section 6.10. None of such proceeds will be used for the
purpose of purchasing or carrying any "margin stock" as defined in Regulation U,
Regulation X or Regulation G, or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry "margin stock"
or for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of Regulation U, Regulation X or Regulation G. Such
Credit Party does not own "margin stock" except as identified in the financial
statements referred to in Section 5.06 hereof and, as of the date hereof, the
aggregate value of all "margin stock" owned by such Credit Party and its
Subsidiaries does not exceed 25% of the value of all such Credit Party's and its
Subsidiaries' assets.
5.17 Government Regulation.
Such Credit Party is not subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940 or the Interstate Commerce Act, each as amended. In addition, such
Credit Party is not (i) an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, and is not
controlled by such a company, or (ii) a "holding company," or a "Subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "Subsidiary" or a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
5.18 Hazardous Substances.
Except as disclosed on Schedule 5.18 or except as would not reasonably
be expected to have a Material Adverse Effect, to the knowledge of any
Responsible Officer of such Credit Party, the real property owned or leased by
such Credit Party and its Subsidiaries or on which it or its Subsidiaries
operates (the "Subject Property") (i) is free from "hazardous substances" as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. ss.ss. 9601 et seq., as amended, and the regulations
promulgated thereunder; (ii) no portion of the Subject Property is subject to
federal, state or local regulation or liability because of the presence of
stored, leaked or spilled petroleum products, waste materials or debris, "PCB's"
or PCB items (as defined in 40 C.F.R. ss.763.3), underground storage tanks,
"asbestos" (as defined in 40 C.F.R. ss.763.63) or the past or present
accumulation, spillage or leakage of any such substance; (iii) such Credit Party
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and its Subsidiaries are in substantial compliance with all federal, state and
local requirements relating to protection of health or the environment in
connection with the operation of their businesses; and (iv) no Responsible
Officer of such Credit Party knows of any complaint or investigation regarding
real property which it or any other Credit Party owns or leases or on which it
or any other Credit Party operates.
5.19 Patents, Franchises, etc.
Such Credit Party possesses all material patents, trademarks, service
marks, trade names, copyrights, licenses and other rights, free from burdensome
restrictions, that are reasonably necessary for the operation of its business as
presently conducted and as proposed to be conducted. Such Credit Party has
obtained all material licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its respective property and to the
conduct of its business except as would not reasonably be expected to have a
Material Adverse Effect.
5.20 Solvency.
Such Credit Party and each of its Restricted Subsidiaries, both
collectively and individually, is and, after consummation of this Credit
Agreement and after giving effect to all Indebtedness incurred hereunder, will
be, solvent.
5.21 Investments.
All investments of such Credit Party are Permitted Investments.
SECTION 6
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans, together with interest, fees
and other obligations hereunder, have been paid in full and the Commitments
hereunder shall have terminated:
6.01 Information Covenants.
The Credit Parties will furnish, or cause to be furnished, to the
Administrative Agent and each Bank:
(a) Annual Financial Statements. As soon as available and in any event
within 90 days after the close of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its Subsidiaries as at the end of
such fiscal year together with related consolidated statements of income and
retained earnings and of cash flows for such fiscal year, setting forth in
comparative form consolidated figures for the preceding fiscal year, all in
reasonable detail and examined by KPMG Peat Marwick, or other independent
certified public accountants of recognized national standing reasonably
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acceptable to the Required Banks and whose opinion shall be to the effect that
such consolidated financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
for changes with which such accountants concur). It is specifically understood
and agreed that failure of the annual financial statements to be accompanied by
an opinion and certificate of such accountants in form and substance as provided
herein shall constitute a Default hereunder.
(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the end of each of the first three fiscal quarters of
the Borrower, a consolidated and consolidating balance sheet of the Borrower and
its Subsidiaries, and consolidated and consolidating statements of income and
retained earnings and a consolidated statement of cash flows for the Borrower
and its Subsidiaries, each for such quarterly period and for the portion of the
fiscal year ending with such period (except in the case of consolidated
statements of cash flow, in which case such statements shall be prepared on a
year to date basis), in each case setting forth in comparative form consolidated
figures for the corresponding period of the preceding fiscal year (except that
the balance sheet shall be compared to that at prior year end), all in
reasonable form and detail acceptable to the Required Banks, and accompanied by
a certificate of the chief financial officer, treasurer, controller or chief
accounting officer of the Borrower, to the best of his knowledge and belief, as
being true and correct in all material respects, in the case of consolidated
statements, and as having been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, subject to changes
resulting from normal year-end audit adjustments. As used in this Section
6.01(b), the term "consolidating" shall be deemed to include Owens & Minor
Medical, Inc. and Stuart Medical, Inc. only. All consolidating statements
delivered under this Section 6.01(b) shall be prepared based on the Borrower's
internal practices consistently applied and may not be in strict conformity with
generally accepted accounting principles.
(c) Borrowing Base Certificates. As soon as practicable and in any
event within 15 days after the end of each fiscal quarter of the Borrower, a
statement of the Borrowing Base and its components as of the end of the
immediately preceding fiscal quarter, substantially in the form of Schedule
6.01(c) hereto, certified by the chief financial officer, treasurer, controller
or chief accounting officer of the Borrower as being, to the best of his
knowledge and belief, true and correct in all material respects as of such date.
(d) Officer's Certificate. At the time of delivery of the financial
statements provided for in Sections 6.01(a) and (b) hereof, a certificate of the
chief financial officer, treasurer, controller or chief accounting officer of
the Borrower substantially in the form of Schedule 6.01(d) to the effect that no
Default or Event of Default exists, or if any Default or Event of Default does
exist specifying the nature and extent thereof and what action the Borrower
proposes to take with respect thereto. In addition, the Officer's Certificate
shall demonstrate compliance of the financial covenants contained in Section
6.11 by calculation thereof as of the end of each such fiscal period.
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(e) Accountant's Certificate. Within the period for delivery of the
annual financial statements provided in Section 6.01(a), a certificate of the
accountants conducting the annual audit stating that they have reviewed this
Credit Agreement and stating further whether, in the course of their audit, they
have become aware of any Default or Event of Default arising as a result of a
violation of the financial covenants contained in Section 6.11 of this Credit
Agreement and, if any such Default or Event of Default exists, specifying the
nature and extent thereof.
(f) SEC and Other Reports. Promptly upon transmission thereof, copies
of any filings and registrations with, and reports to, (i) the Securities and
Exchange Commission, or any successor agency, by the Borrower or any of its
Subsidiaries, and copies of all financial statements, proxy statements, notices
and reports as the Borrower or its Subsidiaries shall send to its shareholders
or to the holders of any other Indebtedness (including specifically without
limitation, any Subordinated Debt) in their capacity as such holders and (ii)
the United States Environmental Protection Agency, or any state or local agency
responsible for environmental matters, the United States Occupational Health and
Safety Administration, or any state or local agency responsible for health and
safety matters, or any successor agencies or authorities concerning
environmental, health or safety matters.
(g) Other Information. With reasonable promptness upon any such
request, such other information regarding the business, properties or financial
condition of the Borrower and its Subsidiaries as the Administrative Agent or
the Required Banks may reasonably request.
(h) Notice of Default or Litigation. Upon any Responsible Officer of a
Credit Party obtaining knowledge thereof, such Credit Party will give written
notice to the Administrative Agent (i) immediately, but in any event within 3
Business Days, of the occurrence of an event or condition consisting of a
Default or Event of Default, specifying the nature and existence thereof and
what action the Borrower proposes to take with respect thereto, and (ii)
promptly, but in any event within 5 Business Days, of the occurrence of any of
the following with respect to any member of the Consolidated Borrower Group: (A)
the pendency or commencement of any litigation, arbitral or governmental
proceeding against any member of the Consolidated Borrower Group which if
adversely determined is likely to have a Material Adverse Effect, (B) any levy
of an attachment, execution or other process against its assets having a value
of $500,000 or more, (C) the occurrence of an event or condition which shall
constitute a default or event of default under any Indebtedness of any member of
the Consolidated Borrower Group which, if accelerated as a result of such event
of default would have a Material Adverse Effect, (D) any development in its
business or affairs which has resulted in, or which any Credit Party reasonably
believes may result in, a Material Adverse Effect, or (E) the institution of any
proceedings against any member of the Consolidated Borrower Group with respect
to, or the receipt of notice by a Responsible Officer of such Person of
potential liability or responsibility for violation, or alleged violation of any
federal, state or local law, rule or regulation, including but not limited to,
regulations promulgated under the Resource Conservation and Recovery Act of
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1976, 42 U.S.C. ss.ss. 6901 et seq., regulating the generation, handling or
disposal of any toxic or hazardous waste or substance or the release into the
environment or storage of any toxic or hazardous waste or substance, the
violation of which would likely have a Material Adverse Effect, or (F) any
notice or determination concerning the imposition of any withdrawal liability by
a multiemployer Plan against any member of the Consolidated Borrower Group or
any of its ERISA Affiliates, the determination that a multiemployer Plan is, or
is expected to be, in reorganization within the meaning of Title IV or ERISA,
the termination of any Plan, and the amount of liability incurred or which may
be incurred in connection with any such event.
6.02 Preservation of Existence and Franchises.
Except as otherwise permitted under Section 7.05, each member of the
Consolidated Borrower Group will do all things necessary in any material respect
to preserve and keep in full force and effect its existence, rights, franchises
and authority for the normal conduct of its business.
6.03 Books, Records and Inspections.
Each member of the Consolidated Borrower Group will keep complete and
accurate books and records of its transactions in accordance with good
accounting practices on the basis of generally accepted accounting principles
applied on a consistent basis (including the establishment and maintenance of
appropriate reserves). Each member of the Consolidated Borrower Group will
permit on reasonable notice and, prior to the occurrence or during the
continuance of an Event of Default, during normal business hours, officers or
designated representatives of Administrative Agent or any Bank to visit and
inspect its books of account and records and any of its properties or assets (in
whomever's possession) and to discuss the affairs, finances and accounts of such
member of the Consolidated Borrower Group with, and be advised as to the same
by, its and their officers, directors and independent accountants.
6.04 Compliance with Law.
Each member of the Consolidated Borrower Group will comply with all
applicable laws, rules, regulations and orders of, and all applicable
restrictions imposed by all applicable Governmental Authorities applicable to it
and its property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls) if noncompliance
with any such law, rule, regulation or restriction would have a Material Adverse
Effect.
6.05 Payment of Taxes and Other Indebtedness.
Each member of the Consolidated Borrower Group will pay and discharge
(i) all material taxes, assessments and governmental charges or levies imposed
upon it, or upon its income or profits, or upon any of its properties, before
they shall become delinquent, (ii) all lawful claims (including claims for
labor, materials and supplies) which, if unpaid, might give rise to a Lien or
charge upon any of its properties, and (iii) except as prohibited hereunder, all
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of its other Indebtedness as it shall become due; provided, however, that
members of the Consolidated Borrower Group shall not be required to pay any such
tax, assessment, charge, levy, claim or Indebtedness which is being contested in
good faith by appropriate proceedings and as to which adequate reserves therefor
have been established in accordance with generally accepted accounting
principles, unless the failure to make any such payment (a) shall give rise to
an immediate right to foreclosure on a Lien securing such amounts or (b)
otherwise would have a Material Adverse Effect.
6.06 Insurance.
Each member of the Consolidated Borrower Group will at all times
maintain in full force and effect insurance (including worker's compensation
insurance, liability insurance, casualty insurance and business interruption
insurance) in such amounts, covering such risks and liabilities and with such
deductibles or self-insurance retentions as are in accordance with normal
industry practice unless higher limits or other types of coverage are required
by the terms of the other Credit Documents or are otherwise reasonably required
by the Required Banks. The present coverage of the members of the Consolidated
Borrower Group is outlined as to carrier, policy number, expiration date, type
and amount on Schedule 6.06 hereto and is acceptable to the Banks as of the
Closing Date.
6.07 Maintenance of Property.
Each member of the Consolidated Borrower Group will maintain and
preserve its properties and equipment used or useful in any material portion of
its business (in whomsoever's possession as they may be) in good repair, working
order and condition, normal wear and tear, obsolescence and replacement
excepted, and will make, or cause to be made, in such properties and equipment
from time to time all repairs, renewals, replacements, extensions, additions,
betterments and improvements thereto as may be needed or proper, to the extent
and in the manner customary for companies in similar businesses.
6.08 Performance of Obligations.
Each member of the Consolidated Borrower Group will perform in all
material respects all of its obligations (including, except as may be otherwise
prohibited or contemplated hereunder, payment of Indebtedness in accordance with
its terms) under the terms of all material agreements, indentures, mortgages,
security agreements or other debt instruments to which it is a party or by which
it is bound if the failure to do so would have a Material Adverse Effect.
6.09 ERISA.
Each Credit Party and ERISA Affiliate will, (a) at all times, make
prompt payment of all contributions required under all employee pension benefit
plans (as defined in Section 3(2) of ERISA) ("Pension Plans") and required to
meet the minimum funding standard set forth in ERISA with respect to each Plan;
(b) promptly upon request, furnish the Administrative Agent and the Banks copies
of each annual report/return (Form 5500 Series), as well as all schedules and
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attachments required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA, and the regulations promulgated
thereunder, in connection with each of its Pension Plans for each Plan Year; (c)
notify the Administrative Agent immediately of any fact, including, but not
limited to, any Reportable Event (as defined in ERISA) arising in connection
with any Plan, which might constitute grounds for termination thereof by the
PBGC or for the appointment by the appropriate United States District Court of a
trustee to administer such Plan, together with a statement, if requested by the
Bank, as to the reason therefor and the action, if any, proposed to be taken
with respect thereof; and (d) furnish to the Administrative Agent, upon its
request, such additional information concerning any of the Pension Plans as may
be reasonably requested. The Borrower will not, nor will it permit any of its
Subsidiaries or ERISA Affiliates to (I) terminate a Plan if any such termination
would have a Material Adverse Effect, or (II) cause or permit to exist any
Reportable Event (as defined in ERISA) or other event or condition which
presents a material risk of termination at the request of the PBGC.
6.10 Use of Proceeds.
The proceeds of the Loans hereunder shall be used for the purpose of
(i) refinancing and replacing the existing credit facility extended to Owens &
Minor, Inc. by NationsBank and the other lenders and other existing bank
indebtedness, (ii) general working capital purposes, (iii) capital expenditures
and (v) other general corporate purposes.
6.11 Financial Covenants.
(a) Consolidated Current Ratio. The Borrower will maintain a
Consolidated Current Ratio, as determined on each Determination Date, 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 $53,500,000; provided, however, the minimum Consolidated Tangible
Net Worth required hereunder shall be increased on the last day of each of the
Borrower's fiscal quarters to occur after March 31, 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) Leverage Ratio. As of each Determination Date during the periods
set out below, the Leverage Ratio will not exceed:
Leverage Ratio
--------------
For the fiscal quarter ending
on June 30, 1996 through and
including the fiscal quarter
ending on March 31, 1998 .65 to 1.0
For the fiscal quarter ending
on June 30, 1998 and thereafter .60 to 1.0
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(d) 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 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 through and
including the fiscal quarter
ending on December 31, 1998 1.3 to 1.0
For the fiscal quarter ending on
March 31, 1999 and thereafter 1.5 to 1.0
The Applicable Period for which the Fixed Charge Coverage Ratio shall be
determined shall be for the period of four consecutive fiscal quarters 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 as of the applicable
Determination Date.
6.12 Additional Credit Parties.
(a) Additional Subsidiaries. Where the Subsidiaries (other than a
Securitization Subsidiary) which are not Guarantors hereunder (the
"Non-Guarantor Subsidiaries") shall, as a group, at any time constitute more
than either (i) 5% of the consolidated gross revenues for the Borrower and its
Subsidiaries, (ii) 5% of consolidated net income for the Borrower and its
Subsidiaries, or (iii) 5% of consolidated assets for the Borrower and its
Subsidiaries (collectively, the "Threshold Requirement"), the Borrower will
promptly notify the Administrative Agent thereof, and promptly cause one or more
of the Non-Guarantor Subsidiaries (other than a Securitization Subsidiary) to
become a "Guarantor" hereunder by way of execution of a Joinder Agreement, such
that immediately after the joinder of such Subsidiaries as Guarantors hereunder,
the remaining Non-Guarantor Subsidiaries shall not, as a group, exceed the
Threshold Requirement. The Borrower may at any time, at its option, cause a
Non-Guarantor Subsidiary to sign a Joinder Agreement at which time such
Subsidiary shall become a Guarantor and a Credit Party under this Credit
Agreement.
(b) Guaranties Relating to Other Debt. Where a Non-Guarantor Subsidiary
shall give a guaranty or become obligated under Guaranty Obligations relating to
other Indebtedness (including specifically without limitation, the Senior
Subordinated Notes), the Borrower will promptly notify the Administrative Agent
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thereof, and promptly cause such Non-Guarantor Subsidiary to become a
"Guarantor" hereunder by way of execution of a Joinder Agreement.
SECTION 7
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans, together with interest, fees
and other obligations hereunder, have been paid in full and the Commitments
hereunder shall have terminated:
7.01 Indebtedness.
Neither the Borrower nor any of its Restricted Subsidiaries will
contract, create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the
other Credit Documents;
(b) Indebtedness existing as of the Closing Date as referenced
in Section 5.09 (and renewals, refinancings or extensions thereof on
terms and conditions no more favorable to such Person than such
existing Indebtedness (taking into account reasonable market conditions
existing at such time) and in a principal amount not in excess of that
outstanding as of the date of such renewal, refinancing or extension);
(c) Indebtedness in respect of current accounts payable or
accrued (other than for borrowed money or purchase money obligations)
and incurred in the ordinary course of business, provided, that all
such liabilities, accounts and claims shall be paid when due (or in
conformity with customary trade terms);
(d) Purchase money Indebtedness and capital lease obligations
relating to Capitalized Leases incurred to finance the purchase or
lease of fixed assets provided that (i) the total of all such
Indebtedness and obligations shall not exceed an aggregate principal
amount of $10,000,000 at any one time outstanding; (ii) such
Indebtedness and obligations when incurred shall not exceed the
purchase price of the asset financed; and (iii) no such Indebtedness
and obligations shall be refinanced for a principal amount in excess of
the principal balance outstanding thereon at the time of such
refinancing; and
(e) (i) Indebtedness evidenced by the Senior Subordinated
Notes and (ii) other Subordinated Debt acceptable to the Required
Lenders in their sole discretion;
(f) Indebtedness and obligations relating to Qualified
Securitization Transactions, provided that the aggregate principal
amount outstanding pursuant to all facilities under such Qualified
Securitization Transactions shall not exceed $150,000,000 at any time;
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(g) Unsecured intercompany Indebtedness among the Credit
Parties;
(h) Other short term unsecured indebtedness for borrowed money
(including Guaranty Obligations) by the Borrower which does not exceed
$10,000,000 in the aggregate at any time outstanding; and
(i) Obligations under or arising in connection with Interest
Rate Protection Agreements entered into in order to manage existing or
anticipated interest rate risks and not for speculative purposes and
relating to Indebtedness otherwise permitted under this Section 7.01.
7.02 Liens.
Neither the Borrower nor any of its Restricted Subsidiaries will
contract, create, incur, assume or permit to exist any Lien with respect to any
of its property or assets of any kind (whether real or personal, tangible or
intangible), whether now owned or after acquired, except for Permitted Liens.
7.03 Guaranty Obligations.
Neither the Borrower nor any of its Restricted Subsidiaries will enter
into or otherwise become or be liable in respect of any Guaranty Obligations
(excluding specifically therefrom endorsements in the ordinary course of
business of negotiable instruments for deposit or collection) other than (i)
those in favor of the Banks in connection herewith, (ii) guaranty of
indebtedness of account debtors of the Credit Parties relating to the financing
or refinancing of trade receivables owing to the Credit Parties in an aggregate
amount not to exceed $1,000,000, (iii) guaranty by the Credit Parties in respect
of the Indebtedness evidenced by the Senior Subordinated Notes and in respect of
Obligations under or arising in connection with Interest Rate Protection
Agreements permitted hereunder, (iv) guaranty by a Credit Party of operating
lease obligations of another Credit Party entered into in the ordinary course of
business, and (v) other Guaranty Obligations to the extent permitted pursuant to
Section 7.01.
7.04 Nature of Business.
Neither the Borrower nor any of its Restricted Subsidiaries will
substantively alter the character of its business in any material respect from
that conducted as of the Closing Date.
7.05 Consolidation, Merger, Sale or Purchase of Assets, etc.
Neither the Borrower nor any of its Restricted Subsidiaries will
(a) dissolve, liquidate, or wind up its affairs, sell,
transfer, lease or otherwise dispose of all or any substantial part of
its property or assets (other than in the ordinary course of business
for fair consideration), or agree to any of the foregoing at a future
time, except for (i) the sale or disposition of machinery and equipment
no longer useful in the conduct of its business, (ii) sales, transfers
or other dispositions of property where the proceeds of such sale,
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transfer or other disposition are reinvested within 90 days in property
of the Borrower or a Restricted Subsidiary of substantially equal value
and (iii) the sale of Receivables and Receivables Related Assets
pursuant to the terms of a Qualified Receivables Transaction permitted
hereunder. As used herein, "substantial part" shall mean if the book
value of such assets, when added to the book value of all other assets
sold, leased or otherwise disposed of by the Borrower and its
Restricted Subsidiaries (other than in the ordinary course of business)
during the period beginning on the date of this Credit Agreement and
ending on the date of such sale, lease or other disposition, exceeds at
any time an amount equal to 5% of Consolidated Total Assets determined
as of the end of the immediately preceding fiscal year; or
(b) purchase, lease or otherwise acquire (in a single
transaction or a series of related transactions) all or any substantial
part of the property or assets of any Person (other than purchases or
other acquisitions of inventory, leases, materials, property and
equipment in the ordinary course of business, except as otherwise
limited or prohibited herein), or enter into any transaction of merger
or consolidation, or agree to do any of the foregoing at a future time,
except for (i) Capital Expenditures to the extent of the limitations
set out in Section 6.11(d) by way of inclusion of Capital Expenditures
in the definition of "Consolidated Net Income Available for Fixed
Charges" as used therein, (ii) investments, acquisitions and transfers
or dispositions of properties permitted pursuant to Section 7.06, (iii)
the merger or consolidation of a Restricted Subsidiary into, or a sale,
transfer or lease of all or a substantial part of its properties (at
fair value) to, a Credit Party, (iv) the sale of Receivables and
Receivables Related Assets pursuant to the terms of a Qualified
Securitization Transaction permitted hereunder, and (v) the merger of
any Person into a Credit Party, provided that the Credit Party shall be
the surviving corporation, and management and control of the Credit
Party shall remain substantially unchanged and no Default or Event of
Default shall exist either immediately prior to or after giving effect
to such merger. Notwithstanding the foregoing, other than Capital
Expenditures permitted pursuant to Section 6.11(d) by way of inclusion
of Capital Expenditures in the definition of "Consolidated Net Income
Available for Fixed Charges" as used therein, investments pursuant to
Section 7.06, in the case of an acquisition by the Borrower or its
Restricted Subsidiaries, whether by way of asset purchase, stock or
securities purchase or merger or consolidation, the aggregate
consideration paid in connection with such acquisitions whether in
cash, securities, property or other consideration, shall not exceed 20%
of Consolidated Tangible Net Worth in any fiscal year. The Borrower
will, in connection with any such material purchase, lease or
acquisition and prior to giving effect thereto, deliver to the
Administrative Agent a pro forma statement demonstrating compliance
with the provisions hereof.
7.06 Advances, Investments and Loans.
Neither the Borrower nor any of its Restricted Subsidiaries will lend
money or credit or make advances to any Person, or purchase or acquire any
stock, obligations or securities of, or any other interest in, or make any
capital contribution to any Person except for Permitted Investments.
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7.07 Prepayments and Amendments Relating to Other Debt.
The Borrower will not, without the prior written consent of the
Required Banks, nor will it permit any of its Restricted Subsidiaries to,
(a) after the issuance thereof, amend or modify, or permit any
amendment to or modification of, any of the terms of any Subordinated Debt
(including specifically without limitation, the Indebtedness evidenced by the
Senior Subordinated Notes) or any other senior Funded Debt, if reasonably
adverse to the Banks and their interests hereunder;
(b) make, or give any notice with respect thereto, any voluntary or
optional payment, prepayment, redemption, defeasance or acquisition for value of
(including by way of deposit of money or securities with a trustee with respect
thereto before due for the purpose of paying when due) or exchange of any other
Indebtedness for borrowed money, other than prepayments in respect of capital
lease obligations relating to Capital Leases not to exceed $10,000,000 in the
aggregate in any fiscal year;
(c) make any payment, prepayment, redemption, defeasance or acquisition
for value (including without limitation by way of deposit of money or securities
with a trustee with respect thereto before due for the purpose of paying when
due), or refund, refinance or exchange of any Subordinated Debt other than (i)
regularly scheduled non-default principal payments and regularly scheduled
non-default semiannual interest payments on the Senior Subordinated Notes and
(ii) so long as
(A) no Default or Event of Default shall exist either
immediately prior to or immediately after giving effect
thereto, and
(B) 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,
prepayments and redemption in respect of the Senior Subordinated Notes, provided
that the aggregate amount of all such prepayments and redemptions shall not
exceed $25,000,000 in any calendar year.
7.08 Transactions with Affiliates.
Other than transactions relating to a Qualified Securitization
Transaction, no member of the Consolidated Borrower Group will enter into any
transaction or series of transactions, whether or not in the ordinary course of
business, with any officer, director, shareholder, Subsidiary or Affiliate other
than on terms and conditions substantially as favorable as would be obtainable
in a comparable arm's-length transaction with a Person other than an Affiliate.
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7.09 Ownership of Subsidiaries.
Neither the Borrower nor any of its Restricted Subsidiaries will sell,
transfer or otherwise dispose of, any shares of capital stock of any
Subsidiaries or permit any Subsidiaries to issue, sell or otherwise dispose of,
any shares of capital stock of any Subsidiary to any Person other than a
Subsidiary. The Borrower will not create, form or acquire, nor will it permit
any of its Subsidiaries to create, form or acquire, any Subsidiary, unless such
Subsidiary is either (i) promptly joined as an Additional Credit Party pursuant
to the requirements of Section 6.12, if such joinder is required thereby or (ii)
a Securitization Subsidiary.
7.10 Fiscal Year.
Neither the Borrower nor any of its Restricted Subsidiaries will change
its fiscal year.
7.11 Subsidiary Dividends.
Neither the Borrower nor any of the other Credit Parties will enter
into, assume or otherwise become subject to, or permit any of their respective
Subsidiaries (other than a Securitization Subsidiary pursuant to a Qualified
Securitization Transaction permitted hereunder) to enter into, assume or
otherwise become subject to, any agreement prohibiting or otherwise restricting
the payment of dividends by any of the Borrower's Subsidiaries (other than a
Securitization Subsidiary pursuant to a Qualified Securitization Transaction
permitted hereunder), except as may be provided herein or in the indenture
relating to the Senior Subordinated Notes.
7.12 Dividends.
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.
7.13 Securitization Transaction.
As part of the refinancing contemplated by this Credit Agreement, the
Borrower and two of its Restricted Subsidiaries are entering into a Qualified
Securitization Transaction pursuant to the Securitization Agreements. The
execution and delivery of the Securitization Agreement and the performance by
the Borrower and its Subsidiaries of their obligations under the Securitization
Agreements and any related agreements shall not constitute a default under this
Credit Agreement; provided, however, that any default which shall occur with
respect to the Securitization Agreements resulting from any action or inaction
by any of the Borrower or its Restricted Subsidiaries shall constitute an Event
of Default hereunder.
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SECTION 8
EVENTS OF DEFAULT
8.01 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of
any principal of any of the Loans, or
(ii) default, and such default shall
continue for three (3) or more days, in the payment when due
of any interest on the Loans, or of any fees or other amounts
owing hereunder, under any of the other Credit Documents or in
connection herewith; or
(b) Representations. Any representation, warranty or statement made or
deemed to be made by any Credit Party herein, in any of the other Credit
Documents, or in any statement or certificate delivered or required to be
delivered pursuant hereto or thereto shall prove untrue in any material respect
on the date as of which it was made or deemed to have been made; or
(c) Covenants. Any Credit Party shall
(i) default in the due performance or
observance of any term, covenant or agreement contained in
Sections 6.01(h), 6.02, 6.10 or 7.01 through 7.11, inclusive,
or
(ii) default in the due performance or
observance of any of the financial covenants contained in
Section 6.11 and the continuance thereof for a period of 15
days after knowledge thereof by a Responsible Officer (but in
no event later than 15 days after the date by which the
Borrower is required to deliver annual or quarterly financial
statements in accordance with Sections 6.01(a) and (b), as
appropriate) without the Borrower having obtained an effective
waiver hereunder; or
(iii) default in the due performance or
observance by it of any term, covenant or agreement (other
than those referred to in subsections (a), (b) or (c)(i) or
(ii) of this Section 8.01) contained in this Credit Agreement
and such default shall continue unremedied for a period of at
least 30 days after the earlier of a Responsible Officer
becoming aware of such default or notice thereof by the
Administrative Agent; provided, however, that if such default
cannot be cured within such period, the Borrower or other
Credit Party may have such additional period of time not to
exceed 30 days after the expiration of such original 30 day
period, and such default shall not constitute an Event of
Default hereunder, so long as the applicable Credit Party
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shall commence within such original 30 day period, and
diligently pursue, appropriate curative efforts; or
(d) Other Credit Documents. (i) Any Credit Party shall default in the
due performance or observance of any term, covenant or agreement in any of the
other Credit Documents (subject to applicable grace or cure periods, if any), or
(ii) any Credit Document shall fail to be in full force and effect or to give
the Administrative Agent and/or the Banks the liens, rights, powers and
privileges purported to be created thereby; or
(e) Guaranties. The guaranty given by the Credit Parties hereunder or
by any Additional Credit Party hereafter or any material provision thereof shall
cease to be in full force and effect, or any Guarantor thereunder or any Person
acting by or on behalf of such Guarantor shall deny or disaffirm such
Guarantor's obligations under such guaranty, or any Guarantor shall default in
the due performance or observance of any term, covenant or agreement on its part
to be performed or observed pursuant to any guaranty; or
(f) Bankruptcy, etc. The Borrower or any Restricted Subsidiary shall
commence a voluntary case concerning itself under the Bankruptcy Code; or an
involuntary case is commenced against the Borrower or any Restricted Subsidiary
under the Bankruptcy Code and the petition is not dismissed within 90 days after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of all or substantially all of the property of
the Borrower or any Restricted Subsidiary; or the Borrower or any Restricted
Subsidiary commences any other proceeding under any reorganization, arrangement,
adjustment of the debt, relief of creditors, dissolution, insolvency or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Borrower or any Restricted Subsidiary; or there is commenced against the
Borrower or any Restricted Subsidiary any such proceeding which remains
undismissed for a period of 90 days; or the Borrower or any Restricted
Subsidiary is adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Borrower or any
Restricted Subsidiary suffers appointment of any custodian or the like for it or
for any substantial part of its property to continue unchanged or unstayed for a
period of 90 days; or the Borrower or any Restricted Subsidiary makes a general
assignment for the benefit of creditors; or any corporate action is taken by the
Borrower or any Restricted Subsidiary for the purpose of effecting any of the
foregoing; or
(g) Defaults under Other Agreements. With respect to any Indebtedness
(other than Indebtedness outstanding under this Credit Agreement) in excess of
$10,000,000 in the aggregate for the Borrower and its Restricted Subsidiaries,
(i) the Borrower or any of its Restricted Subsidiaries shall (A) default in any
payment (beyond the applicable grace period with respect thereto, if any) with
respect to any such Indebtedness, or (B) default in the observance or
performance relating to such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event or
condition shall occur or condition exist, the effect of which default or other
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event or condition is to cause, or permit, the holder or holders of such
Indebtedness (or trustee or agent on behalf of such holders) to cause, any such
Indebtedness to become due prior to its stated maturity; or (ii) any such
Indebtedness shall be declared due and payable, or required to be prepaid other
than by a regularly scheduled required prepayment, prior to the stated maturity
thereof; or
(h) Judgments. One or more judgments or decrees shall be entered
against the Borrower or any Restricted Subsidiary involving a liability of
$500,000 or more in the aggregate (to the extent not paid or fully covered by
insurance provided by a carrier who has acknowledged coverage) and any such
judgments or decrees shall not have been vacated, discharged or stayed or bonded
pending appeal within 30 days from the entry thereof; or
(i) ERISA. (i) Any Credit Party or any member of the Controlled Group
shall fail to pay when due an amount or amounts aggregating in excess of
$500,000 which it shall have become liable to pay under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans which in the aggregate have
unfunded liabilities in excess of $500,000 (individually and collectively, a
"Material Plan") shall be filed under Title IV of ERISA by any such member of
the Consolidated Borrower Group or any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, to impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the Controlled Group to incur a current
payment obligation in excess of $500,000; or
(j) Ownership. There shall occur a Change of Control; or
(k) Default under Senior Subordinated Notes. The occurrence of an
event of default under the Senior Subordinated Notes; or
(l) Default under Securitization Agreement. The occurrence of an event
of default under any of the Securitization Agreements.
8.02 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the Required Banks or
cured to the satisfaction of the Required Banks (pursuant to the voting
procedures in Section 10.06), the Administrative Agent may, and upon the request
and direction of the Required Banks, shall, by written notice to the Borrower
take any of the following actions without prejudice to the rights of the
Administrative Agent or any Bank to enforce its claims against the Credit
Parties, except as otherwise specifically provided for herein:
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(i) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(ii) Acceleration of Loans. Declare the unpaid principal of
and any accrued interest in respect of all Loans and any and all other
indebtedness or obligations of any and every kind owing by the Borrower
to any of the Banks hereunder to be due whereupon the same shall be
immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the
Borrower.
(iii) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents and all
rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
8.01(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all accrued interest in respect thereof, all accrued and unpaid Fees and
other indebtedness or obligations owing to the Banks hereunder shall immediately
become due and payable without the giving of any notice or other action by the
Administrative Agent or the Banks.
SECTION 9
AGENCY PROVISIONS
9.01 Appointment.
Each Bank hereby designates and appoints NationsBank, N.A. as agent (in
such capacity as Agent hereunder, the "Agent"), Bank of America NT & SA and
Crestar Bank as co-agents (in such capacity as Co-Agent hereunder, the
"Co-Agents") and NationsBank, N.A. as administrative agent (in such capacity as
Administrative Agent hereunder, the "Administrative Agent") of such Bank to act
as specified herein and the other Credit Documents, and each such Bank hereby
authorizes the Agent, the Administrative Agent and the Co-Agents, respectively,
as the agent for such Bank, to take such action on its behalf under the
provisions of this Credit Agreement and the other Credit Documents and to
exercise such powers and perform such duties as are expressly delegated by the
terms hereof and of the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere herein and in the other Credit Documents, neither the Agent,
the Co-Agents nor the Administrative Agent shall have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Agents. To the extent that the provisions of this Section relate to
intercreditor or other issues as between and among the Agents and the Banks,
they are solely for the benefit of the Agents and the Banks and none of the
Credit Parties shall have any rights as a third party beneficiary of the
provisions hereof. In performing its functions and duties under this Credit
Agreement and the other Credit Documents, the Agent, the Administrative Agent
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and the Co-Agents shall act solely as agents of the Banks and do not assume and
shall not be deemed to have assumed any obligation or relationship of agency or
trust with or for the Borrower or any other Credit Party.
9.02 Delegation of Duties.
The Agents may execute any of their respective duties hereunder or
under the other Credit Documents by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agents shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.
9.03 Exculpatory Provisions.
Neither the Agent, the Co-Agents nor the Administrative Agent nor any
of their respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection herewith or in connection with
any of the other Credit Documents (except for its or such Person's own gross
negligence or willful misconduct), or (ii) responsible in any manner to any of
the Banks for any recitals, statements, representations or warranties made by
any of the Credit Parties contained herein or in any of the other Credit
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Administrative Agent under or in
connection herewith or in connection with the other Credit Documents, or
enforceability or sufficiency hereof or of any of the other Credit Documents, or
for any failure of the Borrower to perform its obligations hereunder or
thereunder. Neither the Agent, the Co-Agents nor the Administrative Agent shall
be responsible to any Bank for the effectiveness, genuineness, validity,
enforceability, collectability or sufficiency of this Credit Agreement, or any
of the other Credit Documents or for any representations, warranties, recitals
or statements made herein or therein or made by the Borrower or any Credit Party
in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith furnished or made by the Agent, the Co-Agents or the Administrative
Agent to the Banks or by or on behalf of the Credit Parties to the Agent, the
Co-Agents or the Administrative Agent or any Bank or be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or of the existence or possible existence of any
Default or Event of Default or to inspect the properties, books or records of
the Credit Parties.
9.04 Reliance on Communications.
The Agent, the Co-Agents and the Administrative Agent shall be entitled
to rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation reasonably believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel
to the Borrower or any of the other Credit Parties, independent accountants and
other experts selected by the Administrative Agent with reasonable care). The
Administrative Agent may deem and treat the Banks as the owner of their
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respective interests hereunder for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent in accordance with Section 10.03(b) hereof. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Credit Agreement or under any of the other Credit Documents
unless it shall first receive such advice or concurrence of the Required Banks
as it deems appropriate or it shall first be indemnified to its satisfaction by
the Banks against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or under any of the other Credit Documents in accordance with
a request of the Required Banks (or to the extent specifically provided in
Section 10.06, all the Banks) and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Banks (including their
successors and assigns).
9.05 Notice of Default.
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the
Administrative Agent has received notice from a Bank or a Credit Party referring
to the Credit Document, describing such Default or Event of Default and stating
that such notice is a "notice of default." In the event that the Administrative
Agent receives such a notice, the Administrative Agent shall give prompt notice
thereof to the Banks. The Administrative Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Banks.
9.06 Non-Reliance on Agents and Other Banks.
Each Bank expressly acknowledges that neither the Agent, the Co-Agents
nor the Administrative Agent nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by the Agent, the Co-Agents or the
Administrative Agent or any affiliate thereof hereinafter taken, including any
review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent, the Co-Agents or the Administrative
Agent to any Bank. Each Bank represents to the Agent, the Co-Agents and the
Administrative Agent that it has, independently and without reliance upon the
Agent, the Co-Agents or the Administrative Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Borrower
and made its own decision to make its Loans hereunder and enter into this Credit
Agreement. Each Bank also represents that it will, independently and without
reliance upon the Agent, the Co-Agents or the Administrative Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Credit Agreement, and to make such
investigation as it deems necessary to inform itself as to the business, assets,
operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Banks by the Administrative
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Agent hereunder, neither the Agent, the Co-Agents nor the Administrative Agent
shall have any duty or responsibility to provide any Bank with any credit or
other information concerning the business, operations, assets, property,
financial or other conditions, prospects or creditworthiness of the Borrower
which may come into the possession of the Agent, the Co-Agents nor the
Administrative Agent or any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates.
9.07 Indemnification.
The Banks agree to indemnify the Agent, the Co-Agents and the
Administrative Agent in their respective capacities as such (to the extent not
reimbursed by the Borrower and without limiting the obligation of the Borrower
to do so), ratably according to their respective Commitments, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including without limitation at any time following the payment
of the Obligations) be imposed on, incurred by or asserted against the Agent,
the Co-Agents or the Administrative Agent in their respective capacities as such
in any way relating to or arising out of this Credit Agreement or the other
Credit Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Agent, the Co-Agents or the Administrative Agent under or in
connection with any of the foregoing; provided that no Bank shall be liable for
the payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the gross negligence or willful misconduct of the Agent, a Co-Agent or the
Administrative Agent. If any indemnity furnished to the Agent, the Co-Agents or
the Administrative Agent for any purpose shall, in the opinion of the Agent, the
Co-Agents or the Administrative Agent, be insufficient or become impaired, the
Administrative Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished. The agreements in this Section shall survive the payment of the
Obligations and all other amounts payable hereunder and under the other Credit
Documents.
9.08 Agents in their Individual Capacity.
The Agent, the Co-Agents and the Administrative Agent and their
respective affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower or any other members of the
Consolidated Borrower Group as though the Agent, the Co-Agents or the
Administrative Agent were not the Agent, a Co-Agent or Administrative Agent
hereunder. With respect to the Loans made and all Obligations owing to it, the
Agent, the Co-Agent or the Administrative Agent shall have the same rights and
powers under this Credit Agreement as any Bank and may exercise the same as
though they were not the Agent, a Co-Agent or Administrative Agent, and the
terms "Bank" and "Banks" shall include the Agent, the Co-Agents and the
Administrative Agent in their individual capacity.
9.09 Successor Agent.
The Agent, the Administrative Agent and any Co-Agent may, at any time,
resign upon 30 days' written notice to the Banks and the Borrower, and be
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removed with or without cause by the Required Banks upon 30 days' written notice
to the Borrower and the Agent, the Co-Agent or Administrative Agent. Upon any
such resignation or removal, the Required Banks, with the consent of the
Borrower (which consent shall not be unreasonably withheld or delayed), shall
have the right to appoint a successor Agent, Co-Agent or Administrative Agent.
If no successor Agent, Co-Agent or Administrative Agent shall have been so
appointed by the Required Banks, and shall have accepted such appointment,
within 30 days after the notice of resignation or notice of removal, as
appropriate, then the retiring Agent or Administrative Agent shall select a
successor Agent or Administrative Agent, with the consent of the Borrower (which
consent shall not be unreasonably withheld or delayed), provided such successor
is a Bank hereunder or a commercial bank organized under the laws of the United
States of America or of any State thereof and has a combined capital and surplus
of at least $400,000,000. There is no requirement for a successor Co-Agent to be
appointed. Upon the acceptance of any appointment as Agent, Co-Agent or
Administrative Agent hereunder by a successor, such successor Co-Agent or
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, Co-Agent or
Administrative Agent, and the retiring Agent, Co-Agent or Administrative Agent
shall be discharged from its duties and obligations as Agent, Co-Agent or
Administrative Agent, as appropriate, under this Credit Agreement and the other
Credit Documents and the provisions of this Section 9.09 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent,
Co-Agent or Administrative Agent under this Credit Agreement.
SECTION 10
MISCELLANEOUS
10.01 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (iv)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case to the respective parties at
the address, in the case of the Borrower and the Administrative Agent, set forth
below, and in the case of the Banks, set forth on Schedule 2.01(a), or at such
other address as such party may specify by written notice to the other parties
hereto:
if to the Borrower or the Guarantors:
Owens & Minor, Inc.
4800 Cox Road
Glen Allen, Virginia 23060
Attn: Richard F. Bozard
Telephone: (804) 965-2921
Telecopy: (804) 965-5403
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if to the Agent, the Administrative Agent or the Swingline Lender:
NationsBank, N.A.
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Tonya Sloan
Agency Services
Telephone: (704) 386-3916
Telecopy: (704) 386-9923
With a copy to:
NationsBank, N.A.
NationsBank Healthcare Finance Group
6610 Rockledge Drive, First Floor
Bethesda, Maryland 20817-1876
Attn: Michael B. Andry
Vice President
Telephone: (301) 571-0710
Telecopy: (301) 571-0719
10.02 Right of Set-Off.
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, the Borrower
agrees that upon the occurrence and during the continuance of an Event of
Default and the commencement of the remedies described in Section 8.02 hereof,
each Bank is authorized at any time and from time to time, without presentment,
demand, protest or other notice of any kind (all of which rights being hereby
expressly waived), to set-off and to appropriate and apply any and all deposits
(general or special) and any other indebtedness at any time held or owing by
such Bank (including, without limitation branches, agencies or Affiliates of
such Bank wherever located) to or for the credit or the account of the Borrower
against obligations and liabilities of the Borrower to such Bank hereunder,
under the Notes, the other Credit Documents or otherwise, irrespective of
whether such Bank shall have made any demand hereunder and although such
obligations, liabilities or claims, or any of them, may be contingent or
unmatured, and any such set-off shall be deemed to have been made immediately
upon the occurrence of an Event of Default even though such charge is made or
entered on the books of such Bank subsequent thereto. The Borrower hereby agrees
that any Person purchasing a participation in the Loans and Commitments
hereunder pursuant to Section 10.03(c) or Section 2.20. may exercise all rights
of set-off with respect to its participation interest as fully as if such Person
were a Bank hereunder. The Administrative Agent and the Banks agree to give
written notice to the appropriate Credit Party of any exercise of set-off,
bankers' lien or other similar right; provided, however, that any such notice
need not be given in advance of the exercise thereof.
10.03 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
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the parties hereto; provided that the Borrower may not assign and transfer any
of its interests without prior written consent of the Banks; provided further
that the rights of each Bank to transfer, assign or grant participations in its
rights and/or obligations hereunder shall be limited as set forth in this
Section 10.03, provided however that nothing herein shall prevent or prohibit
any Bank from (i) pledging its Loans hereunder to a Federal Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank, or (ii)
granting assignments or participation in such Bank's Loans and/or Commitments
hereunder to its parent company and/or to any affiliate of such Bank which is at
least 50% owned by such Bank or its parent company.
(b) Assignments. Each Bank may with the prior written consent of the
Administrative Agent, and so long as no Event of Default then exists, the
Borrower, which consent shall not be unreasonably withheld or delayed, assign
all or a portion of its rights and obligations hereunder pursuant to an
assignment agreement (an "Assignment") substantially in the form of Schedule
10.03(b) to one or more Eligible Assignees, provided that (i) any such
prospective assignment shall first be offered to the other Banks on the same
terms and conditions as are available to the prospective assignee, (ii) so long
as no Event of Default shall then exist and be continuing, after a period of 15
days from first offering such assignment interest to the Banks as provided in
the foregoing subsection (i) hereof, the assigning Bank shall give notice to the
Borrower of any such prospective assignment and the Borrower may, at its own
expense with the assistance of the Administrative Agent, within a period of 30
days thereafter, make arrangements for another bank or financial institution
reasonably acceptable to the Administrative Agent to purchase and accept such
assignment interest (at par without payment of any fee, other than the $1,500
transfer fee to the Administrative Agent described below, on account thereof),
(iii) any such assignment shall be in a minimum aggregate amount of $10,000,000
of the Commitments and in integral multiples of $1,000,000 above such amount,
and (iv) each such assignment shall be of a constant not varying the percentage
of all of the assigning Bank's rights and obligations under this Credit
Agreement. The Administrative Agent shall maintain a copy of each Assignment and
the names and addresses of the Banks, and the Commitment of, and principal
amount of the Loans owing to, each Bank pursuant to the terms hereof from time
to time (the "Register"). The entries in the Register shall be conclusive in the
absence of manifest error and the Credit Parties, the Agents and the Banks may
treat each person whose name is recorded in the Register pursuant to the terms
hereof as a Bank hereunder for all purposes of this Credit Agreement. The
Register shall be available for inspection by the Borrower and any Bank, at any
reasonable time and from time to time upon reasonable prior notice. Any such
assignment hereunder shall be effective upon (i) the written consent of the
Borrower and the Administrative Agent as provided above, (ii) delivery to the
Administrative Agent of a copy of the Assignment together with a transfer fee of
$1,500 payable by the assigning Bank to the Administrative Agent for its own
account and (iii) the Administrative Agent's recordation of the name of the
assignee in the Register. The assigning Bank will give prompt notice to the
Administrative Agent and the Borrower of any Assignment. Upon the effectiveness
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of any such assignment (and after notice to the Borrower as provided herein),
the assignee shall become a "Bank" for all purposes of this Credit Agreement and
the other Credit Documents and, to the extent of such assignment, the assigning
Bank shall be relieved of its obligations hereunder to the extent of the Loans
and Commitment components being assigned. Along such lines the Borrower agrees
that upon notice of any such assignment and surrender of the appropriate Note or
Notes, it will promptly provide to the assigning Bank and to the assignee
separate promissory notes in the amount of their respective interests
substantially in the form of the original Note (but with notation thereon that
it is given in substitution for and replacement of the original Note or any
replacement notes thereof). All surrendered Notes shall be canceled and returned
to the Borrower.
(c) Participations.
(i) Each Bank may sell, transfer, grant or assign participations in all
or any part of such Bank's interests and obligations hereunder; provided that
(i) such selling Bank shall remain a "Bank" for all purposes under this Credit
Agreement (such selling Bank's obligations under the Credit Documents remaining
unchanged) and the participant shall not constitute a Bank hereunder, (ii) no
such participant shall have, or be granted, rights to approve any amendment or
waiver relating to this Credit Agreement or the other Credit Documents except to
the extent any such amendment or waiver would (A) reduce the principal of or
rate of interest on or fees in respect of any Loans in which the participant is
participating, (B) postpone the date fixed for any payment of principal
(including extension of the Termination Date or the date of any mandatory
prepayment), interest or fees in which the participant is participating, or (C)
release all or substantially all of the collateral or guaranties (except as
expressly provided in the Credit Documents) supporting any of the Loans or
Commitments in which the participant is participating, (iii) sub-participations
by the participant (except to an affiliate, parent company or affiliate of a
parent company of the participant) shall be prohibited and (iv) any such
participations shall be in a minimum aggregate amount of $5,000,000 of the
Commitments and in integral multiples of $1,000,000 in excess thereof (except in
the case of Competitive Loans as to which there shall be no minimum amount). In
the case of any such participation, except as provided in Section 10.02, the
participant shall not have any rights under this Credit Agreement or the other
Credit Documents (the participant's rights against the selling Bank in respect
of such participation to be those set forth in the participation agreement with
such Bank creating such participation) and all amounts payable by the Borrower
hereunder shall be determined as if such Bank had not sold such participation.
(ii) Each prospective participant that is a Non-U.S. Person must submit
to the Borrower and the Administrative Agent on or before the effective date of
the related participation either: (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 participant claiming an exemption from U.S. federal withholding
tax under Section 871(h) or 881(c) of the Code with respect to payments of
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"portfolio interest", a Form W-8 (or any subsequent versions thereof or
successors thereto) and a certificate representing that such participant is not
a bank for purposes of Section 881(c)(3)(A) of the Code, is not a 10 percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower, and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code), in either case properly
completed and duly executed by such participant and entitling such participant
to receive a complete exemption from U.S. federal withholding tax with respect
to payments received pursuant to such participation. Each prospective
participant that is organized under the laws of the United States or any state
thereof or the District of Columbia shall deliver to the Borrower on or before
the date of the related participation an original copy of the Internal Revenue
Service Form W-9 (or applicable successor form) properly completed and duly
executed by such participant. Each participant also shall, from time to time,
submit to the Borrower and the Administrative Agent such additional duly
completed and signed copies of such forms (or such successor forms or other
documents as shall be adopted from time to time by the relevant United States
taxing authorities) as may be (i) reasonably requested in writing by the
Borrower or the Administrative Agent, (ii) appropriate under then current United
States laws or regulations, or (iii) required due to the obsolescence or
invalidity of any form previously delivered by such participant. Upon the
reasonable request of the Borrower or the Administrative Agent, each participant
that has not provided the forms or other documents, as provided above, on the
basis of being a United States person shall submit to the Borrower and the
Administrative Agent a certificate to the effect that it is such a "United
States person."
10.04 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Administrative Agent or any Bank
in exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Borrower or any Guarantor and the
Administrative Agent or any Bank shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege hereunder or
under any other Credit Document preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder or thereunder.
The rights and remedies provided herein are cumulative and not exclusive of any
rights or remedies which the Administrative Agent or any Bank would otherwise
have. No notice to or demand on the Borrower in any case shall entitle the
Borrower or any Guarantor to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Administrative
Agent or the Banks to any other or further action in any circumstances without
notice or demand.
10.05 Payment of Expenses, etc.
The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses of the Administrative Agent in connection with the negotiation,
preparation, execution and delivery and administration of this Credit Agreement
and the other Credit Documents and the documents and instruments referred to
therein (including, without limitation, the reasonable fees and expenses of
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Moore & Van Allen, PLLC, special counsel to the Administrative Agent) and any
amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by the
Borrower under this Credit Agreement and of the Administrative Agent and the
Banks in connection with enforcement of the Credit Documents and the documents
and instruments referred to therein (including, without limitation, in
connection with any such enforcement, the reasonable fees and disbursements of
counsel for the Administrative Agent and each of the Banks, including in-house
counsel); (ii) pay and hold each of the Banks harmless from and against any and
all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iii)
indemnify each Bank, its officers, directors, employees, representatives and
agents from and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses incurred by any of them as a result of,
or arising out of, or in any way related to, or by reason of, any investigation,
litigation or other proceeding (whether or not any Bank is a party thereto)
related to the entering into and/or performance of any Credit Document or the
use of proceeds of any Loans (including other extensions of credit) hereunder or
the consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding (i) any costs or expenses associated with the transfer
of a participation interest under Section 10.03(a)(ii) or 10.03(c), and (ii) any
such losses, liabilities, claims, damages or expenses to the extent incurred by
reason of gross negligence or willful misconduct on the part of the Person to be
indemnified).
10.06 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing signed by the Required Banks, provided that no such amendment, change,
waiver, discharge or termination shall, without the consent of each Bank
affected thereby, (i) extend the scheduled maturities (including the final
maturity and any mandatory prepayments) of any Loan, or any portion thereof, or
reduce the rate or extend the time of payment of interest (other than as a
result of waiving the applicability of any post-default increase in interest
rates) thereon or fees hereunder or reduce the principal amount thereof, or
increase the Commitments or the Revolving Committed Amount of the Banks over the
amount thereof in effect (it being understood and agreed that a waiver of any
Default or Event of Default or of a mandatory reduction in the total commitments
shall not constitute a change in the terms of any Commitment of any Bank), (ii)
release of Stuart Medical, Inc. or substantially all of the other Guarantors
from their guaranty obligations hereunder, (iii) amend, modify or waive any
provision of this Section or Section 2.13, 2.14, 2.15, 2.16, 2.19, 8.01(a),
9.07, 10.02 and 10.03, (iv) reduce any percentage specified in, or otherwise
modify, the definition of Required Banks, (v) consent to the assignment or
transfer by the Borrower (or Guarantor) of any of its rights and obligations
under (or in respect of) this Credit Agreement or (vi) release all or
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substantially all of the collateral, if any, pledged to secure the Loans and
Obligations hereunder. No provision of Section 9 may be amended without the
consent of the Administrative Agent.
10.07 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
10.08 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
10.09 Survival of Indemnification.
All indemnities set forth herein, including, without limitation, in
Sections 2.13, 2.15 or 10.05 shall survive the execution and delivery of this
Credit Agreement, and the making of the Loans, the repayment of the Loans and
other obligations and the termination of the Commitment hereunder.
10.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
VIRGINIA. Any legal action or proceeding with respect to this Credit Agreement
or any other Credit Document may be brought in the courts of the Commonwealth of
Virginia in City of Richmond, or of the United States for the Eastern District
of Virginia, and, by execution and delivery of this Credit Agreement, each of
the Credit Parties hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of such courts. Each
of the Credit Parties further irrevocably consents to the service of process out
of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
it at the address set out for notices pursuant to Section 10.01, such service to
become effective 30 days after such mailing. Nothing herein shall affect the
right of the Agent to serve process in any other manner permitted by law or to
commence legal proceedings or to otherwise proceed against the Borrower in any
other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Credit Agreement or any other Credit Document brought in the courts referred to
in subsection (a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
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(c) EACH OF THE AGENTS, EACH OF THE BANKS AND EACH OF THE CREDIT
PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT,
ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
10.10 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
10.11 Entirety.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
10.12 Survival of Representations and Warranties.
All representations and warranties made by the Borrower herein shall
survive delivery of the Notes and the making of the Loans hereunder.
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER:
OWENS & MINOR, INC.,
a Virginia corporation
By________________________________
Richard F. Bozard
Vice President and Treasurer
GUARANTORS:
OWENS & MINOR MEDICAL, INC.,
a Virginia corporation
NATIONAL MEDICAL SUPPLY CORPORATION,
a Delaware corporation
OWENS & MINOR WEST, INC.,
a California corporation
KOLEY'S MEDICAL SUPPLY, INC.,
a Nebraska corporation
LYONS PHYSICIAN SUPPLY COMPANY,
an Ohio corporation
A. KUHLMAN & COMPANY,
a Michigan corporation
STUART MEDICAL, INC.,
a Pennsylvania corporation
By___________________________________
Vice President and Treasurer
of each of the Companies listed above
<PAGE>
Signature Pages to
Owens & Minor, Inc. Credit Agreement
BANKS:
NATIONSBANK, N.A.,
individually in its capacity as a
Bank and in its capacity as Agent and
Administrative Agent
By______________________________________
Scott S. Ward,
Senior Vice President
BANK OF AMERICA NT & SA,
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_____________________________________
FIRST UNION NATIONAL BANK
By________________________________________
Title_____________________________________
<PAGE>
Signature Pages to
Owens & Minor, Inc. Credit Agreement
PNC BANK, NATIONAL ASSOCIATION
By___________________________________
Title________________________________
THE BANK OF NEW YORK
By___________________________________
Title________________________________
MELLON BANK, N.A.
By___________________________________
Title________________________________
THE FIRST NATIONAL BANK OF CHICAGO
By___________________________________
Title________________________________
THE SANWA BANK LTD.
By___________________________________
Title________________________________
<PAGE>
Signature Pages to
Owens & Minor, Inc. Credit Agreement
SIGNET BANK
By______________________________________
Title___________________________________
WACHOVIA BANK, N.A.
By_____________________________________
Title__________________________________
THE BANK OF NOVA SCOTIA
By____________________________________
Title_________________________________
<PAGE>
Schedule 2.01(a)
Schedule of Banks and
Commitments
<TABLE>
<CAPTION>
Address Revolving
for Funding Address for Committed
Bank and Payments Other Notices Amount
---- ------------ ------------- ------
<S> <C>
NationsBank, N.A. NationsBank, N.A. NationsBank, N.A. $25,000,000
101 N. Tryon Street NationsBank Healthcare Finance Group
Independence Center 6610 Rockledge Drive
NC1-005-15-04 First Floor
Charlotte, NC 28255 Bethesda, MD 20817-1876
Attn: Michael Roof Attn: Michael B. Andry
Phone: (704) 388-3916 Phone: (301) 571-0710
Fax: (704) 386-9923 Fax: (301) 571-0719
Bank of America NT & SA Bank of America NT & SA Bank of America NT & SA $22,500,000
1850 Gateway Boulevard 1230 Peachtree Street
Concord, CA 94520 Suite 3800
Attn: Louise Hosey Atlanta, Georgia 30309
Phone: (510) 675-8242 Attn: Bill Tucker
Fax: (510) 603-7252 Phone: (404) 249-6927
Fax: (404) 249-6938
Crestar Bank Crestar Bank $22,500,000
919 East Main Street
Richmond, VA 23219
Attn: Pat Collins
Phone: (804) 782-7781
Fax: (804) 782-5413
<PAGE>
The Bank of Nova Scotia The Bank of Nova Scotia $20,000,000
26th Floor
One Liberty Plaza
New York, NY 10006
Attn: Frank Vidal
Phone: (212) 225-5179
Fax: (212) 225-5090
First Union National Bank First Union National Bank $20,000,000
901 East Cary Street
2nd Floor
Richmond, VA 23219
Attn: Lowndes Burke
Phone: (804) 788-9732
Fax: (804) 788-9673
PNC Bank, National Association PNC Bank, National $20,000,000
Association
1600 Market Street
Philadelphia, PA 19103
Attn: Gary Tyrrell
Phone: (215) 585-5934
Fax: (215) 585-6037
<PAGE>
The Bank of New York The Bank of New York $15,000,000
One Wall Street
22nd Floor
New York, NY 10286
Attn: Ann Marie Hughes
Phone: (212) 635-6724
Fax: (212) 635-6434
Mellon Bank, N.A. Mellon Bank, N.A. $15,000,000
Mellon Bank Center
1735 Market Street
7th Floor
Philadelphia, PA 19101
Attn: Donald G. Cassidy
Phone: (215) 553-2065
Fax: (215) 553-4899
The First National Bank of Chicago The First National Bank of Chicago $20,000,000
153 West 51st Street
8th Floor
New York, New York 10019
Attn: Lynn Dillon
Phone: (212) 373-1373
Fax: (212) 373-1403
<PAGE>
The Sanwa Bank Ltd. The Sanwa Bank Ltd. $15,000,000
Atlanta Agency Atlanta Agency
4750 Georgia-Pacific Center
133 Peachtree St., N.E.
Atlanta, GA 30303
Attn: William Plough
Phone: (404)586-6888
Fax: (404)589-1629
Signet Bank Signet Bank $15,000,000
800 East Main Street
Richmond, VA 23260
Attn: Charles Link
Phone: (804) 771-7034
Fax: (804) 771-7151
Wachovia Bank, N.A. Wachovia Bank, N.A. $15,000,000
100 North Main Street, 20th Floor
Winston-Salem, NC 27150-7202
Attn: Michael H. Trainor
Phone: (910) 732-2530
Fax: (910) 732-6935
-------------------
$225,000,000
</TABLE>
<PAGE>
Schedule 2.02(1)
FORM OF NOTICE OF BORROWING
NationsBank, N.A., NationsBank, N.A.,
as Administrative Agent for as Swingline Lender
the Lenders referred to below 101 N. Tryon Street, 15th Floor
101 N. Tryon Street, 15th Floor Independence Center, NC1-001-15-04
Independence Center, NC1-001-15-04 Charlotte, North Carolina 28255
Charlotte, North Carolina 28255 Attention: Michael Roof
Attention: Michael Roof Agency Services
Agency Services
Ladies and Gentlemen:
The undersigned, OWENS & MINOR, INC. (the "Borrower"), refers to the
Credit Agreement dated as of September 15, 1997 (as it may be amended, modified,
extended or restated from time to time, the "Credit Agreement"), among the
Borrower, the other Credit Parties party thereto, the Banks party thereto, and
NationsBank, N.A., as Administrative Agent. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Credit Agreement. The Borrower hereby gives you notice that it requests a
Revolving Loan advance or a Swingline Loan advance pursuant to the provisions of
Section 2.02 or 2.07 of the Credit Agreement, as appropriate, and in that
connection sets forth below the terms on which such advance is requested to be
made:
(A) Type of Loan Advance Requested (Check One)
_____ Revolving Loan
_____ Swingline Loan
(B) Date of Borrowing
(which is a Business Day) _______________________
(C) Principal Amount of
Borrowing(1) _______________________
- -------------
(1) In the case of Revolving Loans, a minimum of $5,000,000 and $1,000,000
increments in excess thereof (or the remaining Revolving Committed Amount,
if less) and in the case of Swingline Loans, a minimum of $250,000 and
$100,000 increments in excess thereof (or the remaining Swingline
Committed Amount, if less).
<PAGE>
(D) Interest rate basis (Check One)
_____ Eurodollar Loan(2)
_____ Base Rate Loan
(E) Interest Period and the
last day thereof(3) _______________________
- ----------------------
(2) Fixed rate for applicable Interest Period in the case of Revolving Loans.
Floating rate applicable in the case of Swingline Loans.
(3) Revolving Loans only. Subject to the provisions and definitions of the
Credit Agreement, but generally one, two, three or six months' duration for
Fixed Eurodollar Loans, and also with respect to a single Eurodollar Loan of
up to $30,000,000 under the Revolving Loan facility also for 7 days
duration.
<PAGE>
Upon acceptance of any or all of the Loans made by the Banks in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Section 2.09(b) of the
Credit Agreement have been satisfied.
Very truly yours,
OWENS & MINOR, INC.
By:__________________________________
Title:
<PAGE>
Schedule 2.02(2)
FORM OF NOTICE OF CONVERSION
NationsBank, N.A., NationsBank, N.A.,
as Administrative Agent for as Swingline Lender
the Lenders referred to below 101 N. Tryon Street, 15th Floor
101 N. Tryon Street, 15th Floor Independence Center, NC1-001-15-04
Independence Center, NC1-001-15-04 Charlotte, North Carolina 28255
Charlotte, North Carolina 28255 Attention: Michael Roof
Attention: Michael Roof Agency Services
Agency Services
Ladies and Gentlemen:
The undersigned, OWENS & MINOR, INC. (the "Borrower"), refers to the
Credit Agreement dated as of September 15, 1997 (as it may be amended, modified,
extended or restated from time to time, the "Credit Agreement"), among the
Borrower, the other Credit Parties party thereto, the Banks party thereto, and
NationsBank, N.A., as Administrative Agent. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Credit Agreement. The Borrower hereby gives you notice pursuant to Section
2.03 of the Credit Agreement that it requests an extension or conversion of a
Revolving Loan outstanding under the Credit Agreement, and in that connection
sets forth below the terms on which such extension or conversion is requested to
be made:
(A) Type of Loan (Check One)
_____ Revolving Loan
_____ Swingline Loan
(B) Date of Extension or Conversion
(which is the last day of the _______________________
the applicable Interest Period)
(C) Principal Amount of
Extension or Conversion(4) _______________________
(D) Interest rate basis (Check One) ______________________
_____ Eurodollar Loan(5)
- ------------------
(4) In the case of Revolving Loans, a minimum of $5,000,000 and $1,000,000
increments in excess thereof (or the remaining Revolving Committed Amount,
if less) and in the case of Swingline Loans, a minimum of $250,000 and
$100,000 increments in excess thereof (or the remaining Swingline Committed
Amount, if less).
(5) Fixed rate for applicable Interest Period in the case of Revolving Loans.
Floating rate applicable in the case of Swingline Loans.
<PAGE>
_____ Base Rate Loan
(E) Interest Period and the
last day thereof(6) _______________________
Upon acceptance of extension or conversion of any or all of the Loans
made by the Banks in response to this request, the Borrower shall be deemed to
have represented and warranted that the conditions to lending specified in
Section 2.09(b) of the Credit Agreement have been satisfied.
Very truly yours,
OWENS & MINOR, INC.
By:__________________________________
Title:
- -------------------------
(6) Revolving Loans only. Subject to the provisions and definitions of the
Credit Agreement, but generally one, two, three or six months' duration for
Eurodollar Loans, and also with respect to a single Eurodollar Loan of up to
$30,000,000 under the Revolving Loan facility also for 7 days duration.
<PAGE>
Schedule 2.06
FORM OF REVOLVING NOTE
September 15, 1997
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to
the order of ________________________, and its successors and assigns, on or
before the Termination Date to the office of the Administrative Agent in
immediately available funds as provided in the Credit Agreement,
(i) in the case of Revolving Loans, such Bank's Revolving
Committed Amount or, if less, the aggregate unpaid principal amount of
all Revolving Loans made by such Bank to the undersigned;
(ii) in the case of Swingline Loans, if such Bank is the
Swingline Lender, the aggregate Swingline Committed Amount or, if less,
the aggregate unpaid principal amount of all Swingline Loans made to
the undersigned; and
(iii) in the case of Competitive Loans, the aggregate unpaid
principal amount of all Competitive Loans made by such Bank to the
undersigned;
together with interest thereon at the rates and as provided in the Credit
Agreement.
This Note is one of the Revolving Notes referred to in the Credit
Agreement dated as of September 15, 1997 (as amended and modified, the "Credit
Agreement") among OWENS & MINOR, INC., a Virginia corporation, the Guarantors
and Banks identified therein and NationsBank, N.A., as Administrative Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by
this Note may, or shall, become immediately due and payable as provided in the
Credit Agreement without presentment, demand, protest or notice of any kind, all
of which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
<PAGE>
This Note shall be governed by, and construed and interpreted in
accordance with, the law of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
OWENS & MINOR, INC.,
a Virginia corporation
By_________________________________
Name:
Title:
<PAGE>
SCHEDULE A TO REVOLVING NOTE OF OWENS & MINOR, INC.
DATED September 15, 1997
Person
Making Interest Payments Balance
Date Notation Amount Period Rate Principal Interest of Note
---- -------- ------ ------ ---- --------- -------- -------
<PAGE>
Schedule 2.08(b)-1
FORM OF COMPETITIVE BID REQUEST
NationsBank, N.A.,
as Administrative Agent for the Banks
101 North Tryon Street
Independence Center, 15th Floor
NC1-005-15-04
Charlotte, North Carolina 28255
Attn: Agency Services
Re: Credit Agreement dated as of September 15, 1997 (as amended
and modified the "Credit Agreement") among OWENS & MINOR,
INC., the Guarantors and Banks identified therein and
NationsBank, N.A., as Administrative Agent. Terms used but not
otherwise defined shall have the meanings provided in the
Credit Agreement.
Ladies and Gentlemen:
The undersigned hereby gives you notice pursuant to Section 2.08(b) of
the Credit Agreement it requests solicitation of Competitive Bids under the
Credit Agreement, and in connection therewith sets forth below the terms on
which the related Competitive Loan borrowing is requested to be made:
(A) Date of Competitive Loan borrowing
(which is a Business Day) __________________________
(B) Principal amount of
Competitive Loan borrowing __________________________
(C) Interest Period and the last
day thereof __________________________
In accordance with the requirements of Section 5.2, the Borrower hereby
reaffirms the representations and warranties set forth in the Credit Agreement
as provided in subsection (b) of such Section, and confirms that the matters
referenced in subsections (c), (d), (e) and (f) of such Section, are true and
correct.
OWENS & MINOR, INC.
By:___________________________________
Name:
Title:
<PAGE>
Schedule 2.08(b)-2
FORM OF NOTICE OF RECEIPT OF COMPETITIVE BID REQUEST
[Name of Bank]
[Address]
Attention:
Re: Credit Agreement dated as of September 15, 1997 (as amended
and modified the "Credit Agreement") among OWENS & MINOR,
INC., the Guarantors and Banks identified therein and
NationsBank, N.A., as Administrative Agent. Terms used but not
otherwise defined shall have the meanings provided in the
Credit Agreement.
Dear Sirs:
OWENS & MINOR, INC., a Virginia corporation, being Borrower under the
above-referenced Credit Agreement made a Competitive Bid Request on
_______________, 19__, pursuant to Section 2.08(b) of the Credit Agreement, and
in that connection you are invited to submit a Competitive Bid by 10:00 A.M.
(Charlotte, North Carolina time) ______________, 19__ [Date of Proposed
Competitive Loan Borrowing]. Your Competitive Bid must comply with Section
2.08(c) of the Credit Agreement and the terms set forth below on which the
Competitive Bid Request was made:
(A) Date of Competitive Borrowing _________________________
(B) Principal amount of Competitive Borrowing _________________________
(C) Interest Period and the last day thereof _________________________
NATIONSBANK, N.A., as Administrative Agent
By:_____________________________________
Name:
Title:
<PAGE>
Schedule 2.08(c)
FORM OF COMPETITIVE BID
NationsBank, N.A.,
as Agent for the Banks
101 North Tryon Street
Independence Center, 15th Floor
NC1-005-15-04
Charlotte, North Carolina 28255
Attn: Agency Services
Re: Credit Agreement dated as of September 15, 1997 (as amended
and modified the "Credit Agreement") among OWENS & MINOR,
INC., the Guarantors and Banks identified therein and
NationsBank, N.A., as Administrative Agent. Terms used but not
otherwise defined shall have the meanings provided in the
Credit Agreement.
Ladies and Gentlemen:
The undersigned, [Name of Bank], hereby makes a Competitive Bid
pursuant to Section 2.08(c) of the Credit Agreement, in response to the
Competitive Bid Request made by the Borrower on _____________________, 19__, and
in that connection sets forth below the terms on which such Competitive Bid is
made:
(A) Principal Amount ______________________________
(B) Competitive Bid Rate ______________________________
(C) Interest Period and last day thereof ______________________________
The undersigned hereby confirms that is prepared, subject to the
conditions set forth in the Credit Agreement, to extend credit to the Borrower
upon acceptance by the Borrower of this bid in accordance with Section 2.08(e)
of the Credit Agreement.
[NAME OF BANK]
By:___________________________________
Name:
Title:
<PAGE>
Schedule 2.08(e)
FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER
NationsBank, N.A.,
as Agent for the Banks
101 North Tryon Street
Independence Center, 15th Floor
NC1-005-15-04
Charlotte, North Carolina 28255
Attn: Agency Services
Re: Credit Agreement dated as of September 15, 1997 (as amended
and modified the "Credit Agreement") among OWENS & MINOR,
INC., the Guarantors and Banks identified therein and
NationsBank, N.A., as Administrative Agent. Terms used but not
otherwise defined shall have the meanings provided in the
Credit Agreement.
Ladies and Gentlemen:
In accordance with Section 2.08(e) of the Credit Agreement, in
connection with our Competitive Bid Request dated __________________ and in
accordance with Section 2.08(e) of the Credit Agreement, we hereby accept the
following bids for maturity on [date]:
Principal Amount Competitive Bid Rate Bank
---------------- -------------------- ----
$ [%]
$ [%]
We hereby reject the following bids:
Principal Amount Competitive Bid Rate Bank
---------------- -------------------- ----
$ [%]
$ [%]
OWENS & MINOR, INC.
By:____________________________________
Name:
Title:
<PAGE>
Schedule 4.01(b)(1)
Form of Legal Opinion of Drew St. J. Carneal
<PAGE>
Schedule 4.01(b)(2)
Form of Legal Opinion of Hunton & Williams
<PAGE>
Schedule 5.09
Schedule of Outstanding Indebtedness
<PAGE>
Schedule 5.10
Schedule of Legal Proceedings
<PAGE>
Schedule 5.15
Schedule of Subsidiaries
<PAGE>
Schedule 5.18
Schedule of Environmental Exceptions
<PAGE>
Schedule 6.01(c)
Form of Borrowing Base Certificate
For the calendar month ended _______________, 19__.
I, the undersigned, the _______________________ of OWENS & MINOR, INC.
(the "Borrower"), certify as of the date hereof and prior to giving effect to
any payment due as of the date hereof under the Credit Agreement dated as of
September 15, 1997 (as it may be amended, modified, extended or restated from
time to time, the "Credit Agreement"; all capitalized terms used herein shall
have the meanings given to such terms in the Credit Agreement) among the
Borrower, the other Credit Parties party thereto, the Banks party thereto and
NationsBank, N.A., as Administrative Agent:
<TABLE>
<S> <C>
Eligible Inventory
------------------
Aggregate Net Book Value of Inventory of the Credit Parties on a
consolidated basis after deducting allowances and
reserves relating thereto $____________
LIFO Reserve $____________
Total Eligible Inventory $____________
Eligible Receivables
--------------------
Aggregate Net Book Value of Accounts
Receivable of the Credit Parties on a
consolidated basis after deducting
allowances and reserves relating thereto $____________
Total Borrowing Base
--------------------
Borrowing Base Advance Rate -
85% of foregoing Eligible Receivables $_____________
Borrowing Base Advance Rate -
50% of foregoing Eligible Inventory + $_____________
Total Borrowing Base $______________
</TABLE>
With reference to this Borrowing Base certificate, I hereby certify on behalf of
the Borrower that, to the best of my knowledge and belief, the above statements
are true and correct in all material respects as of the date hereof.
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and seal this _____ day of
____________, 199_.
OWENS & MINOR, INC.
By________________________
Title_____________________
<PAGE>
Schedule 6.01(d)
Form of Officer's Compliance Certificate
For the fiscal quarter ended _________________, 1997.
I, ______________________, [Title] of OWENS & MINOR, INC. (the
"Borrower") hereby certify that, to the best of my knowledge and belief, with
respect to that certain Credit Agreement dated as of September 15, 1997 (as it
may be amended, modified, extended or restated from time to time, the "Credit
Agreement"; all of the defined terms in the Credit Agreement are incorporated
herein by reference) among the Borrower, the other Credit Parties party thereto,
the Banks party thereto and NationsBank, N.A., as Administrative Agent:
a. The company-prepared consolidated financial statements
which accompany this certificate are true and correct in
all material respects and have been prepared in accordance
with generally accepted accounting principles applied on a
consistent basis. The company-prepared consolidating
statements which accompany this certificate are true and
correct in all material respects and have been prepared
consistent with the Borrower's internal practices
consistently applied and may not be in strict conformity
with generally accepted accounting principles. Both sets of
such financial statements are subject to changes resulting
from normal year-end audit adjustments.
b. Since ___________ (the date of the last similar
certification, or, if none, the Closing Date) no Default or
Event of Default has occurred under the Credit Agreement;
and
Delivered herewith are detailed calculations demonstrating compliance by the
Credit Parties with the financial covenants contained in Section 6.11 of the
Credit Agreement as of the end of the fiscal period referred to above.
This ______ day of ___________, 199_.
OWENS & MINOR, INC.
--------------------------------
Title:
<PAGE>
Attachment to Officer's Certificate
Computation of Financial Covenants
<PAGE>
Schedule 6.06
Schedule of Insurance
<PAGE>
Schedule 6.12
Form of Joinder Agreement
THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________,
19__, is by and between _____________________, a ___________________ (the
"Subsidiary"), and NATIONSBANK, N.A., in its capacity as Administrative Agent
under that certain Credit Agreement (as it may be amended, modified, extended or
restated from time to time, the "Credit Agreement"), dated as of September 15,
1997, by and among OWENS & MINOR, INC., a Virginia corporation (the "Borrower"),
the other Credit Parties party thereto, the Banks party thereto and NationsBank,
N.A., as Administrative Agent. All of the defined terms in the Credit Agreement
are incorporated herein by reference.
The Subsidiary is an Additional Credit Party, and, consequently, the
Credit Parties are required by Section 6.12 of the Credit Agreement to cause the
Subsidiary to become a "Guarantor".
Accordingly, the Subsidiary hereby agrees as follows with the
Administrative Agent, for the benefit of the Banks:
1. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Credit Agreement, the Subsidiary will be deemed to be a party
to the Credit Agreement and a "Guarantor" for all purposes of the Credit
Agreement, and shall have all of the obligations of a Guarantor thereunder as if
it had executed the Credit Agreement. The Subsidiary hereby ratifies, as of the
date hereof, and agrees to be bound by, all of the terms, provisions and
conditions contained in the Credit Agreement, including without limitation (i)
all of the representations and warranties set forth in Section 5 of the Credit
Agreement as they relate to such Subsidiary, (ii) all of the affirmative and
negative covenants set forth in Sections 6 and 7 of the Credit Agreement and
(iii) all of the undertakings and waivers set forth in Section 3 of the Credit
Agreement (subject to the limitations set forth therein). Without limiting the
generality of the foregoing terms of this paragraph 1, the Subsidiary hereby (i)
subject to the limitation set forth in Section 3.07 of the Credit Agreement,
jointly and severally together with the other Guarantors, guarantees to each
Bank, the Administrative Agent and the Co-Agents, as provided in Section 3 of
the Credit Agreement, the prompt payment and performance of the Obligations in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise) strictly in accordance with the terms thereof and
(ii) agrees that if any of the Obligations are not paid or performed in full
when due (whether at stated maturity, as a mandatory prepayment, by acceleration
or otherwise), the Subsidiary will, jointly and severally together with the
other Guarantors, promptly pay and perform the same, without any demand or
notice whatsoever, and that in the case of any extension of time of payment or
renewal of any of the Obligations, the same will be promptly paid in full when
due (whether at extended maturity, as a mandatory prepayment, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
<PAGE>
2. This Credit Agreement may be executed in two or more counterparts,
each of which shall constitute an original but all of which when taken together
shall constitute one contract.
105
<PAGE>
IN WITNESS WHEREOF, the Subsidiary has caused this Credit Agreement to
be duly executed by its authorized officers, and the Administrative Agent, for
the benefit of the Banks, has caused the same to be accepted by its authorized
officer, as of the day and year first above written.
[SUBSIDIARY]
By____________________________
Title_________________________
Acknowledged and accepted:
NATIONSBANK, N.A.,
as Administrative Agent
By______________________________
Title___________________________
106
<PAGE>
Schedule 7.02
Schedule of Permitted Liens
107
<PAGE>
Schedule 10.03(b)
Form of Assignment and Acceptance
THIS ASSIGNMENT AND ACCEPTANCE dated as of ________, 199_ is entered
into between ________________ ("Assignor") and ____________________
("Assignee").
Reference is made to the Credit Agreement dated as of September 15,
1997, as amended and modified from time to time thereafter (the "Credit
Agreement") among OWENS & MINOR, INC., the other Credit Parties party thereto,
the Banks party thereto and NationsBank, N.A., as Administrative Agent. Terms
defined in the Credit Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, effective as of the Effective Date set forth below, the interests
set forth below (the "Assigned Interest") in the Assignor's rights and
obligations under the Credit Agreement, including, without limitation, the
interests set forth below in the Commitments of the Assignor on the effective
date of the assignment designated below (the "Effective Date") and the Revolving
Loans owing to the Assignor and in the Swingline Loans in which Assignor has or
may have a participation interest which are outstanding on the Effective Date,
together with unpaid interest accrued on the assigned Loans to the Effective
Date and the amount, if any, set forth below of the Fees accrued to the
Effective Date for the account of the Assignor. Each of the Assignor and the
Assignee hereby makes and agrees to be bound by all the representations,
warranties and agreements set forth in Section 10.03(b) of the Credit Agreement,
a copy of which has been received by each such party. The Assignee has submitted
to the Borrower and the Administrative Agent the documents required pursuant to
Section 10.03(c) of the Credit Agreement. From and after the Effective Date (i)
the Assignee, if it is not already a Bank under the Credit Agreement, shall be a
party to and be bound by the provisions of the Credit Agreement and, to the
extent of the interests assigned by this Assignment and Acceptance, have the
rights and obligations of a Bank thereunder and (ii) the Assignor shall, to the
extent of the interests assigned by this Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Credit Agreement.
2. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
3. Terms of Assignment
(a) Date of Assignment:
(b) Legal Name of Assignor:
(c) Legal Name of Assignee:
(d) Effective Date of Assignment:
108
<PAGE>
(e) Revolving Committed Amount
Percentage Assigned (expressed
as a percentage of the total
Commitment of the Banks to
make Revolving Loans and set
forth to at least 8 decimals) %
(f) Revolving Committed Amount
Percentage of Assignor after
Assignment (set forth to at
least 8 decimals) %
(g) Total Revolving Loans outstanding
as of Effective Date $_____________
(h) Principal Amount of Revolving
Loans assigned on Effective
Date (the amount set forth
in (g) multiplied by the
percentage set forth in (e)) $_____________
The terms set forth above are hereby agreed to:
____________________, as Assignor
By:_____________________________________
Title:__________________________________
_____________________, as Assignee
By:_____________________________________
Title:__________________________________
CONSENTED TO:
NATIONSBANK, N.A.,
as Administrative Agent
By:____________________________________
Title:_________________________________
109
<PAGE>
OWENS & MINOR, INC.
By:____________________________________
Title:_________________________________
110
Exhibit 10(a)
OWENS & MINOR, INC.
MANAGEMENT EQUITY OWNERSHIP PROGRAM
SECTION I. DEFINITIONS
1.1 Annual Bonus means the cash portion of any Incentive Award.
1.2 Annual Incentive Plan means the Companys Annual Incentive Plan approved
by the shareholders of the Company on April 30, 1991.
1.3 Base Salary means the annual salary paid by the Company to a Participant
for performance of his job excluding any benefits, Incentive Awards, bonuses or
any component of pay other than the base amount.
1.4 Board means the Board of Directors of the Company.
1.5 Business Day means any day on which the New York Stock Exchange is open and
the Common Stock is traded.
1.6 Cause means conduct of the Participant amounting to (i) fraud or dishonesty
against the Company, (ii) willful misconduct, repeated refusal to follow the
reasonable directions of the Companys management or knowing violation of law in
the performance of the duties of Participants employment with the Company, (iii)
violation of the Companys standards of conduct or other Company policies, (iv) a
conviction or plea of guilty or nolo contendere to a felony or a crime involving
dishonesty or (v) a breach or violation of the terms of any employment,
confidentiality, non-compete or other agreement to which the Participant and the
Company are party. The determination of whether the Company has or had Cause to
terminate a Participants employment shall be made by the Committee in its sole
and absolute discretion.
1.7 Change in Control means that situation when (i) any "person," as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, or
any Company owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company),
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
20% or more of the combined voting power of the Company's then outstanding
securities; (ii) during any period of two consecutive years (not including any
period prior to the effective date of this Program), individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (ii) or (iv) of this
Section) whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of a majority of the directors then still in
office who either (x) were directors at the beginning of such period or (y) were
so elected or nominated with such approval, cease for any reason to constitute
at least a majority of the Board; (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other Company, other than (x)
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (y) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 20% of the combined voting
power of the Company's then outstanding securities; or (iv) the stockholders of
the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
1.8 Committee means the Compensation & Benefits Committee of the Board or any
successor committee.
1.9 Common Stock means the Common Stock, $2.00 par value, of Owens & Minor,
Inc.
1.10 Company means Owens & Minor, Inc., including its Subsidiaries.
1.11 Disability means any physical or mental injury or disease of a permanent
nature which renders a Participant incapable of meeting the requirements of the
employment performed by such Participant immediately prior to the commencement
of such disability. The determination of whether a Participant is disabled shall
be made by the Committee in its sole and absolute discretion.
1.12 Effective Date shall have the meaning set forth in subsection 2.3
hereof.
1.13 Equity Ownership Dividend shall have the meaning specified in
subsection 4.2 hereof.
1.14 Fair Market Value means, as of any given date, the average of the high and
low trading prices of the Common Stock on such date as reported on the New York
Stock Exchange. If Fair Market Value is to be determined as of a day when the
New York Stock Exchange is not open, the Fair Market Value on that day shall be
the Fair Market Value on the next preceding day on which the New York Stock
Exchange was open.
1.15 Incentive Award means an award under the Annual Incentive Plan (or any
successor plan) approved by the Committee which entitles the recipient to shares
of Common Stock, cash or a combination of Common Stock and cash.
1.16 Interim Stock Ownership Requirement shall have the meaning specified
in subsection 3.2 hereof.
1.17 Own or Owned means, with respect to shares of Common Stock, shares of which
the Participant is the beneficial owner within the meaning of Rule 16a-1(2)
under the Securities Exchange Act of 1934, as amended, but excluding any options
to purchase shares of Common Stock. Shares of Common Stock of which a
Participant is the beneficial owner will include, by way of example, (i) shares,
whether registered in the owners name or in nominee name, which are owned by the
Participant, his spouse or any member of his immediate family living in his
household, (ii) shares held by the Participant in or through any benefit plan of
the Company, (iii) shares of restricted stock (including Restricted Stock
awarded under this Program) and (iv) in certain cases, shares owned by a trust
of which the Participant, his spouse or an immediate family member living in his
household is a trustee or beneficiary.
1.18 Participant means a Teammate designated in subsection 2.5 hereof or
selected to participate in the Program by the Committee pursuant to subsection
2.5 hereof.
1.19 Program means the Owens & Minor, Inc. Management Equity Ownership
Program, as it may be amended from time to time.
1.20 Restricted Period shall mean the period of time specified in this Program
with respect to particular grants of Restricted Stock during which the
restrictions imposed by Section VI hereof shall apply.
1.21 Restricted Stock means shares of Common Stock which are awarded by the
Company under this Program subject to forfeiture, restrictions on transfer and
such other restrictions as are set forth in Section VI hereof or as the
Committee may determine in accordance with the provisions of Section VI of this
Program.
1.22 Retirement means retirement from the Company within the meaning of the
Companys Supplemental Executive Retirement Plan or any successor thereto.
1.23 Stock Purchase Period means (i) with respect to any Participant whose
participation in the Program begins on the Effective Date and who has completed
at least one year of service with the Company as of the Effective Date, the
period of time beginning on the Effective Date and ending on December 31 of the
fifth full calendar year thereafter or (ii) with respect to any Participant
whose participation in the Program begins after the Effective Date or who has
completed less than one year of service with the Company as of the Effective
Date, the period of time beginning on the date the Participant first becomes a
Participant under the Program and ending on December 31 of the sixth full
calendar year thereafter.
1.24 Subsidiary means a corporation of which more than 50% of the total combined
voting power of all classes of stock entitled to vote is owned, directly or
indirectly, by Owens & Minor, Inc.
1.25 Teammate means any person employed by the Company.
1.26 Total Stock Ownership Requirement shall have the meaning specified in
subsection 3.1 hereof.
Unless the context clearly requires otherwise, the masculine pronoun whenever
used shall include the feminine and neuter pronouns, the singular shall include
the plural and the plural shall include the singular.
SECTION II. GENERAL TERMS
2.1 Purpose of the Program. The purpose of the Program is to promote the
interests of the Company and its shareholders by increasing the ownership of
Common Stock by certain key management level Teammates to more closely align
their financial rewards with the performance of the Company and to motivate
these Teammates to manage the Company for long-term growth and profitability.
2.2 Administration of the Program. The Program shall be administered by the
Committee which shall have exclusive and absolute authority and discretion to
interpret the Program, to establish and modify rules for the administration of
the Program, to impose such conditions and restrictions as it determines
appropriate with respect to the Program and to take such other actions and make
such other determinations as it may deem necessary or advisable for the
implementation and administration of the Program. Notwithstanding any provision
in the Program to the contrary, the Committee shall have the authority to waive
or modify any stock ownership requirement set forth in Section 3 of the Program;
provided that any such modification or waiver is applied uniformly to all
Participants. All actions taken and all interpretations and determinations made
by the Committee in good faith shall be final and binding upon the Participants,
the Company and all other interested persons. No member of the Committee shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Program or any award of Restricted Stock
hereunder.
2.3 Effective Date of the Program. The Program is effective on July 1, 1997 (the
Effective Date) and will continue in effect for a period of ten years or until
sooner terminated by the Board.
2.4 Scope of the Program. The Program is adopted under and is part of the Annual
Incentive Plan and is subject in all respects to the provisions of the Annual
Incentive Plan. Upon expiration of the Annual Incentive Plan, unless determined
otherwise by the Board, the Program will continue under any plan that is adopted
to succeed or replace the Annual Incentive Plan and will be subject to all
provisions of such successor or replacement plan. All shares of Restricted Stock
issued under the Program shall be provided from shares of Common Stock
authorized under the Annual Incentive Plan or such other plan as may be adopted
to succeed or replace the Annual Incentive Plan. In the event there are
insufficient shares of Common Stock authorized under the Annual Incentive Plan
or any successor or replacement plan to make the grants of Restricted Stock
contemplated by this Program, then no such grants of Restricted Stock shall be
made under this Program.
2.5 Eligibility. Participants in the Program shall be selected by the Committee
from among those management level Teammates who, in the opinion of the
Committee, are in a position to contribute materially to the Companys growth and
development and to its long-term financial success. The Chief Executive Officer
and any Executive Vice President, Senior Vice President, Vice President, Group
Vice President and Regional Vice President (or, in each case, the same positions
bearing different titles) shall automatically be Participants in the Program
effective on the later of the Effective Date or the date on which he is
appointed to or employed in such position.
SECTION III. COMMON STOCK OWNERSHIP REQUIREMENTS
3.1 Five-Year Ownership Requirement. Each Participant will be required to Own
shares of Common Stock the Fair Market Value of which on the last day of the
Participants Stock Purchase Period and each December 31 thereafter during the
term of this Program is not less than the applicable ownership multiple
designated in the table below (as such ownership multiple may be changed by the
Committee) multiplied by the Participants then-current Base Salary (the Total
Stock Ownership Requirement).
<TABLE>
<CAPTION>
Position Ownership Multiple of Base Salary
--------- -----------------------------------
<S> <C>
Chief Executive Officer 4.0X
Executive Vice President 2.0X
Senior Vice President 1.5X
Vice President, Group Vice President,
Regional Vice President 1.0X
Other Management Level Teammates
who are Participants As designated by the Committee
</TABLE>
In the event a Participant is promoted to a higher position with a higher
ownership multiple during the Participants Stock Purchase Period, the
Participants Total Stock Ownership Requirement based on the higher ownership
multiple will adjust effective January 1 of the following year without the
commencement of a new Stock Purchase Period.
3.2 Interim Ownership Requirement. As of each December 31 during a Participants
Stock Purchase Period, such Participant will be required to Own shares of Common
Stock the Fair Market Value of which on each such date is not less than the
respective percentages designated in the applicable table below of the
Participants Total Stock Ownership Requirement (the Interim Stock Ownership
Requirement).
A. Participants with at Least 12 Months of Service with the
Company as of the Effective Date and Whose Participation
Begins on the Effective Date
Percentage of Total Stock
December 31 Ownership Requirement
------------ ----------------------
1st 10%
2nd 25%
3rd 45%
4th 65%
5th 85%
6th 100%
B. Participants with Less Than 12 Months of Service with the
Company as of the Effective Date or Whose Participation Begins
after the Effective Date
Percentage of Total Stock
December 31 Ownership Requirement
------------ --------------------------
1st No Requirement
2nd 10%
3rd 25%
4th 45%
5th 65%
6th 85%
7th 100%
3.3 Annual Bonus Deferrals. Not later than 30 days after a Participant first
becomes a Participant in the Program and not later than January 1 of each full
calendar year thereafter during a Participants Stock Purchase Period, the
Participant may make an irrevocable election on a form provided by the Company
to receive 25%, 50%, 75% or 100% of his Annual Bonus for performance during that
calendar year, if any, in shares of Restricted Stock based upon the Fair Market
Value of the Common Stock on the date the Annual Bonus is awarded. The
Restricted Period for any shares of Restricted Stock granted pursuant to this
subsection 3.3 shall commence on the date the Annual Bonus is awarded and expire
on the third January 2nd (or next succeeding Business Day) thereafter.
SECTION IV. RESTRICTED STOCK AWARDS
4.1 1998 Salary Increase. Each Participant who is a Participant as of the
Effective Date and who has been employed by the Company for at least one year as
of the Effective Date will receive his 1998 Base Salary increase, if any, in the
form of shares of Restricted Stock in lieu of cash based on the Fair Market
Value of the Common Stock on the date any such Base Salary increase is approved
by the Committee; provided however, that any amount by which a Participants 1998
Base Salary increase is greater than 4% of the Participants 1997 Base Salary
will be paid in the form of cash. The Restricted Period for shares of Restricted
Stock granted pursuant to this subsection 4.1 shall be fourteen months
commencing on the date any 1998 Base Salary increase is approved by the
Committee.
4.2 Equity Ownership Dividends. Each Participant who, as of December 31 of any
year during the term of this Program, achieves the applicable Interim Stock
Ownership Requirement or Total Stock Ownership Requirement as specified in
subsections 3.1 and 3.2 hereof will receive an award of Restricted Stock equal
to 10% of the Fair Market Value of all Common Stock Owned by the Participant up
to the Total Stock Ownership Requirement (the Equity Ownership Dividend),
subject to such terms and conditions as may be prescribed by the Committee and
the full and complete authority of the Committee to decrease the amount or
eliminate the payment of Equity Ownership Dividends with respect to any calendar
year. Each award of an Equity Ownership Dividend hereunder will be determined
based on the Fair Market Value of the Common Stock on December 31 of the year in
which the Interim Stock Ownership Requirement or the Total Stock Ownership
Requirement, as the case may be, is achieved. Equity Ownership Dividends will be
granted upon approval by the Committee not later than February 1 of the year
following achievement of the applicable stock ownership requirement. The
Restricted Period for any shares of Restricted Stock awarded pursuant to this
subsection 4.2 shall commence on the date of grant and expire on the fifth
January 2nd (or next succeeding Business Day) thereafter.
SECTION V. FAILURE TO ACHIEVE STOCK OWNERSHIP REQUIREMENTS
Each Participant who, as of the second December 31 during the
Participants Stock Purchase Period and each December 31 thereafter during the
term of this Program, fails to achieve the applicable Interim Stock Ownership
Requirement or Total Stock Ownership Requirement, will incur the following
consequences:
<TABLE>
<CAPTION>
Consequences of Failure to Achieve
December 31 Stock Ownership Requirement
- ------------ --------------------------
<S> <C>
2nd 25% of Annual Bonus*, if any, will be paid in
Restricted Stock
3rd 50% of Annual Bonus*, if any, will be paid in
Restricted Stock
4th 75% of Annual Bonus*, if any, will be paid in
Restricted Stock
5th 100% of Annual Bonus*, if any, will be paid in
Restricted Stock
6th 100% of Annual Bonus*, if any, will be paid in
Restricted Stock and 50% of the following years Base
Salary increase, if any, will be paid in Restricted
Stock
7th and thereafter 100% of Annual Bonus*, if any, will be paid in
Restricted Stock and 100% of the following years
Base Salary increase, if any,will be paid in
Restricted Stock
</TABLE>
* In each instance, the percentage of Annual Bonus payable in
Restricted Stock will be the greater of the applicable amount set forth
above or the percentage elected by the Participant pursuant to
subsection 3.3 hereof
The number of shares of Restricted Stock granted in lieu of cash payment of
Annual Bonus or Base Salary increase will be determined based on the Fair Market
Value of the Common Stock on the date the Annual Bonus or Base Salary increase
is awarded. The Restricted Period for any shares of Restricted Stock granted
pursuant to this Section V in respect of Annual Bonus shall commence on the date
the Annual Bonus is awarded and expire on the third January 2nd (or next
succeeding Business Day) thereafter. The Restricted Period for any shares of
Restricted Stock granted pursuant to this Section V in respect of Base Salary
increase shall be two years from the date of grant.
SECTION VI. RESTRICTED STOCK
6.1 Terms of Restricted Stock. Until the expiration of the Restricted Period or
the lapse of restrictions as provided in subsection 6.4 or 6.5 hereof, shares of
Restricted Stock issued to Participants under the Program shall be subject to
the following restrictions and any additional restrictions that the Committee in
its sole discretion, may determine; provided, however, the Participant shall
have beneficial ownership of shares of Restricted Stock, including the right to
receive cash dividends on and the right to vote shares of Restricted Stock:
(i) Participants shall not be entitled to receive the
certificate or certificates representing shares of Restricted Stock;
(ii) Shares of Restricted Stock may not be sold, transferred,
assigned, pledged, conveyed, hypothecated or otherwise disposed of; and
(iii) Shares of Restricted Stock may be forfeited immediately
as provided in subsection 6.4.
Any stock dividends or other shares of Company stock or other property issued in
respect of Restricted Stock, including without limitation, shares issued in
connection with stock splits and recapitalizations, will be subject to the same
restrictions applicable to the Restricted Stock.
6.2 Custody of Shares of Restricted Stock. Any certificates representing shares
of Restricted Stock issued under the Program shall be issued in the Participants
name but shall be held by the Company during the Restricted Period. The Company
shall serve as attorney-in-fact for the Participant during the Restricted Period
with full power and authority in the Participants name to assign and convey to
the Company any shares of Restricted Stock held by the Company for such
Participant if the Participant forfeits the shares under the terms of the
Restricted Stock. Each certificate representing shares of Restricted Stock may
bear a legend referring to the Program and the risk of forfeiture of the shares
and stating that such shares are nontransferable until all restrictions have
been satisfied and the legend has been removed.
6.3 Distribution of Restricted Stock. If a Participant who receives shares of
Restricted Stock under the Program remains in the continuous employment of the
Company during the entire Restricted Period and otherwise does not forfeit such
shares pursuant to subsection 6.4 hereof, all restrictions applicable to the
shares of Restricted Stock shall lapse upon expiration of the Restricted Period
and a certificate or certificates representing the shares of Common Stock that
were granted to the Participant in the form of shares of Restricted Stock shall
be delivered to the Participant.
6.4 Forfeiture.
A. Termination of Employment.
(i) Subject to the provisions of subsection B. below, if a
Participants employment is terminated before the expiration of the Restricted
Period by reason of Retirement, Disability or death of the Participant,
subject to the authority of the Committee in its sole discretion to determine
otherwise, all restrictions applicable to the shares of Restricted Stock held
by the Company for the Participant shall immediately lapse on the date the
Participants employment is terminated and the certificate or
certificates representing the shares of Common Stock upon which the restrictions
have lapsed shall be delivered to the Participant (or in the event of the
Participants death, to his estate). If a Participants employment is terminated
under this subsection (i) on or after December 31st but prior to the issuance of
any Equity Ownership Dividend awarded for such year, subject to the authority of
the Committee in its sole discretion to determine otherwise, the Participant
shall be entitled to receive the shares issuable in respect of any such Equity
Ownership Dividend free of all applicable restrictions.
(ii) Subject to the provisions of subsection B. below, if a
Participants employment is terminated before the expiration of the Restricted
Period by the Company without Cause, subject to the authority of the Committee
in its sole discretion to determine otherwise, the number of shares of
Restricted Stock held by the Company for the Participant shall be reduced by the
proportion of the Restricted Period remaining after the Participants termination
of employment, the restrictions on the balance of such shares of Restricted
Stock shall lapse on the date the Participants employment terminated and the
certificate or certificates representing the shares of Common Stock upon which
the restrictions have lapsed shall be delivered to the Participant. If a
Participants employment is terminated under this subsection (ii) on or after
December 31st but prior to the issuance of any Equity Ownership Dividend awarded
for such year, subject to the authority of the Committee in its sole discretion
to determine otherwise, the Participant shall not be entitled to receive any
portion of the shares issuable in respect of any such Equity Ownership Dividend.
(iii) Subject to the provisions of subsection B. below, if a
Participants employment is terminated before the expiration of the Restricted
Period by the Company for Cause or by the Participant at any time, all shares of
Restricted Stock held by the Company for the Participant shall be forfeited
immediately and all rights of the Participant to such shares shall terminate
immediately without further obligation on the part of the Company. If a
Participants employment is terminated under this subsection (iii) on or after
December 31st but prior to the issuance of any Equity Ownership Dividend awarded
for such year, the Participant shall not be entitled to receive any of the
shares issuable in respect of any such Equity Ownership Dividend.
B. Failure to Maintain Total Stock Ownership Requirement. Shares of
Restricted Stock granted in respect of an Equity Ownership Dividend shall be
forfeited immediately and all rights of the Participant to such shares shall
terminate immediately without further obligation on the part of the Company if a
Participant does not meet the applicable Interim Stock Ownership Requirement or
Total Stock Ownership Requirement on the December 31 immediately preceding the
earlier of (i) the date a Participants employment is terminated or (ii) the last
day of the Restricted Period applicable to those shares.
6.5 Change of Control. Upon any Change of Control, unless the Committee in its
sole discretion determines otherwise prior to the Change of Control, all
restrictions applicable to shares of Restricted Stock shall immediately lapse
and the certificate or certificates representing the shares of Common Stock that
were granted to the Participants in the form of shares of Restricted Stock shall
be delivered to the Participants.
6.6 Waiver of Restrictions. The Committee, in its sole discretion, may at any
time waive any or all restrictions with respect to shares of Restricted Stock.
SECTION VII. MISCELLANEOUS PROVISIONS
7.1 Termination and Amendment. The Board at any time may amend or terminate the
Program. Notwithstanding any expiration or termination of the Program, unless
otherwise determined by the Committee, the provisions relating to Restricted
Stock contained in Section VI hereof shall continue to apply with respect to all
shares of Restricted Stock outstanding as of the date of expiration or
termination.
7.2 Withholding. Each Participant shall pay to the Company any amount necessary
to satisfy applicable federal, state or local tax withholding requirements
attributable to an award of Restricted Stock under the Program, or upon the
vesting of such Restricted Stock, promptly upon notification of the amount due.
Such amounts to be paid by the Participant, at the election of the Committee,
may be withheld from the shares of Common Stock that otherwise would be
distributed to such Participant pursuant to the Program.
7.3 Legal and Other Requirements. The grant or distribution of shares of
Restricted Stock shall be subject to the condition that if at any time the
Company determines in its discretion that the satisfaction of withholding tax or
other tax liabilities, or the listing, registration or qualification of any
shares of Common Stock upon any securities exchange or under and federal or
state law, or the consent or approval of any regulatory body, is necessary or
desirable as a condition of, or in connection with such grant or distribution,
then in any such event, such grant or distribution shall not be effective unless
such liabilities have been satisfied or such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company.
7.4 Choice of Law. The Program, its validity, interpretation and administration
and the rights and obligations of all persons having an interest therein shall
be governed by and construed in accordance with the laws of the Commonwealth of
Virginia, except to the extent that such laws may be preempted by federal law.
7.5 Adjustment Upon Changes in Capitalization. In the event of a
recapitalization, stock split, stock dividend, exchange, combination or
reclassification of shares, merger, consolidation, reorganization or other
change in or affecting the capital structure or capital stock of the Company,
the Board, upon recommendation of the Committee, may make appropriate
adjustments in the number and kind of shares subject to outstanding Restricted
Stock grants as it deems equitable to prevent dilution or enlargement of the
rights of Participants.
7.6 Fractional Shares. The Company shall not be required to issue or deliver any
fractional share of Restricted Stock issuable under this Program but shall round
each grant of shares of Restricted Stock hereunder up to the nearest whole
share.
7.7 No Employment Contract. The Program shall not confer upon any Participant
any right to continued employment by the Company nor shall the Program in any
way interfere with the right of the Company to terminate the employment of any
Participant at any time.
Exhibit 10(b)
FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
THIS FIRST AMENDMENT dated as of October 17,1997 to the AMENDED AND
RESTATED RECEIVABLES PURCHASE AGREEMENT (as defined below), (this "Amendment"),
is 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. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned thereto in the Receivables Purchase Agreement.
PRELIMINARY STATEMENTS
A. Seller, Servicer, Parent and Guarantor, Issuer and Administrator are
parties to that certain Amended and Restated Receivables Purchase Agreement,
dated as of May 28, 1996 (the "Receivables Purchase Agreement").
B. Seller, Servicer, Parent and Guarantor, Issuer and Administrator
desire to amend the Receivables Purchase Agreement in certain respects as set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendment. (i) The Receivables Purchase Agreement is hereby
amended to incorporate the changes shown on the marked pages attached hereto as
Annex A; (ii) Exhibit I to the Receivables Purchase Agreement is hereby amended
to incorporate the changes shown on the marked pages attached hereto as Annex B;
and (iii) Schedule II to the Receivables Purchase Agreement is hereby amended in
its entirety to read as set forth in Annex C hereto;
SECTION 2. Representations and Warranties. Each of the Seller and the
Servicer hereby represents and warrants that the representations and warranties
made by it set forth in Exhibit III to the Receivables Purchase Agreement, after
giving effect to this Amendment, are correct on and as of the Effective Date
(defined below) as though made on and as of the Effective Date and shall be
deemed to have been made on such Effective Date. No event has occurred and is
continuing, or would result from this Amendment, which
<PAGE>
constitutes a Termination Event or an Unmatured Termination
Event.
SECTION 3. Effectiveness. This Amendment shall
become effective on the date on which the Administrator
shall have received the following (such date, the "Effective
Date"):
(a) a copy of this Amendment duly executed by each
of the parties hereto;
(b) a Certificate of the Secretary or Assistant
Secretary of each of the Seller and the Servicer
certifying that attached thereto is a copy of
the Resolutions of the Board of Directors of the
Seller or the Servicer, as applicable, approving
this Amendment and affirming that the Articles
of Incorporation, By-Laws and/or incumbency
certificate of Seller or the Servicer, as
applicable, delivered pursuant to the
Receivables Purchase Agreement have not been
amended or rescinded, and remain in full force
and effect;
(c) an opinion of counsel of the Seller and the Servicer in form
and substance reasonably acceptable to the Administrative
Agent;
(d) a fully-executed counterpart of the first amendment to each of
(i) the Amended and Restated Parallel Asset Purchase Agreement
and (ii) the Amended and Restated Liquidity Asset
Purchase Agreement;
(e) a fully-executed counterpart of the fee letter referred to in
Section 1.5 of the Receivables Purchase Agreement, as amended;
(f) a fully-executed counterpart of each of the Lock-Box
Agreements referred to in Schedule II of the Receivables
Purchase Agreement, as amended, and
(g) such other approvals, opinions or documents as the
Administrator may reasonably request.
SECTION 4. Miscellaneous. This Amendment may be
executed in any number of counterparts, and by the different
parties on separate counterparts, each of which shall
constitute an original, but all of which together shall
constitute one and the same agreement. This Amendment shall
2
<PAGE>
be governed by, and construed in accordance with, the internal laws of the State
of New York. Any reference to the Receivables Purchase Agreement from and after
the date hereof shall be deemed to refer to the Receivables Purchase Agreement
as amended hereby, unless otherwise expressly stated. The Receivables Purchase
Agreement, as amended hereby, remains in full force and effect.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective duly authorized officers as of the date and
year first written.
O&M FUNDING CORP., as Seller
By:________________________________________
Name Printed:______________________________
Title:_____________________________________
OWENS & MINOR MEDICAL, INC.,
as Servicer
By:________________________________________
Name Printed:______________________________
Title:_____________________________________
OWENS & MINOR, INC.,
as Parent and Guarantor
By:________________________________________
Name Printed:______________________________
Title:_____________________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Administrator
By:________________________________________
Name Printed: Mark A. Wegener
Title: Attorney-in-fact
RECEIVABLES CAPITAL CORPORATION, as
Issuer
By:________________________________________
Name Printed:______________________________
Title:_____________________________________
4
<PAGE>
ANNEX A
Amendments to Receivables Purchase Agreement
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
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 May 28, 1996
(as amended as of October 17, 1997)
-----------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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 as of October
17, 1997 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 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
-8-
<PAGE>
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.
-9-
<PAGE>
ANNEX B
Amendments to Exhibit I to the Receivables Purchase
Agreement
<PAGE>
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.
"Amended and Restated Intercreditor Agreement" means the
Amended and Restated Intercreditor Agreement dated as of May 28, 1996 among the
Issuer, the Administrator, the Administrative Agent and the Parallel Purchasers.
"Amended and Restated Liquidity Asset Purchase Agreement"
means the Amended and Restated Liquidity Asset Purchase Agreement dated as of
May 28, 1996 among Bank of America 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.
"Amended and Restated Parallel Asset Purchase Agreement" means
the Amended and Restated Parallel Asset Purchase Agreement dated as of May 28,
1996 among O&M Funding Corp., as Seller, O&M Medical, as Servicer, Owens &
Minor, Inc., as Parent and Guarantor, certain financial institutions from time
to time parties thereto, as the Parallel Purchasers, and Bank of America, as
Administrative Agent, as the same may be amended, supplemented or otherwise
modified in accordance with its terms.
"Amended and Restated Purchase and Sale Agreement" means the
Amended and Restated Purchase and Sale Agreement dated as of May 28, 1996
between O&M Medical 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.
"Applicable Default Ratio Multiplier" means, for
any Month End Date, the product of (x) the Default Ratio Factor times (y) the
Six Month Default Ratio as calculated on such Month End Date.
"Attorney Costs" means and includes all fees and disbursements
of any law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.
"Average Maturity" means at any time that period
I-3
<PAGE>
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
I-4
<PAGE>
"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 rate per annum, selected at
the sole discretion of the Administrator, equal to (A) 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 or (B) the "weighted average cost"
(as defined below) related to the issuance of Notes that are allocated, in whole
or in part, by the Issuer (or by the Administrator) to fund or maintain such
Portion of Capital, all other Portions of Capital of the Purchased Interest held
by the Issuer hereunder and all interests (including security interests) in
receivables or other assets of "Other Pool Sellers" (as defined below) held by
the Issuer; provided, however, that if any component of such rate is a discount
rate, in calculating the "CP Rate" for such Portion of Capital for such Fixed
Period, the Issuer shall for such component use the rate resulting from
converting such discount rate to an interest bearing equivalent rate per annum.
As used in this definition,(i) "Other Pool Sellers" means all other sellers
which transfer interests (including
I-6
<PAGE>
by borrowing loans secured by such interests) in receivables or other financial
assets to the Issuer to the extent that such interests in receivables or other
financial assets are aggregated with the Portion of Capital of the Purchased
Interest held by the Issuer hereunder and funded on a pooled basis by the
Issuer, and (ii) the Issuer's "weighted average cost" shall consist of (x) the
actual interest rate paid to purchasers of the Issuer's Notes, together with the
commissions of placement agents and dealers in respect of such Notes, to the
extent such commissions are allocated, in whole or in part, to such Notes by the
Issuer (or by the Administrator), (y) the costs associated with the issuance of
such Notes, and (z) other borrowings by the Issuer (other than under any Program
Support Agreement), including to fund small or odd dollar amounts that are not
easily accommodated in the commercial paper market.
"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.
"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.
"Default Ratio Factor" means, for each of the
twelve consecutive Month End Dates ending with the
September, 1997 Month End Date, 4.5, and for each Month End
Date thereafter, 6.0.
"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
I-7
<PAGE>
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.
I-8
<PAGE>
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.
"Existing Receivables Agreement" means the Receivables
Purchase Agreement dated as of December 28, 1995, among the Seller, the
Servicer, the Parent, the Issuer and the Administrator.
"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.
"Excluded Receivables" means all Receivables originated by all
divisions of Stuart other than the Greensburg, Pennsylvania, Allentown,
Pennsylvania and Franklin, Massachusetts divisions of Stuart.
"Facility Fee" has the meaning set forth in Section 1.12 of
the Amended and Restated Purchase and Sale Agreement.
"Facility Fee Percentage" has the meaning set forth in Section
1.12 of the Amended and Restated Purchase and Sale Agreement.
"Facility Termination Date" means the earliest to occur of (a)
October 15, 1998, (b) the Purchase Termination Date, as defined in the Amended
and Restated Liquidity Asset Purchase Agreement, which as of October 17, 1997,
is October 15, 1998, or such later date designated as the Purchase Termination
Date from time to time pursuant to the Amended and Restated Liquidity Asset
Purchase Agreement (it being understood that the Administrator shall notify the
I-13
<PAGE>
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
Amended and Restated Liquidity Asset Purchase
I-14
<PAGE>
"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 with respect to any Person's Rated
Debt (if such Rated Debt is not Single-A Rated), a rating of at least BBB- or
A-2, as applicable, by Standard & Poor's Ratings Services and Baa3 or P-2, as
applicable, by Moody's Investors Service, Inc. and, if such Person's Rated Debt
is rated by Duff & Phelps Credit Rating Co., at least BBB- or D-2, as
applicable, by such rating agency; provided, that if such Person has a rating of
both its long term public senior unsecured, uncredit-enhanced debt securities
and its short term senior unsecured uncredit-enhanced debt securities, then such
Person must have the ratings specified above for both the long term and short
term securities.
"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.
I-18
<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 UCC or other similar
recording or notice statute, and any lease in the nature thereof) securing or
purporting to secure any Indebtedness.
"Liquidity Agent" means Bank of America in its
capacity as Liquidity Agent pursuant to the Amended and
Restated Liquidity Asset Purchase Agreement.
"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 Amended
and Restated Receivables Purchase Agreement and the Amended and Restated
Parallel Asset Purchase Agreement on any date means an amount equal to the
greater of
(x) Capital times the greatest of the following: (i) the
highest Applicable Default Ratio Multiplier 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 the Rated Debt of which is Investment Grade,
(iv) 4 times the highest Normal or Special Concentration Percentage for
any Obligor the Rated Debt of which is not Investment Grade, (v) the
highest Normal or Special Concentration Percentage for any Obligor the
Rated Debt of which is Single-A Rated, and (vi) 7.5%;
and
(y) $6,000,000.
I-19
<PAGE>
"Majority Parallel Purchasers" means, at any
time, Parallel Purchasers with Percentages under the Amended
and Restated Parallel Asset Purchase Agreement that are more
than 50% in the aggregate.
"Maximum Parallel Purchase" means, with respect
to each Parallel Purchaser and the Amended and Restated
Parallel Asset
I-20
<PAGE>
"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.
"Rated Debt" means with respect to any Person, (a) the long
term public senior unsecured, uncredit-enhanced, debt securities of such Person
and (b) the short term senior unsecured and uncredit-enhanced debt
securities of such Person.
"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 Bank of America.
"Related Assets" has the meaning set forth in Section 1.1 of
the Amended and Restated Purchase and Sale Agreement.
"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
I-26
<PAGE>
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
I-27
<PAGE>
"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 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.
"Single-A Rated" means, with respect to any Person's Rated
Debt, an actual rating of at least A- or A-2, as applicable, by Standard and
Poor's Ratings Services and A3 or P-2, as applicable, by Moody's Investor's
Service, Inc. and, if such Person's Rated Debt is rated by Duff & Phelps Credit
Rating Co., at least A- or D-2, as applicable, by such rating agency; provided,
that if such Person has a rating of both its long term public senior unsecured,
uncredit-enhanced debt securities and its short term senior unsecured
uncredit-enhanced debt seucrities, then such Person must have the ratings
specified above for both the long term and short term securities.
"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.
I-28
<PAGE>
"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 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.
"Stuart" means Stuart Medical, Inc., a
Pennsylvania corporation.
"Sub-Servicer" has the meaning set forth in
Section 4.1.
"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 Amended and Restated Parallel Asset
Purchase Agreement, pursuant to which the Parent or a Subsidiary of
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<PAGE>
the Parent shall become an Originator under the Amended and Restated 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
I-30
<PAGE>
ANNEX C
Amendments to Schedule II to the Receivables Purchase
Agreement
I-31
<PAGE>
SCHEDULE II
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
Lock-Box Bank Lock-Box Account
NationsBank:
Atlanta 3750239306
Dallas 0180533554
Crestar:
Baltimore 201143739
Baltimore - EFT Payments (Paper Remittances) 201652315
First Union:
Charlotte 2050000226997
Orlando 2050000226997
Richmond 2050000226997
First Chicago 6587379
PNC Bank 3063550
Mellon:
Pittsburgh 1184649
EFT Payments 1445079
EFT Payments (Department of Defense) 1936687
I-32
Exhibit 10(c)
FIRST AMENDMENT
THIS FIRST AMENDMENT dated as of October 17, 1997, is to the AMENDED
AND RESTATED PARALLEL ASSET PURCHASE AGREEMENT (as defined below), (this
"Amendment"), 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. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned thereto in the
Parallel Asset Purchase Agreement.
PRELIMINARY STATEMENTS
A. The parties hereto are parties to that certain Amended and Restated
Parallel Asset Purchase Agreement, dated as of May 28, 1996 (the "Parallel Asset
Purchase Agreement").
B. The parties hereto desire to amend the Parallel Asset Purchase
Agreement in certain respects as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendment. (a) Paragraph C of the
Preliminary Statements to the Parallel Asset Purchase
Agreement is hereby amended by inserting the following
phrase immediately after the date "May 28, 1996" therein:
", as amended as of October 17, 1997".
(b) Schedule II to the Parallel Asset Purchase Agreement is hereby
amended in its entirety to read as set forth in Annex A hereto.
SECTION 2. Representations and Warranties. Each of the Seller and the
Servicer hereby represents and warrants that the representations and warranties
made by it set forth in Exhibit II to the Parallel Asset Purchase Agreement,
after giving effect to this Amendment, are correct on and as of the Effective
Date (defined below) as though made on and as of the Effective Date and shall be
deemed to have been
<PAGE>
made on such Effective Date. No event has occurred and is continuing, or would
result from this Amendment, which constitutes a Termination Event or an
Unmatured Termination Event.
SECTION 3. Effectiveness. This Amendment shall
become effective on the date on which the Administrative
Agent shall have received the following (such date, the
"Effective Date"):
(a) a copy of this Amendment duly executed by each
of the parties hereto;
(b) a Certificate of the Secretary or Assistant
Secretary of each of the Seller and the Servicer
certifying that attached thereto is a copy of
the Resolutions of the Board of Directors of the
Seller or the Servicer, as applicable, approving
this Amendment and affirming that the Articles
of Incorporation, By-Laws and/or incumbency
certificate of Seller or the Servicer, as
applicable, delivered pursuant to the Parallel
Asset Purchase Agreement have not been amended
or rescinded, and remain in full force and
effect;
(c) an opinion of counsel of the Seller and the Servicer in form
and substance reasonably acceptable to the Administrative
Agent;
(d) a fully-executed counterpart of the first amendment to each of
(i) the Amended and Restated Receivables Purchase Agreement
and (ii) the Amended and Restated Liquidity Asset Purchase
Agreement;
(e) a fully-executed counterpart of each of the Lock-Box
Agreements referred to in Schedule II of the Parallel Asset
Purchase Agreement, as amended, and
(f) such other approvals, opinions or documents as the
Administrative Agent may reasonably request.
SECTION 4. Miscellaneous. This Amendment may be
executed in any number of counterparts, and by the different
parties on separate counterparts, each of which shall
constitute an original, but all of which together shall
constitute one and the same agreement. This Amendment shall
be governed by, and construed in accordance with, the
internal laws of the State of New York. Any reference to
2
<PAGE>
the Parallel Asset Purchase Agreement from and after the date hereof shall be
deemed to refer to the Parallel Asset Purchase Agreement as amended hereby,
unless otherwise expressly stated. The Parallel Asset Purchase Agreement, as
amended hereby, remains in full force and effect.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective duly authorized officers as of the date and
year first written.
O&M FUNDING CORP., as Seller
By:_________________________________________
Name:
Title:
OWENS & MINOR MEDICAL, INC.,
as Servicer
By:_________________________________________
Name:
Title:
OWENS & MINOR, INC.,
as Parent and Guarantor
By:_________________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Administrative Agent
By:_________________________________________
Name: Mark A. Wegener
Title: Attorney-in-fact
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, as a
Parallel Purchaser
By:_____________________
Name: Mark A. Wegener
Title: Attorney-in-fact
4
<PAGE>
THE BANK OF NOVA SCOTIA,
as a
Parallel Purchaser
By:_____________________
Name: James R. Trimble
Title:Senior Relations
Manager
THE BANK OF TOKYO -
MITSUBISHI, LTD. NEW
YORK BRANCH, as a
Parallel Purchaser
By:_____________________
Name: Catherine Moeser
Title: Vice President
THE FIRST NATIONAL BANK
OF CHICAGO, as a
Parallel Purchaser
By:_____________________
Name: Amy L. Golz
Title: Vice President
THE BANK OF NEW YORK, as
a Parallel Purchaser
By:_____________________
Name: Ann Marie Hughes
Title:Assistant Vice President
FIRST UNION NATIONAL BANK, as a Parallel
Purchaser
By:_______________________________
Name: Brand Hosford
Title: Vice President
WACHOVIA BANK, N.A.,
as a Parallel Purchaser
By:_______________________________
Name: Elizabeth Wagner
Title: Vice President
I-5
<PAGE>
ANNEX A
Amendments to Schedule II to the Parallel Asset Purchase Agreement
<PAGE>
SCHEDULE II
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
Lock-Box Bank Lock-Box Account
NationsBank:
Atlanta 3750239306
Dallas 0180533554
Crestar 201143739
First Union:
Charlotte 2050000226997
Orlando 2050000226997
Richmond 2050000226997
First Chicago 6587379
PNC Bank 3063550
Mellon 1184649
Exhibit 10(d)
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
This agreement ("Agreement") is made and entered into this 20th day of
August, 1997, by and between VHA Inc. ("VHA"), a Delaware corporation, and Owens
& Minor ("O&M"), a ___________________ corporation, an authorized distribution
agent of VHA ("ADA").
This Agreement is entered into based on the following facts:
A. VHA is a nonexclusive limited Agent for VHA Members and Affiliates;
B. VHA is, among other things, in the business of providing (a)
products and other property, purchasing and other opportunities, procurement,
distribution and other services, directly and indirectly, to, for, on
behalf of and as an Agent for certain health care providers, and (b) marketing
and other assistance to certain Vendors and certain wholesalers and
distributors, including, without limitation, ADAs, in order to make the
products, opportunities, procurement, distribution and related services more
conveniently, efficiently and effectively available to Designated VHA Members
and Affiliates (sometimes referred to collectively as "Designated Members");
C. ADA has a reputation for offering to sell and selling high quality
products and for providing prompt, efficient and effective distribution services
that meet or exceed the requirements set forth in this Agreement, including, but
not limited to, the services of selling, marketing, ordering, paying, order
receiving, billing/invoicing, product handling, product storing, product
receiving, inventorying, managing inventory, product transporting, product
delivery, collecting funds, cash application, cash management, receivables
management, payables management, handling customer
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and other inquiries, providing customer service, handling product recalls and
market withdrawals, providing for product returns permitted by law, handling
allowances and providing other distribution services;
D. ADA has computer-based systems which are useful in connection with
managing and conducting its business, which are flexible and able to produce a
wide variety of computer-based reports and which are capable of establishing
computer-to-computer communications among VHA, Vendors and Designated Members;
E. ADA shall provide distribution services as a distribution agent of
VHA to the Designated Members and shall offer as a first option Contract
Products, including, without limitation, Contract Products which display the VHA
PLUS(R) trademark; and ADA desires to perform such services;
F. ADA desires to sell Noncontract Products to the Designated Members
and, in connection therewith, to provide distribution services; and VHA desires
that the Designated Members have the opportunity to purchase such Noncontract
Products and distribution services;
THEREFORE, in consideration of the premises, the representations and
warranties of the parties, the mutual covenants contained herein, and other good
and valuable consideration, the adequacy, receipt and sufficiency of which are
hereby acknowledged, the parties agree, subject to the conditions, terms and
provisions hereof, as follows:
Section 1. Definitions.
(A) As used in this Agreement, each of the following capitalized terms
shall have the following meaning:
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(1) "Agent" means any entity authorized to act on behalf of
another entity by the other within the limited scope of the grant of authority
set forth in the document or documents granting such authority.
(2) "Alternate Distribution Center" refers to any ADA
distribution center other than a Primary Ordering Location.
(3) "Automatic Product Substitution" has the meaning set forth
in Section 4(E).
(4) "Backorder Relay" has the meaning set forth in Section
4(B) .
(5) "Equipment" means equipment having an order in a single or
multiple unit value of over $1,000.
(6) "Contract Products" refers to those products with respect to
which VHA has executed a contract ("Purchasing Agreement"), other than this
Agreement, with a Vendor thereof, such contract providing for, among other
things, the sale by such Vendor of the products to certain Designated Members
through ADA.
(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 Members without subtraction for cash
discounts allowed by Vendors for prompt payment and prior to the addition of any
distribution service fees, (b) ADA's out-of-pocket expense in obtaining the
product, 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 or (c) the net distributor cost of any
product pursuant to any agreement between the Designated Member and the vendor
of such products. In addition to the foregoing, Cost for any product may be
increased by the
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amount equal to the decrease in prompt payment or cash payment discount terms
during the term of a Purchasing Agreement offered by a manufacturer and actually
taken on a consistent basis by ADA.
(8) "Delivery Schedules" has the meaning set forth in Section
6(C).
(9) "Delivery Times" has the meaning set forth in
Section 6(C).
(10) "Designated VHA Members and Affiliates" refers to
those VHA Members and Affiliates identified as such on Schedule 1A. Schedule
1B lists nonacute sites associated with Designated VHA Members and Affiliates.
Schedule 1C lists other Designated health-care organizations assigned by VHA
to ADA for service. Facilities identified on Schedules 1A, 1B and 1C are
sometimes collectively referred to as "Designated Members." Schedules 1A, 1B
and 1C may be amended by VHA to add new Designated Members or to delete
Designated Members at its sole discretion at any time during the term of this
Agreement, upon thirty (30) days notice to ADA.
(11) "Noncontract Products" refers to all products that are
not Contract Products or VHA PLUS(R) Products.
(12) "Price" has the meaning set forth in Section 6.
(13) "Primary Ordering Location" ("POL") refers to the ADA
distribution center which has service responsibility for a particular Designated
Member. ADA's POLs, as of the date of this Agreement, are listed in Schedule 2.
(14) "Purchasing Agreement" has the meaning set forth in
Section 1(A)(6).
(15) "Revised Delivery Time" has the meaning set forth in
Section 6(C).
(16) "VHA Regional Offices" refer to Regional Health Care
Systems and VHA Area Offices which are listed on Schedule 3. Schedule 3 may be
amended by VHA at its sole discretion at any time during the life of this
Agreement upon thirty (30) days written notice to ADA.
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(17) "Service Level Report" has the meaning set forth in
Section 10.
(18) "Vendors" mean the sellers, including, without
limitation, manufacturers of products.
(19) "VHA PLUS(R) Products" mean products bearing the VHA
PLUS(R) trademark.
(20) "VHA Fee" has the meaning set forth in Section 8(G).
(21) "Delivery" is the physical delivery to each location
specified by the Designated Member of the products covered by all orders
received by ADA prior to the standard order cut-off times.
(B) Capitalized terms used in this Agreement but not
specifically defined herein shall have the meanings customarily ascribed to such
terms in the products distribution industry.
Section 2. Appointment as Agent.
VHA appoints ADA as a distribution Agent, subject to the provisions of
Section 11(B). ADA shall provide Designated Members with products, services,
reports and value-added distribution functions. ADA shall work to build a
mutually successful relationship with each Designated Member and work in a
proactive manner to provide the lowest total delivered cost of products, develop
and implement standardization and utilization processes and provide logistics,
operational and analytical services. Based on the scope of logistics,
operational and analytical services requested, ADA may charge appropriate fees
for such services.
ADA agrees to actively support and supplement the strategic initiatives
of VHA through its role as an ADA under this Agreement, including, but not
limited to, the support of all Contract Products as the product of first choice
for each Designated Member.
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Section 3. Product Capacity and Handling.
ADA shall provide warehouse facilities at each of its Primary Ordering
Locations to secure and store sufficient product to meet the service levels to
Designated Members specified in this Agreement.
(A) Contract Products.
(1) ADA's Duties. As VHA's Agent, ADA's duties shall include
the provision of distribution services with respect to Contract Products to each
and every Designated Member, and ADA shall act at all times in accordance with
the conditions, terms and provisions of the Purchasing Agreements.
(2) Purchasing Agreements. VHA shall notify ADA of the
existence of all Purchasing Agreements and all provisions of such Purchasing
Agreements which have or may have any effect on ADA's activities hereunder. VHA
shall provide such notification within thirty (30) days of the date of this
Agreement for Purchasing Agreements executed by VHA on or before the date of
this Agreement and within forty-five (45) calendar days of execution for
Purchasing Agreements executed by VHA hereafter.
(3) ADA Loading of Contract Products. ADA agrees that all
changes in Purchasing Agreements will be loaded into ADA's computer system not
less than forty-five (45) days prior to the effective date of the Purchasing
Agreement or as soon as possible if ADA receives less than forty-five (45) days
notice. ADA will supply each Designated Member with a printout (or such other
format as reasonably requested) setting forth ADA order numbers for all Products
covered by the Purchasing Agreement not less than forty-five (45) days prior to
the effective start date of each Purchasing Agreement and after ADA receives
written notification thereof from VHA.
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ADA will load into ADA's computer system all Contract
Products. Those items not presently stocked by ADA shall be identified on the
printout.
VHA will supply ADA with the Purchasing Agreement data not
less than sixty (60) days prior to the effective date of each Purchasing
Agreement. VHA will instruct Vendors holding Purchasing Agreements to provide to
ADA contract verification based on the foregoing guidelines. ADA shall advise
VHA, at least forty-five (45) days prior to the effective start date of each
Purchasing Agreement, of those Vendors who have not provided contract
verification.
Upon request of a Designated Member, ADA will provide no less
frequently than annually, no more frequently than quarterly, at no charge, a
Purchasing Agreement printout, diskette or electronic transmission listing all
Contract Products with ADA order entry numbers and Prices.
ADA shall load into its mainframe computer, within ten (10)
business days after receipt from VHA, all additions, corrections, price changes
and other modifications to Purchasing Agreements. VHA will notify ADA of the
occurrence of any of the foregoing modifications to the Purchase Agreement on a
bi-weekly basis.
(B) Noncontract Products. Upon request by a Designated Member,
ADA may offer to sell and, if any such offer is accepted, to sell Noncontract
Products to the Designated Members. Designated Members may offer to buy and, if
such offer is accepted, may buy Noncontract Products from ADA. In the event such
offers, sales or purchases are made, such offers, sales or purchases shall be
processed by ADA and the Designated Members in conformity with the provisions of
this Agreement.
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(C) VHA PLUS(R) Products. ADA agrees to stock such amount of VHA
PLUS(R) Products as ADA reasonably determines is necessary to satisfy the
reasonable stocking requirements of the Designated Members. ADA will provide to
Designated Members for use the VHA PLUS(R) Stocking Request Form (Schedule 4B).
Any individual Designated Member requesting a price change on a VHA PLUS(R)
Product shall follow the Pricing Protocol described in Schedule 4. All VHA
PLUS(R) Products that have a minimum of one transaction per month will be
identified in ADA inventory as such and be subject to appropriate inventory by
ADA. ADA will use its best efforts to market and promote VHA PLUS(R) Products
when such Products meet the needs of a Designated Member.
(D) Stocking Responsibility. ADA shall have the following stocking
responsibilities with respect to both Contract Products and Noncontract
Products:
(1) ADA will maintain sufficient stock of Contract Products
and Noncontract Products to support Designated Members at the service level set
forth in this Agreement.
ADA stocking requirements are as follows:
o ADA must stock locally all "A" and Impact items ("A"
items are products that are ordered at least two (2)
times per month by a Designated Member.)
o ADA, upon Designated Member's request, will stock
locally any other non- "A" or Impact items that are
ordered at least five (5) times per month per POL
(VHA Designated Member or not). If Designated Member
requests local stocking on items that are ordered
less then five (5) times per month, Designated Member
will pay non-aligned pricing except on VHA contract,
VHA PLUS and VHA OpportUNITY products.
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o If Designated Member chooses not to have product
stocked locally and product is not stocked locally by
ADA, the Designated Member can either access these
products directly from the manufacturer through the
ADA and pay all additional charges (i.e., in-bound
transportation, drop shipping, etc.) or have ADA ship
from another location and Designated Member will pay
transportation charges.
(2) Upon request of a Designated Member to add items to stock,
ADA will add the items to stock from any vendor which meets industry standards
of good manufacturing practices and has credit worthiness comparable to other
vendors with which the ADA does business, where the VHA Member or Affiliate's
usage meets the demand levels described in Section 3(D)(3). Within thirty (30)
days, or industry standard lead time, of receipt of usage data, ADA will have
the items in stock and advise the requesting Designated Member that the items
are available at the Primary Ordering Location. ADA may refuse to stock a
Noncontract Product.
(3) ADA will not remove from stock at the Primary Ordering
Location any product being purchased by a Designated Member unless ADA no longer
distributes the product. ADA will review its stock on an appropriate basis to
identify those products which have generated sales of less than five (5)
transactions per month. ADA may then contact any Designated Member who was
purchasing these products within the last one hundred eighty (180) calendar days
to ascertain continuing need. If no need is expressed, ADA may give written
notice to all Designated Members of ADA's intent to remove the items from stock.
If a Designated Member provides ADA, within ten (10) business days after such
notice, with the Designated Member usage estimates in
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excess of five (5) transactions per month, ADA will maintain the items in stock.
If ADA does not receive usage data, ADA may discontinue the items and shall so
advise the Designated Members.
(4) From time to time, VHA may advise ADA that specified
Contract Products are to be stocked by ADA exclusively for Designated Members.
ADA shall use its best efforts to restrict delivery of such specified Contract
Products to Designated Members, provided ADA shall be free to enter into
agreements with any Vendor for distribution of any products, including products
which may be Contract Products under this Agreement.
(5) If a Vendor advises ADA that specific Contract Products or
Noncontract Products will be available in reduced quantities or will be
allocated, and that, therefore, ADA may not be able to honor all requests for
such products, ADA will allocate, based on past purchasing history of the
Designated Members, a portion of such products to Designated Members and shall
advise VHA and the Designated Members of the quantity of products so allocated.
ADA agrees that Designated Members shall receive [*] in the event of limited
product availability.
(6) ADA shall provide, upon request of Designated Members,
regular list price catalogs, either in hard copy or electronic media, at the
election of Designated Members.
(E) Notice of Physical Inventory. ADA will give VHA and the Designated
Members not less than forty-five (45) days prior written notice of ADA's intent
to perform a physical inventory at the Primary Ordering Location. ADA will
accept saleable returns up to ten (10) days prior to such inventory and,
thereafter, ADA will continue to authorize returns, except such returns will be
held at the Designated Member until the first business day after completion of
the physical inventory.
* [This confidential information has been omitted and filed separately
with the Commission.]
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Section 4. Ordering.
(A) Orders. Orders for Contract Products and Noncontract Products by
Designated Members may be submitted on purchase orders delivered to ADA through
electronic order entry via computer or any other reasonable means. Orders must
be placed by Designated Member prior to the order cut-off time communicated by
applicable POL to be delivered on the next regularly scheduled delivery. ADA
shall not require a minimum dollar order amount for Contract Products or
Noncontract Products ordered by Designated Members provided products are ordered
in Vendor's standard packaging units. ADA will, after having selected from its
stock the Contract Products and Noncontract Products ordered by a Designated
Member, physically check each order to assure that the products and quantities
selected by ADA accurately correspond to the order received by ADA from the
Designated Member. Upon request, ADA will develop and use a method of setting
predetermined order quantities (standing orders) based on a Designated Member's
average weekly or bi-weekly usage of Contract Products and Noncontract Products.
These order quantities may be adjusted by the Designated Member upon seventy-two
(72) hours notice to ADA. If a Designated Member utilizes standing orders, ADA
shall count all lines of standing orders as lines ordered EOE by the Designated
Member.
(B) Backorder Relay. If ADA fails to have a Contract Product, "A" Item
or "Impact" Item on hand at a Primary Ordering Location when the Contract
Product, "A" Item or "Impact" Item is available at an Alternate Distribution
Center, ADA shall, at its own expense, be able to deliver the Contract Product,
"A" Item or "Impact" Item directly to the ordering Designated Member or by way
of the Primary Ordering Location, whichever is fastest, from the Alternate
Distribution Center ("Backorder Relay"). Backorder Relay is required only for
"A" Items and "Impact" Items (see
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Section 6(E)). ADA shall use Backorder Relay upon customer request whenever an
"A" Item or "Impact" Item is unavailable at a Primary Ordering Location,
regardless of the cause of such unavailability (for example, even if such
unavailability is caused by Vendor's backorder). ADA shall use Backorder Relay
whenever one or more line items are unavailable at the Primary Ordering
Location. ADA will notify Designated Members by automatic order entry print
back, customer service, sales representative or other reasonable means of a true
backorder at the Primary Ordering Location. Designated Members, at their option,
will select a desired means of resolution that may include: product
substitution, maintaining backorder or order item cancellation. Each Designated
Member will also have the option to select a reasonable method of delivery to
meet the individual institution's service requirements. Designated Members shall
not be responsible for any delivery charges where such Backorder was the
responsibility of ADA.
(C) Electronic Order Entry (EOE). All Designated Members will use
Electronic Order Entry for placement for not less than [*] of all lines ordered
unless otherwise agreed by ADA. ADA shall maintain an "800" number for
electronic order entry and direct contact with the Primary Ordering Location
personnel by Designated Members and the VHA Regional Offices. EOE is calculated
by dividing the lines ordered initially electronically divided by the total
lines ordered and shall be measured each calendar quarter.
(D) Confirmation. ADA shall provide to each Designated Member a
complete confirmation of each order placed by such Designated Member. The
complete confirmation shall include the following information: (1) a description
of the products, Price, quantity to be shipped and whether Backorder Relay or
Automatic Product Substitution will be used for each item ordered; and (2) the
dollar amount of the total order.
* [This confidential information has been omitted and filed separately with the
Commission.]
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The complete confirmation shall also include identification
codes such as purchase order numbers and cost center designations, if the
Designated Member by written notification to ADA elects to be supplied such
information. For electronic orders, the complete confirmation shall be received
by the Designated Member within two (2) hours after receipt of the order by ADA
during normal business hours. The complete confirmation will be provided through
print back or computer if the appropriate technology is available to ADA and the
Designated Member.
(E) Automation. ADA shall, at its own expense, make available a
software application capable of computer-to-computer on-line transmission (the
"Application") with each Designated Member, VHA Manufactures and VHA. The
Application will use ANSI X12 EDI where possible. Where EDI is not possible, VHA
and ADA must agree in writing to a proprietary implementation of data
transmission. ADA represents that Schedule 5 hereof sets forth an accurate
description of ADA's current capabilities and types of installations with
respect to communications with each Designated Member, VHA Manufacturer and VHA.
ADA shall use the Application for the term of this Agreement. ADA represents
that it has a computerized Automatic Product Substitution system and that these
systems are accurately described in Schedule 5 hereof. The use of Automatic
Product Substitutions will be done for individual line item products upon the
request of a Designated Member.
Section 5. Uniform Purchase.
Upon request, ADA will, in conjunction with the VHA Regional Offices
and with those Designated Members not part of a VHA Regional Office, identify
products and categories of products that are not under contract through VHA. ADA
will use its best efforts to obtain for
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Designated Members a reduced cost of said product for an extended period of
time, based on the anticipated usage and participation of VHA Regional Office
members or the combined usage for Designated Members not part of a VHA Regional
Office.
Section 6. Base ADA Services.
All services listed in this Section shall be provided to Designated
Members for the cost+plus fee applicable from the Base Distribution Service Fee
Volume Matrix in Schedule 6 or as determined by the Modified Activity Based
Matrix in Schedule 6B. Designated Member will have the option of having its base
ADA Services priced according to Schedule 6 or 6B. Designated Member will be
required to use its selected pricing method for a period of not less than one
(1) year, unless a change in schedule pricing options is approved by VHA
Distribution Services. Schedule 6 provides a Base Distribution Service Fee
Volume Matrix which determines a Designated Member's Base Distribution Service
Fee for the base services provided by its ADA. Designated Members may elect to
have Base Distribution Service Fees billed separately or included in the Price
of the product. ADA shall offer additional services in accordance with Section
7. Additional service fees stated as a percent shall [*]. Distribution Service
Fees for additional services shall equal the actual cost of the service,
provided ADA is capable of calculating actual cost. Otherwise, fees for
additional services will be determined in accordance with Schedule 6A. The
"Price" of the product is determined by the definition of Cost as set forth in
this Agreement, Section 1. Definition (A)(7), adjusted to reflect all credits,
discounts, rebates, returns, allowances and other adjustments granted by the ADA
plus Cost multiplied by the applicable Base Distribution Service Fee from
Schedule 6. Volume to determine the Base Distribution Service Fee is determined
by the actual three-month
* [This confidential information has been omitted and filed separately with the
Commission.]
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purchase history of the Designated Member from the ADA, for the preceding three
months. Volume will be recalculated on a semiannual basis and, at the Designated
Member's election, the Base Distribution Service Fee will be adjusted or the
Designated Member will receive a credit in an amount equal to the actual Base
Distribution Service Fee and the billed Base Distribution Service Fee for the
next six (6) month period. There will be no retroactive credit due Designated
Member for the period being reviewed.
Schedule 6B provides a Modified Activity Based Matrix which determines
a Designated Member's distribution service fee for services provided by its ADA.
Service fees will be billed separately as determined by Schedule 6B. Additional
services not provided in the Modified Activity Based Matrix are found in Section
7 or Schedule 6A. These additional service fees will be billed as a separate
line item charge. The "Price" of the product is determined by the definition of
Cost as set forth in this Agreement, Section 1. Definitions (A) (7), adjusted to
reflect all credits, discounts, rebates, return allowances and other adjustments
granted by the ADA. Product Price will be billed at cost+plus zero under this
fee option. Volume and lines ordered average is determined by the actual three
(3) month purchase and activity history of the Designated Member from the ADA,
for the preceding three (3) months. Volume and lines ordered average will be
recalculated on a semiannual basis and the Designated Member's Modified Activity
Based fee will be adjusted for changes in volume or lines ordered average
activity. There will be no retroactive credit due Designated Member for the
period being reviewed.
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(A) Invoice Format Options. Designated Members may select from the four
options listed below for the invoice format in presenting Base Distribution
Service Fees from Schedule 6 and additional service fees from Schedule 6A, if
any.
Base Distribution Service Fee Matrix
Option 1 - Base Distribution Service Fees from Schedule 6 and
additional services selected from Schedule 6A by the Designated Member,
if any, shall be added to Cost and billed as a total Price.
Option 2 - Base Distribution Service Fees from Schedule 6
shall be added to Cost and billed as a total Price, and any additional
service selected from Schedule 6A shall be billed as a separate line
item, or on a separate monthly invoice, at Designated Member's option.
Option 3 - Base Distribution Service Fees from Schedule 6 and
the charges for additional services selected from Schedule 6A, if any,
shall each be billed as a separate line item, provided that ADA and the
Designated Member are able to resolve any sales tax or similar tax
issues prescribed by this invoice option.
Modified Activity Based Costing Invoice Options
Option 1 - All services will be billed separately from cost.
These charges will be billed as separate line item charges by service.
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Option 2 - All services can be added together and billed as
one separate line item charge or as a separate line item charge for all
services, provided that ADA and the Designated Member are able to
resolve any sales tax or similar tax issues prescribed by this invoice
option.
Designated Member is obligated to use for at least one (1)
year the invoice option selected in accordance with Schedule 6C or Modified
Activity Based Costing. To initiate an invoice format change, Designated Member
must submit a revised Schedule 6C, Designated VHA Member Distribution Service
Fee Calculation and Acknowledgment Form/Distribution Service Fee Change
Form to VHA Distribution Services and ADA.
VHA and/or ADA may request reasonable substantiation of
purchase figures provided by any Designated Member. Any Designated Member which
fails or refuses to provide accurate information in a timely manner as to its
total volume of distributed purchases shall be charged a Distribution Service
Fee based on the smallest volume distribution service fee.
(1) Initial Implementation. See Schedule 6D for the details to
the initial implementation process for current Designated Members. In addition,
each VHA member will be sent a Designated Member Assignment and Reassignment
Form, Schedule 6E.
(2) Semiannual Volume Review. VHA will, on a semiannual
calendar basis, notify each VHA Member and Affiliate and ADA of each VHA Member
or Affiliate's past semiannual actual purchase history. Based on this historical
data, each Designated Member's next semiannual Base Distribution Service Fee
will be determined from the Base Distribution Service Fee
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Matrix, Schedule 6 or Schedule 6B. See Schedule 6D for full details of the
Distribution Service Fee Volume Review process.
(3) Semiannual Distribution Service Activity Review. See
Schedule 6D for complete details on the Semiannual Distribution Service Activity
Review.
(4) Acute Care System Definition Pricing Policy. See Schedule
6F for the details for pricing Base Distribution Service Fees for Systems.
(5) System Pricing Policy for the Continuum of Care. "Care
Continuum Sites of Care" refers to various non-hospital market segments
throughout the continuum of care. Examples of these sites of care include, but
are not limited to, physician/clinic market, home-care market, long- term-care
market, ambulatory-care market and freestanding surgery-center market. See
Schedule 6F1 for the details for pricing of Base Distribution Services for
Systems that include nonacute sites in the system.
(B) Payment Terms. Each Designated Member shall designate in writing
one of the payment options listed in Schedule 7. A Designated Member may change
its payment option no more frequently than semiannually upon thirty (30) days
prior written notice to ADA.
(C) Delivery. Each Designated Member will be entitled to the
appropriate number of deliveries as determined by either the Base Distribution
Service Fee Matrix, Schedule 6, or the Modified Activity Based Distribution
Service Fee Matrix, Schedule 6B, and excluding the following holidays: New
Year's Day, Memorial Day, July 4th, Labor Day, Thanksgiving and Christmas. Each
Designated Member may elect to receive fewer than the number of deliveries
available for their volume or buy additional deliveries at their option. The
cost of additional deliveries is determined
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in accordance with Schedule 6A. There is no credit given for electing to take
less deliveries offered to Designated Member's volume from Schedule 6 or 6B. The
definition of delivery is in Section 1 (22).
The delivery of back ordered items (including items delivered
through Backorder Relay) does not constitute an additional delivery; however,
VHA has no objection to ADA encouraging Designated Members to allow back ordered
items to be held and delivered with the next regular delivery.
ADA shall notify the affected Designated Member at the
earliest convenient time after ADA can reasonably anticipate that a delivery
will be made after the scheduled delivery time ("Delivery Time"). Such
notification shall include the anticipated date and time of delivery of the late
shipment ("Revised Delivery Time") and the reason for the delay.
In order to minimize the frequency and length of delays, ADA
shall establish a secondary delivery system which shall be used in the event
that the primary delivery method is unavailable.
(D) Returned Goods. ADA shall service returned goods, including,
without limitation, arranging for credits due any Designated Member in
accordance with the Returned Goods Policy specified in Schedule 8.
(E) Fill Rate. ADA shall maintain for each Designated Member an
unadjusted Fill Rate for all "A" Items of [*]. "A" Items are defined as those
items that are stock items and are ordered
* [This confidential information has been omitted and filed separately with the
Commission.]
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by the Designated Member at least twice every thirty (30) days. Usage guidelines
are provided in Schedule 9. The Fill Rate is determined by line items ordered
divided by line items filled, first truck.
ADA will provide to each Designated VHA Member or Affiliate by
February 1 of each year, commencing within sixty (60) days of implementation of
this Agreement and by February 1 of each year thereafter, the Designated VHA
Member or Affiliate's "A" Items list, and the ADA and Designated VHA Member or
Affiliate will mutually agree to the "A" Items list by March 15 of the same
year. In addition to "A" Items, the ADA will be responsible for maintaining each
Designated Member's "Impact Product List". The "Impact Product List" is a list
of not more then twenty-five (25) items identified by Designated Members as
items of such importance to Designated Members that without these items
Designated Member's operations would be impeded or would be negatively impacted.
Items on Designated Member's "Impact Product List" will be mutually agreed upon
by Designated Member and ADA no later than February 1 of each year. Fill Rate on
all items on "Impact Product List" will be unadjusted [*]. Each Designated
Member will approve the first "A" and Impact List by signing Schedule 9A.
VHA will take into consideration a manufacturer's backorder
impact if ADA is unable to meet the [*] unadjusted fill rates on "A" Items or
[*] unadjusted on Impact items only if manufacturer's backorder is of such
nature that ADA under no circumstances can meet the fill rate obligation defined
in this Section.
(F) Designated Member Reports. ADA shall provide each Designated Member
with the monthly reports listed in Schedule 10 by the fifteenth day of the
following month. VHA may modify or change Schedule 10 upon sixty (60) days
written notice to ADA.
* [This confidential information has been omitted and filed separately with
the Commission.]
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(G) Member Quarterly Business Review. Once each calendar quarter, ADA
shall meet with each Designated Member to discuss, at a minimum, the issues
listed in Schedule 11, Member Business Review Agenda.
(H) ADA Representative. Schedule 11 lists the responsibilities of ADA's
representatives for each Designated Member.
(I) Hours of Operation. ADA shall staff the Primary Ordering Location
each business day continuously from at least 8:00 a.m. through 6:00 p.m., local
time. In case of an emergency, Designated Members can call the Primary Ordering
Location. ADA will provide a list of emergency telephone numbers at the Primary
Ordering Location for after-hours contact.
(J) ADA Service Responsibilities. Schedule 9 lists the responsibilities
of the ADA with penalties for the ADA upon failure to perform service
responsibility expectations.
Section 7. Other Services Available from ADA.
The services listed in this Section shall be available from ADA at an
additional charge to the Designated Member in accordance with Schedules 6A.
(A) JIT Program. ADA shall offer Just-in-Time ("JIT") delivery services
upon request. JIT services shall include frequent deliveries in cases or boxes,
whatever is Vendor's standard unit of packaging. JIT service fees are outlined
in Schedule 6A.
(B) Stockless/LUM (Lowest Unit of Measure). ADA shall offer
stockless/LUM services upon request. At a minimum, such services shall include
the ability to provide: frequent delivery to meet agreed upon stocking levels,
delivery in the lowest unit of measure, pick and pack by area of use and
delivery to area of use and put stock away. Stockless/LUM services shall be
provided
21
<PAGE>
with a fill or kill calculation with an approved substitution list as provided
by the Designated Member. Stockless service fees are outlined in Schedule 6A.
(C) Emergency Deliveries. ADA shall have emergency delivery services
available twenty-four (24) hours a day, seven (7) days a week. ADA may charge
[*] for providing product by emergency deliveries.
(D) Bar Coding. ADA shall provide Bar Coding labels to Designated
Members upon request. ADA may charge [*] in providing bar coding labels.
(E) Other Services. Schedule 6A details certain listed ADA services
available and the charge structure, if any, associated with those services. ADA
and each Designated Member may negotiate additional services as requested by the
Designated Member.
(F) Selection and Change of Additional Services. Designated Members
shall identify additional services selected in accordance with Schedule 6A, and
Designated Members may change additional services selected in accordance with
Schedule 6A.
(G) Customized Packing Slips and Invoices. ADA shall provide customized
packing slips and invoices consistent with Designated Member requirements in
accordance with Schedule 6A.
(H) Customized Pallet Design. ADA shall assist in pallet design and
arrangement and shall deliver goods in accordance with such pallet design upon
request of Designated Members as defined in Schedule 6A.
Section 8. ADA Responsibilities.
ADA shall be responsible to perform the following:
*[This confidential information has been omitted and filed separately with the
Commission.]
22
<PAGE>
(A) Disaster Plan. ADA will assist each Designated Member and VHA
Regional Offices in developing a plan of action for delivery of products in the
event of a natural disaster in the geographical area of a Designated Member.
Schedule 12 details ADA's disaster plan. ADA shall provide VHA, each VHA
Regional Office and Designated Members, upon request, a written action plan
describing procedures in the event their Primary Ordering Location should become
unable to provide products under this Agreement. These action plans will be
reviewed yearly by ADA and VHA and updated as required.
(B) Computer Systems. ADA attests that, in the event its computer
system should fail, it has access to a backup computer system which will be in
operation in no more than forty-eight (48) hours. Schedules 5 and 13 detail
ADA's computer capabilities. ADA will utilize manual ordering systems during
periods in which its computer systems are not operative in order to provide an
uninterrupted flow of Contract Products and Noncontract Products to the
Designated Members.
(C) EDI Capabilities. Schedule 14 lists the EDI capabilities required
of ADA.
(D) VHA Quarterly Business Review. ADA corporate staff shall meet no
less frequently than once each calendar quarter with VHA to discuss ADA's
performance under this Agreement. This quarterly business review shall also
be used to establish performance targets and goals and to review progress
toward such targets and goals.
(E) Reports to VHA. ADA shall provide to VHA reports as specified in
Schedule 15. VHA may amend Schedule 15 at any time upon sixty (60) days written
notice to the ADA. Additional reporting requirements are specified in the Supply
Chain Management Information Technology Guidebook attached to this Agreement.
Failure to provide the required tapes, diskettes
23
<PAGE>
or information by the deadline shall result in the following payments by ADA to
VHA per calendar year:
1st Failure: Written Warning
2nd Failure: [*] Late Fee
3rd Failure: [*] Late Fee
4th Failure and each
succeeding failure per
calendar year: [*] Late Fee
(F) Realignment of Supply Channel. ADA will support the efforts of VHA
to realign the supply channel through efficient activity behavior by
manufacturers, distributors, Designated Members and VHA. VHA has set standards
of performance for the aforementioned members of the supply channel, and the ADA
will be responsible for collaborating with VHA to determine the best ways for
all members of the supply channel to perform in an efficient manner.
(1) Vendor. The standards of performance for Vendors are
located in Schedule 16 of this Agreement. The ADA will be responsible for
monitoring all Vendors that they distribute and their compliance with these
standards of performance. Schedule 17 lists Vendors which meet the performance
standards, and VHA may amend Schedule 17 from time to time.
Initial Implementation. Each ADA will, upon receipt
of the manufacturers' standards of performance, review each of the
manufacturers that they distribute against these standards and develop two
lists:
(a) Aligned Vendor List
(b) Nonaligned Vendor List
The Aligned Vendor List will be made up of all those
manufacturers that meet the minimum point allocation for standards of
performance. In addition, ADA will provide VHA
* [This confidential information has been omitted and filed separately with the
Commission.]
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<PAGE>
with a complete manufacturer assessment of standards of performance compliance
and exactly how each manufacturer complies with each standard of performance.
The Nonaligned Vendors will be made up of all those
manufacturers that do not meet the minimum point allocation for standards of
performance. In addition, ADA will provide VHA with a complete manufacturer
assessment of standards of performance compliance and exactly how each
manufacturer complies or does not comply with each standard of performance.
Ongoing Management of Vendor Standards of
Performance. Each quarter during the term of this Agreement, ADA will report
to VHA any manufacturers that are either added to or removed from both lists. A
manufacturer may not be added or removed from either list without written
consent from VHA Distribution Services. ADA must provide VHA quarterly a
complete review of all Aligned Manufacturers' adherence to the standards of
performance.
(2) Distributor. The standards of performance for ADAs are
located in Schedule 16 of this Agreement. The ADA will be responsible for
complying with all the standards of performance.
Initial Implementation. Each ADA will have a review
with VHA to determine their compliance level with the ADA standards of
performance. VHA will keep record of all levels of compliance to the
standards of performance. For each performance measure that is not met, VHA
will work with the ADA to achieve full compliance.
Ongoing Management of Distributor Standards of
Performance. At all ADA quarterly business reviews, VHA will review the
ADA's compliance to the Distributor Standards of Performance.
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<PAGE>
(3) Designated Members. The standards of performance for all
Designated Members are located in Schedule 16 of this Agreement. The ADA, along
with VHA will be responsible for managing the Designated Member compliance to
their standards of performance.
Initial Implementation. Beginning with the setting
of each Designated Member's Distribution Service Fees, and based on each
Designated Member's compliance to their standards of performance, compliance
will be rewarded in the form of incentives that each Designated Member can earn.
Ongoing Management of Designated Member Standards of
Performance. Each quarter VHA and ADA will review Designated Member
compliance to their standards of performance. VHA will adjust each Designated
Member's Schedule 6C to reflect Designated Member's compliance to their
standards of performance.
(G) VHA Fee. With the delivery of every monthly sales report listing
the sales to each Designated Member, ADA will pay to VHA on the 10th of each
month a "VHA Fee" calculated on total net sales of all Contract and Noncontract
products. ADA shall pay a VHA Fee on all Aligned Manufacturer sales and a VHA
Fee on all other sales. Additionally, ADA will pay a VHA fee on all
Aligned-Noncontract Manufacturer SKUs that are ordered less than five (5) times
per month and are stocked locally. ADA will pay a fee on all Aligned and
Nonaligned Manufacturer SKUs not stocked locally. These fees are applicable for
both Schedules 6 and 6B as follows:
26
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Monthly Volume Aligned Fee Nonaligned Fee
$0-7,500 [*] [*]
$7,501-25,000 [*] [*]
$25,001-75,000 [*] [*]
$75,001-150,000 [*] [*]
$150,001-250,000 [*] [*]
$250,001-400,000 [*] [*]
$400,001-600,000 [*] [*]
$600,001-800,000 [*] [*]
$800,001> [*] [*]
</TABLE>
Please note for non-acute site of care priced under Schedule 6B1, ADA
will pay VHA a fee on all Aligned/Nonaligned manufacturer SKUs of [*]
on total sales.
Schedule 18 lists those products for which ADA is not
obligated to pay the VHA Fee. Sales of Schedule 18 products shall be deducted
from the quarterly sales volume prior to calculation of the VHA Fee.
(H) ADA Representative Compensation System. ADA shall provide VHA a
written summary of ADA representative's compensation plan for the following year
no later than November 1 of each year. ADA shall provide VHA with the
opportunity to make comments on such plan or plans.
(I) VHA Access to Facilities and Personnel. ADA shall permit VHA and
its authorized representatives access to ADA's facilities and personnel at all
reasonable times upon reasonable request. ADA shall provide, at no charge, VHA
with the necessary software to permit "read only" * [This confidential
information has been omitted and filed separately with the Commission.]
27
<PAGE>
access to ADA's computer data (pricing, inventory, accounts receivable, fill
rates, etc.) on an on-line basis.
(J) Fraud and Abuse Disclosure. ADA represents and warrants that, as a
seller, it will provide each Designated Member all information necessary to
comply with the Medicare Medicaid fraud and abuse/anti-kickback statute (42
U.S.C. ss.1320a-7b) and the regulations issued thereunder.
(K) Vendor Reports. ADA agrees to deliver all manufacturer tracing and
rebate reports to each Vendor for Contract Products no later than ten (10) days
after the end of the month in which the sales reported took place.
(L) Returned Goods Policy. ADA's returned goods policy is stated in
Schedule 8.
(M) EDI Transaction Sets. Required EDI transaction sets are stated in
Schedule 14.
Section 9. Drop Shipments.
If a Vendor ships Contract Products or Noncontract Products directly to
a Designated Member (a "drop shipment") and the Vendor bills through ADA, such
transaction will be subject to the terms of this Agreement.
ADA may pass through to the Designated Member any service charges
levied by Vendor on ADA for drop shipments. ADA will notify VHA Members and
Affiliates of any such service charges at the time of order.
Section 10. Service Level.
In addition to its other service obligations under this Agreement, ADA
shall provide the minimum level of service specified in Schedule 9 attached.
Schedule 9 may be amended from time to time by the written agreement of the
parties.
28
<PAGE>
Section 11. General.
(A) Risk of Loss and Insurance. As between ADA and the Designated
Members, ADA shall bear all risk of loss while Contract Products or Noncontract
Products are in ADA's possession, custody or control. ADA shall provide evidence
to VHA that ADA is maintaining all-risk, full- replacement-cost insurance
coverage for any such Contract Product or Noncontract Product. The Designated
Members shall not bear the risk of loss prior to their receipt of Contract
Products or Noncontract Products. VHA shall never bear any risk of loss. ADA may
satisfy the foregoing insurance requirements through its self-insurance program.
In addition, ADA shall secure and maintain, at its own expense, commercial
general liability insurance, including blanket contractual liability and
products liability coverages with minimum limits of $2,000,000 per occurrence
and $5,000,000 annual aggregate. Such insurance shall include VHA and Designated
Members as additional insureds. Within thirty (30) days from the date hereof,
ADA shall submit to VHA a certificate of insurance attested by a duly authorized
representative of the insurance carrier or carriers, evidencing that the
insurance required by this Section is in force and in effect and that such
insurance will not be canceled or materially changed without giving VHA at least
thirty (30) days prior written notice. ADA's obligation to obtain and maintain
the required insurance and submit the required certificate of insurance to VHA
shall continue during the term of this Agreement and for five (5) years
thereafter.
(B) Nonexclusivity. In consideration that ADA will have access to
confidential price information of VHA and the assistance of VHA in gaining
access to Designated Members, ADA shall not offer to sell or sell Contract
Products or Noncontract Products or otherwise do business with any Designated
Member unless contemplated by this Agreement or approved in writing by
29
<PAGE>
VHA. ADA's entire relationship vis-a-vis products with the Designated Members
shall be governed by this Agreement.
VHA and other persons may sell or distribute Contract
Products, Noncontract Products or both to Designated Members. Nothing in this
Agreement shall prohibit VHA from entering into any distribution agreement with
a manufacturer that distributes its own products. VHA retains the right to
manufacture, sell, market and otherwise distribute goods and services to
Designated Members and to any other party.
(C) Confidentiality. ADA shall not provide any usage, sales or purchase
data relating to Designated Members to any third party, except to the extent
necessary to obtain credits or charge backs or to meet other Vendor
requirements, e.g., sales tracings, etc., or as required by applicable law
(including governmental rules and regulations) or in connection with enforcement
of this Agreement. If ADA currently or during the term of this Agreement has in
place a binding contract or other arrangement to supply usage, sales or purchase
data to IMS America, Ltd., Selling Areas Marketing Inc. of Chicago or any other
data collection entity, ADA may provide the information required by such
contract or arrangement if no Designated Member is identified or identifiable
therefrom either separately or as a group.
ADA acknowledges that information supplied to it by VHA is the
property of VHA. ADA and VHA agree to hold confidential the terms, provisions
and conditions of this Agreement and information which is marked confidential
and is supplied to it by the other party pursuant to or in connection with this
Agreement or the Purchasing Agreements and to return any such information to the
providing party promptly upon the termination of this Agreement. ADA and VHA
agree to use such confidential information only in connection with the
performance of their obligations under
30
<PAGE>
this Agreement. ADA and VHA shall not disclose such information to any third
party except with the consent of the other party.
VHA acknowledges that, as professional business people, ADA's
sales representatives have access to information necessary to properly manage
their territory. The terms of this Agreement will be provided to the sales and
marketing team to ensure their thorough understanding of the program and its
objectives.
Notwithstanding any other provision of this Agreement, the
obligations of ADA and VHA to maintain the confidentiality of the confidential
information shall not apply to any portion of the confidential information that:
(i) was in the public domain at the time of its disclosure to the other party;
(ii) enters the public domain through no fault of the receiving party or its
affiliates; (iii) was communicated to the receiving party or its affiliates by a
third party free of any obligation of confidence; (iv) was developed by
officers, employees or agents of the receiving party or its affiliates
independently of, and without reference to, the confidential information; (v) is
already known to the receiving party or its affiliates at the time of receipt of
the confidential information; (vi) is required by applicable law, governmental
rules or regulations or judicial process to be disclosed.
The obligations of ADA and VHA pursuant to this Section 11(C)
shall survive for a period of three (3) years after the termination of this
Agreement.
(D) Warranty. ADA warrants that any product delivered hereunder shall
be new, unopened and in its original packaging as received from the Vendor,
having been stored in accordance with any Vendor instructions. ADA shall not
sell any products without a reasonable warranty from the Vendor which is
assignable to the Designated Member.
31
<PAGE>
ADA agrees to take any action necessary, and any action
reasonably requested, to effect the assignment of such manufacturers' warranty
to the purchaser of the warranted product.
ADA MAKES NO IMPLIED WARRANTIES OR OTHER EXPRESS WARRANTIES,
INCLUDING ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE.
(E) Relationship. Each party to this Agreement has only the authority
granted by this Agreement. Neither party shall take any action on behalf of the
other party unless consented to in writing by the other party.
(F) Financial Statements. ADA will supply to VHA upon request and at
least annually copies of ADA's annual audited financial reports. Such reports
shall include, at a minimum, an income statement, balance sheet, statement of
equity, statement of cash flows, all footnotes and such other information as VHA
may reasonably request.
(G) Federal Access. Until the expiration of four (4) years after ADA
furnishes any service under this Agreement, ADA will maintain and, upon the
request of the Secretary of the U.S. Department of Health and Human Services,
the Comptroller General of the United States or a representative of either of
them, ADA will make available to such requesting person this Agreement and all
books, documents and records that are necessary to certify the nature and extent
of costs claimed to Medicare by any Designated Member with respect to any
services provided by ADA under this Agreement. Whether or not ADA is permitted
hereunder to do so, if ADA carries out any of the duties of this Agreement
through a subcontract, with a value or cost of $10,000.00 or more over a twelve
(12) month period, with a related organization or person, then ADA agrees to
cause such related organization or person to, and to include in any such
subcontract clauses and provisions
32
<PAGE>
to the effect that such related organization or person agrees to maintain, and
upon the request of the Secretary of the U.S. Department of Health and Human
Services, the Comptroller General of the United States or a representative of
either of them, make available to such requesting person the subcontract and all
books, documents and records that are necessary to certify the nature and extent
of costs claimed to Medicare by any Designated Member with respect to any
services provided under such subcontract.
(H) Compliance With All Laws. Each party to this Agreement represents
and warrants to the other party that it does and will comply with all laws in
connection with this Agreement and the performance of its obligations hereunder;
provided, however, without limiting the generality of the foregoing, ADA shall
provide documentation to VHA upon request to demonstrate compliance with all
applicable OSHA and EEOC requirements.
(I) Indemnification. ADA agrees to indemnify VHA, the Designated
Members and their respective affiliates, directors, officers, employees, agents,
servants and representatives, upon demand for and against any claim, loss,
liability or expense (including reasonable attorneys' fees and other reasonable
expenses of litigation) incurred by any of them in connection with or as a
result of any act, or failure to act, by ADA, its affiliates, directors,
officers, employees, agents, servants or representatives in the performance of
this Agreement or any breach by ADA of this Agreement; provided, however, that
such indemnity shall not extend to any claim, loss, liability or expense
resulting from the negligence or willful misconduct of the party to be
indemnified or to any incidental or consequential damage suffered by such party
(other than personal injuries).
VHA agrees to indemnify ADA, its affiliates, directors
officers, employees, agents, servants and representatives, upon demand for and
against any claim, loss, liability or expense
33
<PAGE>
(including reasonable attorneys' fees and other reasonable expenses of
litigation) incurred by ADA in connection with or as a result of any act, or
failure to act, by VHA, its affiliates, directors, officers, employees, agents,
servants or representatives in the performance of this Agreement or any breach
by VHA of this Agreement; provided, however, that such indemnity shall not
extend to any claim, loss, liability or expense resulting from the negligence or
willful misconduct of any other party or incidental or consequential damages
suffered by such party (other than personal injuries).
(J) Assignment. This Agreement is binding on the parties hereto and
shall inure to the benefit of and be binding upon the successors and assigns of
the parties. Neither this Agreement nor either party's rights and obligations
under this Agreement may be delegated, assigned, pledged or encumbered without
the prior written consent of the other party. For purposes of this paragraph,
any transfer, sale, merger or consolidation of ADA, or a substantial portion of
ADA's assets, whether by contract, agreement or operation of law, shall be
deemed an assignment and require the prior written consent of VHA.
(K) Entire Agreement, Modification, Amendment, Waiver. This Agreement
constitutes the entire agreement between the parties. No modification, amendment
or waiver of any provision of this Agreement will be effective unless approved
in writing by VHA and ADA. The failure of VHA, any Designated Member or ADA at
any time to enforce any provision of this Agreement will not be construed as a
waiver of such provision and will not affect the right of VHA, the Designated
Members or ADA thereafter to enforce each and every provision of this Agreement
in accordance with its terms.
(L) Choice of Law. In the event of any dispute between VHA and ADA,
this Agreement shall be governed by the internal laws of the state of Texas. Any
dispute between ADA and a
34
<PAGE>
Designated Member shall be construed in accordance with the local laws of the
location of such Designated Member.
(M) Third-Party Beneficiaries. The Designated Members are intended
third-party beneficiaries hereunder and may enforce any of the terms of this
Agreement against ADA.
(N) Severability. If this Agreement, or any one or more of the
provisions hereof, shall be held invalid, illegal or unenforceable within any
governmental jurisdiction or subdivision thereof, this Agreement or any such
provision or provisions shall not, as a consequence thereof, be deemed to be
invalid, illegal or unenforceable in any other governmental jurisdiction or
subdivision thereof. If any provisions in this Agreement shall be held invalid,
illegal or unenforceable, such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement; this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein, and there shall be deemed substituted such other provision as
will most nearly accomplish the intent of the parties to the extent permitted by
applicable law.
(O) Authority. Each party represents that the execution, delivery and
performance of this Agreement have been duly authorized by all required action
on such party's part, that such party has the full power to make and perform
this Agreement and that this Agreement constitutes the legal, valid and binding
obligation of such party, enforceable in accordance with its terms.
(P) Force Majeure. ADA shall be excused for failure to perform
hereunder if failure is caused by fire, shortages of goods caused by national
crisis, unavoidable casualties, acts of God, or any other matters beyond ADA's
control.
(Q) Books and Records, Audit. ADA shall keep, maintain and preserve
complete, current and accurate books, records and accounts of the transactions
contemplated hereby and such
35
<PAGE>
additional books, records and accounts as are necessary to establish and verify
ADA's compliance hereunder. All such books, records and accounts shall be
available for inspection and audit by VHA and its authorized representatives at
any time during the term of this Agreement and for two (2) years thereafter, but
no more frequently than twice in any consecutive twelve (12) month period and
only during reasonable business hours and upon reasonable notice. The exercise
by VHA of the right to inspect and audit is without prejudice to any other or
additional rights or remedies of either party hereto.
(R) Market Competitiveness. ADA represents and warrants that the price,
value and quality of products and services delivered to Designated Members
pursuant to this Agreement shall remain market competitive at all times
throughout the term of this Agreement. As competitive situations arise during
the term of this Agreement, it may 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 regard to Designated Members'
request for proposal (RFP), VHA and ADA mutually agree to notify each other
within five (5) business days upon receipt of RFP from Designated Member, and
ADA agrees that any response to the RFP shall be in the context of and pursuant
to the terms of this Agreement.
Section 12. Term and Termination.
This Agreement will become effective upon execution as to each
Designated Member to which ADA is distributing products as of the date of this
Agreement. This Agreement will commence on August 20, 1997, and continue in
force until August 19, 2000, unless terminated sooner as provided in this
Section; provided that either party may at any time terminate this Agreement,
with or without cause, by delivering not less than ninety (90) days prior
written notice
36
<PAGE>
thereof to the other party; and provided that VHA may terminate this Agreement,
in whole or in part, upon thirty (30) days written notice in the event of any
breach or non-performance by ADA, provided ADA has not cured the breach within
said thirty (30) days. This Agreement may be extended for up to two (2)
additional one (1) year terms upon mutual written agreement of the parties.
Section 13. Notices.
(A) All notices given under any of the provisions of this Agreement
shall be deemed duly given to VHA or the Designated VHA Members and Affiliates
if mailed by registered or certified mail, return receipt requested, to:
VHA Inc.
220 East Las Colinas Boulevard
Irving, Texas 75039-5500
or to such other address as VHA may designate in writing by notice to ADA as
provided in this Section 13.
(B) All notices given under any of the provisions of this Agreement
shall be deemed duly given to ADA if mailed by registered or certified mail to:
------------------------------------
------------------------------------
------------------------------------
or to such other address as ADA may designate in writing by notice to VHA as
provided in this Section 13.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
VHA Inc. ("VHA")
By: _______________________________
Mark McKenna
Vice President
----------------------------------
("Authorized Distribution Agent")
By: ________________________________
Title:_______________________________
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<TABLE>
<CAPTION>
<S> <C>
ADA Agreement
List of Schedules
Schedule Schedule Type
Schedule 1A Designated VHA Member and Affiliates List
Schedule 1B Alternate Site and Care Continuum VHA Members List
Schedule 1C Other Designated Health Care Organizations Assigned by VHA to ADA for Service
Schedule 2 ADA Primary Ordering Location (POL)
Schedule 3 VHA Regional Offices (Area Offices and Regional Health Care Systems)
Schedule 4 VHA PLUS(R)Pricing Policy and Protocol
Schedule 4A VHA PLUS(R)Hospital Exception Level Pricing (HELP Form)
Schedule 4B VHA PLUS(R)Stocking Request Form
Schedule 5 [ADA's Capabilities w.r.t. systems to serve on-line communication among ADA, manufacturer
and HCO]
Schedule 6 Base Bulk Distribution Matrix
Schedule 6A Additional Distribution Service Menu Fee and Definitions
Schedule 6B Modified Activity Based Distribution Cost Matrix
Schedule 6B1 Care Continuum Services Matrix
Schedule 6C Designated Member Distribution Service Fee Calculation and Acknowledgment Form / Base
Distribution Service Fee Change Form (for use with Schedule 6 or 6B)
Schedule 6D Initial Implementation and Ongoing Distribution Services Review
Schedule 6E Designated Member ADA Assignment and Reassignment Form (ADA and Care Continuum ADA
Geographic and Service Capabilities)
Schedule 6F System Definition Pricing Policy and Price Determination Worksheet
Schedule 6F1 Definition of System Pricing for Vertically Integrated Systems/Networks
Schedule 7 Payment Term Options
Schedule 8 Return Goods Policy
Schedule 9 ADA Service Levels / Notification Process / Penalties
Schedule 9A Designated Member Verification of "A" and "Impact" List
Schedule 10 ADA Monthly Reports to Designated Members
Schedule 11 ADA Representative Responsibilities / Designated Member Quarterly Business Review Topics
Schedule 12 ADA Disaster Plan
Schedule 13 ADA Computer Capabilities and Backup Systems
Schedule 14 ADA EDI Capabilities
Schedule 15 ADA Reports to VHA
Schedule 16 Standards of Performance
Schedule 17 List of Aligned Vendors
39
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Schedule Schedule Type
Schedule 18 Products On Which ADA Pays No Fee To VHA
Schedule 19 Request for Change of ADA Notification Form
</TABLE>
40
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SCHEDULE 1A
DESIGNATED VHA MEMBERS AND AFFILIATES
[List of VHA Members and Affiliates assigned to ADA]
41
<PAGE>
SCHEDULE 1B
DESIGNATED VHA MEMBERS OR AFFILIATES
Alternate Site and Care Continuum VHA Members List
42
<PAGE>
SCHEDULE 1C
Other Designated Health-Care Organizations Assigned by VHA to ADA for Service
43
<PAGE>
SCHEDULE 2
ADA Primary Ordering Locations (POLs)
and Designated Members Being Served by Location
44
<PAGE>
SCHEDULE 3
VHA REGIONAL OFFICES
[Area Offices and Regional Health Care Systems]
45
<PAGE>
SCHEDULE 4
VHA PLUS(R) Pricing Policy and Protocol
The objective of this policy/protocol is to achieve the following:
o Ensure accurate VHA PLUS(R) pricing to VHA health-
care organizations ("HCOs") in a timely manner,
o Provide traceability and accountability of VHA
PLUS(R) pricing,
o Centralize VHA PLUS(R) pricing decisions and
o Effectively communicate all price revisions.
TIERED OR HOSPITAL EXCEPTION LEVEL PRICING
In the event that it becomes necessary to deviate from the published
pricing for any VHA PLUS(R) medical/surgical product, the following protocol is
to be observed:
1) The VHA PLUS(R) manufacturer, in conjunction with the
appropriate VHA Account Manager, will communicate a request
for tier revision or hospital exception level pricing to the
VHA Medical/Surgical Business Unit ("MSBU") Product Management
on a VHA PLUS(R) HOSPITAL EXCEPTION LEVEL PRICING (HELP) form
(attached).
2) The VHA PLUS(R) Product Manager/Analyst will review requests.
3) The VHA PLUS(R) Product Manager/Analyst will
approve/disapprove requests.
4) The VHA Distribution Services Analyst will telefax approved
VHA PLUS(R) HELP forms to the ADA, and revised pricing will be
available to the HCO in seven (7) working days.
5) The ADA will communicate back to the VHA Distribution Services
Analyst in writing confirming the date entered into the ADA
system.
6) All approved VHA PLUS(R) HELP requests will be on file with
the VHA Distribution Services Analyst for future reference.
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SCHEDULE 4A
VHA PLUS(R)
HOSPITAL EXCEPTION LEVEL PRICING
(H.E.L.P. FORM)
VHA Hospital:
-----------------------------------------------------------------
VHA LIC #:
-----------------------------------------------------------------
Address:
-----------------------------------------------------------------
City/State/Zip:
-----------------------------------------------------------------
Contract #:
-----------------------------------------------------------------
Current Price Tier: New Price Tier:
------------------- ------------------------
Effective Date: Review Date:
----------------------- ---------------------------
(For Office Use Only)
<TABLE>
<CAPTION>
<S> <C>
CAT NO DESCRIPTION ADA HOSP USAGE USAGE
================ ====================================================== ============== ============= ============== ===========
</TABLE>
Submitted By:___________________________________________________________________
SIGNATURE DATE
VHA PLUS(R) Product Management:_________________________________________________
SIGNATURE DATE
ADA Contracts Personnel:________________________________________________________
SIGNATURE DATE
Return copy to Distribution Analyst-VHA
Fax (972) 830-0212
Note: 60-day price change notification is required to the ADA.
47
<PAGE>
SCHEDULE 4B
VHA PLUS(R) Stocking Request Form
[INSERT -- Tom Zaves to provide]
48
<PAGE>
SCHEDULE 5
[ADA's capabilities w.r.t. systems to serve on-line communication
among ADA, manufacturer and HCO.]
49
<PAGE>
SCHEDULE 6 - DISTRIBUTION SERVICES FEE - BASE BULK MATRIX
<TABLE>
<CAPTION>
<S> <C>
Monthly Volume Gross Aligned Gross Nonaligned Weekly Deliveries Line Average
Fee for Fee Incentive
Distribution for Distribution
Services Services
$0 - 7,500 [*] [*] 1 Delivery per week [*]
$7,501 - 25,000 [*] [*] 1 Delivery per week [*]
$25,001 - 75,000 [*] [*] 2 Deliveries per week [*]
$75,001 - 150,000 [*] [*] 2 Deliveries per week [*]
$150,001 - 250,000 [*] [*] 2 Deliveries per week [*]
$250,001 - 400,000 [*] [*] 2 Deliveries per week [*]
$400,001 - 600,000 [*] [*] 3 Deliveries per week [*]
$600,001 - 800,000 [*] [*] 3 Deliveries per week [*]
$800,001 [*] [*] 3 Deliveries per week [*]
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Monthly Volume [*]EOE Net Aligned Fee for Net Nonaligned Fee
Incentive Distribution for Distribution
Services Services
$0 - 7,500 [*] [*] [*]
$7,501 - 25,000 [*] [*] [*]
$25,001 - 75,000 [*] [*] [*]
$75,001 - 150,000 [*] [*] [*]
$150,001 - 250,000 [*] [*] [*]
$250,001 - 400,000 [*] [*] [*]
$400,001 - 600,000 [*] [*] [*]
$600,001 - 800,000 [*] [*] [*]
$800,001 [*] [*] [*]
</TABLE>
Qualifiers: Base Bulk - Delivery to Dock in Manufacturer's Case Shipment
1) Initial Monthly Volume is determined by previous quarter's actual purchases
and reviewed semiannually thereafter
2) To qualify for EOE incentives, HCO must be [*]EOE for past quarter's
activity and reviewed semiannually thereafter
3) DSO is an add on based on past quarter's activity and reviewed
semiannually thereafter
4) All additional services are based on fees on Schedule 6A, Distribution
Service Fee Matrix
5) To qualify for $Average Line Incentive, Designated Members must average
their required monthly volume qualifier for the previous quarter's
activity (line incentive is calculated by dividing the total monthly
dollar volume by the total number of lines shipped for month), reviewed
semiannually
6) Aligned fee, both Gross and Net, will apply to all SKUs from all VHA
Contract, VHA PLUS(R)and VHA OPPORTUNITY Manufacturers
7) Nonaligned fee, both Gross and Net, will apply to all Nonaligned
Manufacturers SKU's and Noncontract Aligned Manufacturers SKU's that
are stocked locally, but are ordered less than a total of 5 times per
month from ADA's branch. If not stocked locally, then Noncontract
Aligned low velocity SKUs will be charged Aligned fee + trans.
<TABLE>
<CAPTION>
<S> <C>
8) Payment Terms: 1) 15 Day Prepay: [*] 2) Net 0 Days: [*]
3) Standard Terms: [*] purchases due [*] of same month, [*] purchases due [*] of following month
4) Net 30 Days: Add [*] 5) Net 45 Days: Add [*]
6) Net 60 Days: Add [*] 7) Over 60 Days: Add additional [*] for each 15 days beyond
60 days
</TABLE>
* [This confidential information has been omitted and filed separately with the
Commission.]
50
<PAGE>
Schedule 6A
Additional Distribution Service Fee Menu and Definitions
<TABLE>
<CAPTION>
<S> <C>
Distribution Services Distribution Service Fee
1) Customized Invoices 1) [*]
2) Customized Packing Slip 2) [*]
3) Combined Packing Slip and Invoice 3) [*]
4) Custom Pallet Architecture - Basic 4) [*]
5) Custom Pallet Architecture - 5) [*]
Expanded
6) Add Delivery 6) Monthly Vol:
$0-75,000 [*]
$75,001-250,000 [*]
$250,001> [*]
7) Bulk Picked By Department 7) a) 1-3 Departments [*]
Delivered to Dock b) 4-10 Departments [*]
c) 11-15 Departments [*]
d) 16> Departments [*]
8) Bulk Break to Manufacturer Next 8) [*]
Packing Unit (if not usually broken
down)
9) LUM Picked by Department 9) [*]
Delivered to Dock*
10) LUM Picked by Department 10) [*]
Delivered to Department**
11) LUM Picked by Department Put 11) [*]
Stock Away***
12) Affix Patient Label 12) [*]
13) Bar Codes 13) [*]
14) Emergency Deliveries 14) [*]
</TABLE>
1) All Distribution Service Fees are additive to the effected activity.
2) Distribution Service Fees # 9, 10 & 11 are additive.
3) Definition of all Distribution Services on Schedule 6A are with this
Schedule.
* [This confidential information has been omitted and filed separately with the
Commission.]
51
<PAGE>
SCHEDULE 6A (Page 2 of 5)
ADA Agreement Service Definitions
SERVICE DEFINITIONS:
1) Centralized Billing:
A health-care system is considered to have centralized billing if all
material products and services fees associated with each entity (i.e.,
HCO) of the system are applied to one "bill-to" number and all invoice
activity conducted by the supporting ADA is forwarded to one central
accounting address location. Additionally, payments are forwarded to
the ADA in a manner that may reflect individual sub "bill-to" (HCO)
purchase activity, but can be processed against the one system wide
"bill-to" number.
2) Centralized Ordering:
A health-care system is considered to have centralized ordering if all
product activity for each member HCO in the system is ultimately
consolidated through, as is often the case, one information system
collection point. This action occurs before any individual facility
purchase activity is forwarded to the ADA in the form of a purchase
order. Although ordering activity at the individual HCOs may take place
on various MIS systems, all purchase activity is funneled into one
primary system prior to being released to the ADA.
3) Customized Invoice:
An invoice is considered to be customized by the ADA when the creation
of the invoice requires the ADA to perform actions other than what is
considered standard operating procedure (SOP) in the generation,
delivery and/or processing of the original invoice. An invoice is also
considered to be customized when any additional documentation that is
not part of the ADA's SOP requirement must be created to accompany the
invoice for delivery to the HCO or health-care system. Traditionally,
one standard purchase order received from the customer will
automatically create one standard invoice. Additionally, any
customization required may necessitate an information system
change/enhancement on the part of the ADA.
52
<PAGE>
SCHEDULE 6A (Page 3 of 5)
ADA Agreement Service Definitions
4) Customized Packing Slip:
A packing slip is considered to be customized by the ADA when the
creation of the packing slip requires the ADA to perform actions other
than what is considered standard operating procedure (SOP) in the
generation and/or delivery of the packing slip created from an original
purchase order. A packing slip is also considered to be customized when
any additional documentation that is not part of the ADA's SOP
requirement must be created to accompany the packing slip for delivery
to the HCO or health-care system. Traditionally, one standard purchase
order received from the customer will automatically create one standard
packing slip.
5) Customized Packing Slip and Invoice:
Combination of 3) and 4).
6) Extra Deliveries:
VHA organization deliveries are included in their base cost+plus price
based on Schedule 6 or 6B. All additional deliveries are added to the
base cost+plus price and priced according to the Service Fee Menu.
7) Bulk Picked by Department, Delivered to Dock:
VHA organizations segment their orders by their departments, but the
product remains in the original manufacturer's case pack or normal ADA
shipping quantity and is delivered to the organization's dock.
8) LUM Picked by Department, Delivered to Dock:
Same as bulk definition, but the product is broken into lowest unit of
measure from the manufacturer's original case pack.
9) LUM Picked by Department, Delivered to Department:
Same as 8), but the VHA organization's ADA delivers the LUM product
directly to the VHA organization's department area.
53
<PAGE>
SCHEDULE 6A (Page 4 of 5)
ADA Agreement Service Definitions
10) LUM Picked by Department, Put Stock Away:
Same as *, but the VHA organization's ADA delivers the LUM product
directly to the VHA organization's department area and actually puts
the product away.
11) Affix Patient Charge Labels:
Covers the cost of the label and the labor to affix the patient charge
label to the product.
12) Bar-Coded Shelf Labels:
ADA creates the bar-coded shelf label and provides them to the VHA
organization for use in central stores, warehouses and departments.
13) Emergency Delivery:
Any delivery after normal business hours, or a delivery that requires
special attention such as use of a courier service, etc.
14) Line Incentive:
Monthly dollar average of lines ordered. Designated Member will be
eligible for incentive if for the previous quarter the lines ordered
average the amount indicated on Schedule 6.
15) Custom Pallet Architecture-Basic:
Attached
16) Custom Pallet Architecture-Expanded:
Attached
54
<PAGE>
SCHEDULE 6A (Page 5 of 5)
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 nonstock 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 health-care organization
weight and/or dimension requirements
55
<PAGE>
SCHEDULE 6B
Modified Activity Based Distribution Service Fee
Matrix
<TABLE>
<CAPTION>
<S> <C>
Avg. Sales Per Monthly Volume Monthly Volume Monthly Volume Monthly Volume
Line $800,001 $600,001 - $800,000 $400,001 - $600,000 $200,001 - $400,000
Aligned/Non- Aligned Non- Aligned Non- Aligned Non- Aligned Non-
Aligned Fee is Fee Aligned Fee Aligned Fee Aligned Fee Aligned
multiplied to Fee Fee Fee Fee
each line
shipped
Above $551 [*] [*] [*] [*] [*] [*] [*] [*]
$401 - $550 [*] [*] [*] [*] [*] [*] [*] [*]
$201 - $400 [*] [*] [*] [*] [*] [*] [*] [*]
$101 - $200 [*] [*] [*] [*] [*] [*] [*] [*]
$51 - $100 [*] [*] [*] [*] [*] [*] [*] [*]
$26 - $ 50 [*] [*] [*] [*] [*] [*] [*] [*]
$11 - $ 25 [*] [*] [*] [*] [*] [*] [*] [*]
$10 - Below [*] [*] [*] [*] [*] [*] [*] [*]
Deliveries 3 3 3 2
Additional [*] [*] [*] [*]
Delivery Fee
<CAPTION>
Avg. Sales Per Monthly Volume Monthly Volume
Line $100,001 - $200,000 $0 - $100,000
Aligned/Non- Aligned Non- Aligned Non-
Aligned Fee is Fee Aligned Fee Aligned
multiplied to Fee Fee
each line
shipped
Above $551 [*] [*] [*] [*]
$401 - $550 [*] [*] [*] [*]
$201 - $400 [*] [*] [*] [*]
$101 - $200 [*] [*] [*] [*]
$51 - $100 [*] [*] [*] [*]
$26 - $ 50 [*] [*] [*] [*]
$11 - $ 25 [*] [*] [*] [*]
$10 - Below [*] [*] [*] [*]
Deliveries 2 2
Additional
Delivery Fee [*] [*]
</TABLE>
1) All orders are placed EOE
2) HCO must be able to communicate 810/832
3) Above Fees are inclusive of Fees # 7, 8 and 9 from Schedule 6A
4) Fee is Separate Line Item Charge on Invoice, based on the percent
charged to dollar volume of the line(line average is determined
previous quarters line average, total lines shipped divided by total
dollars of lines shipped) reviewed semiannually
5) Product is billed at actual product cost
6) Aligned Fee will apply to all items from VHA Contract, VHA PLUS(R), and
VHA OPPORTUNITY Manufacturers and All Aligned NonContract Manufacturers
items that are ordered more than 5 times per month from ADA's branch.
Noncontract Aligned low velocity SKU's (ordered less than 5 times per
month) & stocked locally will have the NonAligned charge applied, if
not stocked locally, then the Aligned charge will apply +
transportation charges
7) NonAligned Fee applies to all NonAligned Manufacturers SKUs and
NonContract Aligned Manufacturers SKUs that are ordered less than 5
times per month from ADA's branch
<TABLE>
<CAPTION>
<S> <C>
8) Payment Terms: 1) 15 Day PrePay: [*] credi2) Net 0 Days: [*] cred3) Standards Terms
Net 30 Days:Add [*] 5) Net 45 Days: Add [*] 6) Net 60 Days: Add [*] 7)Over 60 Days: Add additional
[*] for each 15 days beyond 60 days
</TABLE>
* [This confidential information has been omitted and filed separately with the
Commission.]
56
<PAGE>
Schedule 6B1
Medical/Surgical Care Continuum Distribution
Price Matrix
- --------------------------------------------------------------------------------
VHA Physician Participants
Med/Surg Distribution Monthly Volume Monthly Volume Monthly Volume
Channel
$0 - $4,999 $5,000 - $9,999 $10,000+
Aligned [*] [*] [*]
Nonaligned [*] [*] [*]
NOTES: o Cost+Plus fee is inclusive of the VHA fee.
o Matrix applies to owned/controlled alternate site
facilities credentialed into VHA membership (OHCP) or
VHA PhysicianLINK Services(sm) participants
(strategically important "linked" physician
practices).
o To avoid two costs in the HCO information system, the
difference in cost+plus between an acute care slot
and care continuum slot can be applied as a service
charge to all care continuum sales.
o Delivery to dock, one shipment per week.
VHA Care Continuum Participants: Home Care - Long-Term Care
<TABLE>
<CAPTION>
<S> <C>
Med/Surg Distribution Monthly Volume Monthly Volume Monthly Volume Monthly Volume
Channel
$0-9,999 $10,000-24,999 $25,000-39,999 $40,000+
Aligned [*] [*] [*] [*]
Nonaligned [*] [*] [*] [*]
</TABLE>
NOTES: o Cost+Plus fee to designated care continuum
participant is inclusive of the VHA fee.
o Monthly purchase volumes will be combined for all
sites utilizing a central ordering, billing,
selling and shipping point.
o Cost+Plus matrix applies to both the Acute-Care
Authorized Distribution Agents (ADA) and the Care
Continuum (CC) Authorized Distribution Agents (VHA
ADA).
o Delivery to dock, two deliveries per week.
o Matrix applies to owned/controlled alternate site
facilities credentialed into VHA membership (OHCP).
o To avoid two costs in the HCO information system, the
difference in cost+plus between an acute care slot
and care continuum slot can be applied as a service
charge to all care continuum sales.
o Due to cost of distributing Adult Briefs and
Nutritionals, these two items will be locally
negotiated.
* [This confidential information has been omitted and filed separately with the
Commission.]
57
<PAGE>
SCHEDULE 6C
Designated VHA Member Distribution Service Fee Calculation and Acknowledgment
Form / Distribution Service Fee Change Form for Schedule 6 Base Bulk
Distribution Matrix and Schedule 6B Modified Activity Based Cost Matrix
Designated Member: _______________________________
Address: _______________________________
_______________________________
_______________________________
_______________________________
VHA Lic. #: _______________________________
Phone #: _______________________________
Fax #: _______________________________
Director of Materials Management: _________________________________
Date: _________________________________
Declared ADA: _________________________________
Fill out this section is using Schedule 6 Base Bulk Distribution Matrix:
<TABLE>
<CAPTION>
<S> <C>
1) Previous quarters monthly volume average: _____________________
2) Base volume service fee from Schedule 6:
- Gross Aligned: _____________________
- Gross NonAligned: _____________________
3) Incentives Earned:
a) EOE [*]: -_____________________
b) Line Avg: -_____________________
4) DSO Performance: -/+____________________
5) Extra Services Required:
a) Customized Invoice [*] +_____________________
b) Customized Packing Slip [*] +_____________________
c) Combined Packing Slip & Invoice [*] +_____________________
d) Custom Pallet Architecture Basic [*] +_____________________
e) Custom Pallet Architecture Expanded [*] +_____________________
f) Extra Weekly Deliveries (each) (see sched 6A) -/+____________________
g) Bulk Picked by Depart. Del. to Dock:
- 1-3 Departments [*] +_____________________
- 4-10 Departments [*] +_____________________
- 11-15 Departments [*] +_____________________
- 16> Departments [*] +_____________________
h) Bulk Break to Manufacturer Next
Packing Unit [*] +_____________________
I) LUM Picked by Depart.
Del. to Dock* [*] +_____________________
j) LUM Picked by Depart.
Del. to Depart.* [*] +_____________________
k) LUM Picked by Depart.
Del. and Put Stock Away* [*] +_____________________
6) Total Aligned / NonAligned Net Distribution
Service Fees:
- Net Aligned: ______________________
- Net NonAligned: ______________________
</TABLE>
o New (check) o Change (check)
*[This confidential information has been omitted and filed separately with the
Commission.]
58
<PAGE>
SCHEDULE 6C
Fill out this section if using Schedule 6B Modified Activity Based Cost Matrix:
<TABLE>
<CAPTION>
<S> <C>
1) Previous quarter month volume average: _______________________
2) Line $ average for previous quarter: _______________________
3) GrossAligned Fee based on Line $ average and monthly volume _______________________
4) GrossNonAligned Fee based on Line $ average and monthly volume_______________________
5) DSO Performance: _______________________
6) Extra Services Required:
a) Customized Invoice [*] +______________________
b) Customized Packing Slip [*] +______________________
c) Customized Packing Slip & Invoice [*] +______________________
d) Customized Pallet Architecture Basic [*] +______________________
e) Customized Pallet Architecture Expanded [*] +______________________
f) Extra weekly deliveries (each) (see sched 6A) +______________________
g) Bulk Picked by Depart. Del. To Dock:
- 1-3 Departments [*] +______________________
- 4-10 Departments [*] +______________________
- 11-15 Departments[*] +______________________
- 16> Departments[*] +______________________
h) Delivered and Put Stock Away* [*] +______________________
7) Total Net Aligned / NonAligned Net Distribution Service Fees:
- Net Aligned: _______________________
- Net NonAligned: _______________________
</TABLE>
Please note pricing option chosen must be used for a one year minimum time
period, Designated Member may chose to change pricing option during the
7/15-8/31 review period of each year.
VHA Account Manager Date
- ----------------------------------------------------------------
ADA Representative Date
- ----------------------------------------------------------------
Director of Materials Management Date
- ----------------------------------------------------------------
Please return to VHA Distribution Services via Fax @: (972) 830-0212.
* [This confidential information has been omitted and filed separately with the
Commission.]
59
<PAGE>
SCHEDULE 6D
Initial Implementation and Ongoing Distribution Services Review
Initial Implementation:
1) VHA will send to each Designated Member a letter indicating the terms
of the Redesigned ADA Agreement that are being implemented.
2) The letter will include a Redesigned ADA Agreement Launch Package which
will provide details of the Redesigned ADA Agreement, Designated
Members Assignment and Reassignment Form (Schedule 6E), Designated
Member Distribution Service Fee Calculation and Acknowledgment Form /
Base Activity Based Costing Distribution Service Fee Change Form
(Schedule 6C), Base Distribution Service Fee Matrix and Modified
Activity Based Distribution Cost Matrix (Schedules 6 and 6B),
Designated Member Care Continuum ADA Selection Form (Schedule 6E1).
3) Each Designated Member is to completely review all the information
provided in steps 1 and 2 and completely
fill out Schedule 6E, Schedule 6E1 or Schedule 6C.
4) Mail or FAX back to VHA Distribution Services, c/o VHA Inc., 220 East
Las Colinas Boulevard, Irving, TX
75039 (FAX Number: 972/830/0212).
5) All data needs to be received by VHA Distribution Services by
October 31,1997.
6) If Designated Member is requesting a change of ADAs, actual
implementation date for steps 3 and 4 will vary
based on the issues driving the request for change.
7) If Designated Member is not requesting a change of ADAs, the new
pricing as indicated by Designated Member on Schedule 6 or 6B will go
into effect on December 1, 1997.
Semiannually
Beginning with the end of the first six months of calendar year 1998
and for each six (6) month period thereafter for the term of this Agreement,
VHA, using ADA data, will review each VHA Designated Member Distribution Service
Fee activity. Review periods will be as follows:
Review Period Review
o 1/1 - 6/30 o 7/15 - 8/31
o 7/1 - 12/31 o 1/15 - 2/28
VHA will review the following Designated Member activity:
a) Each six (6) month period thereafter volume purchases from
ADA, excluding equipment
b) Actual manufacturers and products purchased for assessment of
proper pricing based on the use of
Aligned/Nonaligned manufacturers pricing
c) [*] EOE Compliance and Incentive Eligibility
d) Additional services accessed and fees being paid
e) DSO for payment activity to determine the need to change DSO
add ons or deducts
f) Average line order and incentive eligibility
Upon review, VHA will determine any changes to Designated Member
Schedule 6C and send changes to both ADA and Designated Member for review. If no
revisions are necessary from ADA and/or Designated Member, then the changes
initiated by VHA will go into effect thirty (30) days from FedEx mailing to ADA
and Designated Member. If ADA and/or Designated Member makes revisions to the
Schedule 6C sent by VHA, and upon mutual acceptance of revisions by Designated
Member, ADA and VHA, VHA will adjust the Schedule 6C and re-FedEx to ADA and
Designated Member; and these changes will go into effect thirty (30) days from
notice by VHA. There will be no credits issued for previous period's
performance.
* [This confidential information has been omitted and filed separately with the
Commission.]
60
<PAGE>
Schedule 6E
Designated Member ADA Assignment, Reassignment
Distribution Services Fee Choice Form
ADA and Care Continuum Geographic and Service Capabilities Listings
Reassignment:
Beginning in 1995, each Designated VHA Member or Affiliate had the
opportunity to declare a Authorized Distribution Agent from those serving your
marketplace. At that time (Name of Designated VHA Member or Affiliate) declared
(Name of ADA Declared).
To locate the ADAs now serving your market place, please refer to the
Launch Package. You are being reassigned to (Name of ADA Declared). If you have
a specific issue that requires (Name of Designated VHA Member or Affiliate) to
initiate a request for change of ADA for either service or strategic reasons,
please indicate that need on this form. If no such indication is made by (Name
of Designated VHA Member or Affiliate), (ADA Name) will be your ADA for the term
of this Agreement.
Designated VHA Member or Affiliate: _____________________________
Address: _____________________________
_____________________________
_____________________________
Director of Materials Management: _____________________________
Phone Number: _____________________________
Fax Number: _____________________________
I need to initiate a request for change of ADA Yes______ No________
The reason is: Services______ Strategic_______
If Yes, Why:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Director of Materials Management Signature: ____________________________________
Date: ____________________________________
Please return to VHA Distribution Services via Fax: (972-830-0212)
Assignment:
The ADA that (Name of Designated Member) declared as their ADA in 1995
is no longer authorized to serve this marketplace. The ADAs now authorized to
serve (Name of Designated Member) marketplace are:
o 1)__________________________________
o 2)__________________________________
o 3)__________________________________
o 4)__________________________________
Please check the ADA that (Name of Designated Member) is declaring as their ADA.
Designated Member is declaring VHA as their GPO/Alliance of Choice for products
and distribution services.
Director of Materials Management Signature: ____________________________________
Date: ____________________________________
61
<PAGE>
Schedule 6E
In addition to the reassignment/assignment process for each Designated
Member, if needed, the Designated Member may need to declare a continuum of care
ADA from those who serve your marketplace. The acute care ADA can be your
continuum of care ADA if they are capable of serving the continuum of care or
you can designaate a separate ADA to serve the continuum of care. Please
indicate your choice of ADAs to serve your continuum of care (a list of ADA's
capabilities to serve the continuum of care is located in Schedule 6E1):
Continuum of Care ADA: ____________________________________________
Distribution Service Fee Choice Form:
VHA is offering each Designated Member a choice of two pricing options
for their Distribution Service Fee. These choices are found in Schedule 6 Base
Bulk Distribution Matrix or Schedule 6B Modified Activity Based Distribution
Cost Matrix. Please indicate which pricing option Designated Member is declaring
by checking the appropriate box below. Each Designated Member is required to use
their declared pricing option for a period of not less than one year. At the
conclusion of each year of use of declared pricing option Designated Member will
have the opportunity to re-declare their current pricing option or to the option
they are currently not accessing. The Distribution Service Fee options are:
o Schedule 6 - Base Bulk Distribution Matrix
o Schedule 6B - Modified Activity Based Distribution Cost Matrix
Other Information:
- - If Designated Member chooses not to use ADA's order entry system, which
is offered at no charge, and declares to communicate with ADA in other
ways, and the alternative process adds cost to the ADA's operations,
Designated Member is responsible for all additional costs above [*] per
month (i.e., van services).
- - Designated Member agrees to notify ADA of all invoice/pricing
discrepancies within thirty (30) days of receipt of invoice from ADA
- - Designated Member is declaring VHA as their GPO/Alliance of choice.
Please return to VHA Distribution Services via Fax: (972) 830-0212.
Director of Materials Management _______________________________________________
(Signature)
Date: _______________________________________________
* [This confidential information has been omitted and filed separately with the
Commission.]
62
<PAGE>
Schedule 6E
Designated Member ADA Reassignment and Assignment and Pricing Option Form
ADA and Care Continuum ADA Geographic and Service Capabilities
<TABLE>
<CAPTION>
<S> <C>
ADA Acute Care Physician Service Surgery Center Ambulatory Care
Service Service Service
O&M Yes - National Yes - Contact Yes - Contact Yes - Contact
Branch for Branch for Branch for
Specifics Specifics Specifics
Allegiance Yes - National Yes - Via Yes - Via Yes - Via
Teleservices Teleservices Teleservices
Bergen Medical Yes - National Yes - National Yes - National Yes - National
Limited in
Several Areas-
Attached
General Medical Yes - National Yes - National Yes - National Yes - National
Burrows Yes - Regional Yes - Regional Yes - Regional Yes - Regional
Shared Services Yes - Regional Yes - Regional Yes - Regional Yes - Regional
Caligor Medical Yes - Regional Yes - Regional Yes - Regional Yes - Regional
Cardinal Daly Yes - Regional Yes - Regional Yes - Regional Yes - Regional
<CAPTION>
ADA Home Health Long Term Care Comments
Care Service Service
O&M Yes - Only to the Yes - Contact Alternate Site
Home Health Branch for Capabilities need
Agency -Not the Specifics to be verified by
Home Customer each member
prior to declaring
O&M
Allegiance Yes - Via Yes - Via Same as O&M
Teleservices to Teleservices
the Home Health
Agency
Bergen Medical Yes - National, Yes - National Acute Care
Only to the Home Capabilities need
Health Agency to be verified
General Medical Yes - National, Yes - National Provides Service
Only to the Home to all areas
Health Agency
Burrows Yes - Regional, Yes - Regional Provides Service
Only to the Home to all Regional
Health Agency Areas
Shared Services Yes - Regional, Yes - Regional Provides Service
Only to the Home to all Regional
Health Agency Areas
Caligor Medical Yes - Regional Yes - Regional Regional Service
Competencies
Attached
Cardinal Daly Yes - Regional Yes - Regional Regional Service
Competencies
Attached
</TABLE>
Note: PSS will provide Distribution Services under this Agreement to
Alternate Site entities of Designated Members.
63
<PAGE>
SCHEDULE 6F (Page 1 of 2)
System Definition Pricing Protocol and Pricing Matrices
The following system and network definition and price scenario is for
acute-care systems and networks. Systems cannot add their other health-care
provider sites' volume into the pricing equation. Designated Members that are
not part of a system/network as defined below will otherwise be charged
Distribution Services Fees in accordance with the Agreement.
*1) If VHA Shareholder(s)/Partner(s) form a system/network, and
the Designated Members provides one centralized ordering
process, one centralized billing process, one centralized
call point and one centralized delivery point the Designated
Member may combine its dollar volume and be slotted according
to its actual combined volume. Pricing will be determined by
using Schedule 6 Base Bulk Distribution Matrix System/Network
Matrix or Schedule 6B Modified Activity Based Distribution
Cost Matrix. Additional distribution services will be applied
according to the feeds on Schedule 6A
*2) For all other systems/networks that do not fit the above
description, these systems/networks will blend their volumes,
using the Blending Worksheet from Schedule 6F and the pricing
offered on either Schedule 6 or 6B. Additional distribution
Services will be charged according to the fees on Schedule 6A.
3) For free-standing VHA HCO's, systems and/or networks that
need to develop a different type of relationship with their
ADA partner, the VHA HCO, ADA and VHA will work together to
develop the relationship outside of the existing matrix
concept. Examples of this are Fee-For-Service, Activity Based
Costing, Cost Management programs. No ADA can enter into an
off-matrix program pursuant to this Agreement without prior
approval from VHA. Programs that disadvantage VHA contracts,
VHA PLUS(R)or VHA OPPORTUNITY products or programs are not
permitted under this schedule and/or Agreement.
* From implementation date of this Agreement to June 30, 1998,
all current systems/networks already slotted under the former
definitions of the ADA Agreement that this ADA Agreement is
replacing will be grandfathered. As of July 1, 1998 all
systems will be held to the definitions for pricing of
systems/networks of this Agreement. Any system/network that
wishes to be recognized from implementation date of this
Agreement and going forward will be slotted according to the
terms and conditions of this schedule and Agreement.
64
<PAGE>
Schedule 6F (Page 2 of 2)
System/Network Definition Pricing Policy and Price Determination Worksheet
System Name:
<TABLE>
<CAPTION>
<S> <C>
(1) (2) (3) (4) (5) (6) (7)
Facility Names Cities Monthly DSO Net Aligned Price Net NonAligned Monthly Distribution Charge:
Volume from Schedule 6, Price from {3X5} + {3X6} = Net Aggregate
6B or 6B1 Schedule 6, 6B or Blended System/Network
6B1
</TABLE>
Divide total for Column (7)___________________ by total for Column (3)
__________________. The result is the system base blended
cost+plus_____________________.
Monthly Volume, DSO, EOE Incentive earned, Line $ Average Incentive earned, will
be reviewed semi-annually and the Blended System Base fee will be adjusted
accordingly.
65
<PAGE>
SCHEDULE 6F1
Definition of System Pricing for Vertically Integrated Systems/Networks
The following are definitions of the criteria necessary for accessing
vertically integrated system pricing for acute and non-acute sites. All entities
of these systems are controlled (owned, managed or leased) by the sponsoring
Designated Member.
SYSTEM 1: System PROVIDES one centralized ordering, billing, shipping and call
point for all sites of care and UTILIZES ONE distributor (ADA) for the entire
system: all volumes (acute and non-acute) combined for pricing of distribution
services located in Schedule 6, Base Bulk Distribution Matrix, or Schedule 6B,
Modified Activity Based Matrix for acute sites of care and actual cost for
non-acute sites of care. Additional distribution services to any sites of care
will be applied according to Schedule 6A.
SYSTEM 2: System DOES NOT PROVIDE one centralized ordering, billing, shipping
and call point for all sites of care, but UTILIZES ONE distributor (ADA) for the
entire system: all volumes are blended using Blending Worksheet Schedule 6F;
pricing is located in Schedules 6, 6B and 6B1. Additional distribution services
to any sites of care will be applied according to Schedule 6A. The ADA will
charge the actual cost of the delivery to all non-acute care sites in the
system.
System 3: System PROVIDES one centralized ordering, billing, shipping and call
point for all sites of care, but UTILIZES ONE OR MORE distributors (Care
Continuum - ADA) for the non-acute sites of care: all acute care volumes
combined for acute care pricing located in Schedule 6 or 6B; all non-acute care
volumes for each site-of-care category (i.e., physicians, home care and
long-term care) are combined for site-of-care pricing located in Schedule 6B1.
Additional distribution services to any site of care will be applied according
to Schedule 6A, with the exception of deliveries to the non-acute sites of care,
where the actual cost of delivery will be applied.
System 4: System DOES NOT PROVIDE one centralized ordering, billing, shipping
and call point for all sites of care and UTILIZES ONE OR MORE distributors (Care
Continuum - ADA) for the non-acute sites of care: all acute care volumes blended
using the Blending Worksheet Schedule 6F. All non-acute care volumes for each
site-of-care category (i.e., physicians, home care and long-term care) are
blended by each ADA for each site-of-care category and priced based on pricing
located in Schedule 6B1 using blended worksheet Schedule 6F. Additional charges
to all sites of care will be billed according to Schedule 6A. Deliveries to
non-acute sites of care will be charged the actual cost of the delivery.
66
<PAGE>
SCHEDULE 7
Payment Terms Options
Each Designated Member shall select from the following payment options
(all deductions or additions are made to the Base Distribution Service Fee on
the price matrix for that Designated Member):
_______ 15-day prepay: [*] credit
_______ Net 0 days: [*] credit
_______ Standard terms: [*] purchases due [*] of same month
[*] purchases due [*] of following month
_______ Net 30 days: Add [*]
_______ Net 45 days: Add [*]
_______ Net 60 days: Add [*]
_______ Over 60 days: Add additional [*] for each 15 days beyond
60 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 Member can be put on credit hold by their ADA without the
ADA notifying the Designated Member 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 Member prior to loss of credit privileges. If credit privileges
are rescinded to the Designated Member, then the Designated Member 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 Distribution
Service Fee 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 Member as in discrepancy. No Designated Members
will be charged a higher cost+plus for DSO due to invoices that are in dispute.
All invoice disputes need to be reported by Designated Member to the ADA by the
Designated Member or Affiliate within thirty (30) business days of receipt of
the invoice. Disputed invoices on which Designated Member notified ADA of
item(s) in dispute are not subject to late fees or penalties during the
resolution of the dispute. At resolution of dispute, late fees or penalties
applicable may be applied if Designated Member was not justified in disputing
item(s) on invoice.
A service charge may be added by the ADA to the Designated Member'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.]
67
<PAGE>
SCHEDULE 8
Return Goods Policy
I. GENERAL
ADA will accept, for full credit based on original
delivered cost, Contract and Noncontract Product(s) originally
purchased from ADA and returned to ADA in original packaging
and in saleable condition within sixty (60) calendar days of
the date delivered by ADA. ADA may assess a 25% restocking
charge for returned product(s) which are damaged or stickered.
ADA will accept for return, saleable and Contract and
Noncontract Product(s) after sixty (60) calendar days, subject
to a 15% restocking charge.
ADA will accept for return, Contract and Noncontract
Product(s) with expired dating or which have been discontinued
by the Vendor, subject to the Vendor's policy. ADA will issue
credit for this product based on the amount credited to ADA by
the Vendor.
ADA shall levy no other restocking or morgue charges.
ADA shall follow Vendor policy for returns in the
event of a product(s) recall. ADA will provide each Designated
Member a copy of the Vendor's policy regarding the recall, if
requested.
ADA will supply, upon request by Designated Member,
the following:
a) A current list of Vendor addresses for the
purpose of obtaining return goods
authorization from the Vendor
b) The names and telephone numbers of the
Vendor representatives able to authorize the
return of product by Designated Member
c) A list of Vendors who levy a restocking
charge on returned product(s) and the amount
of that charge
II. CREDITS
ADA will process Designated Member credits on a daily
basis. All credits should appear on the next statement to
Designated Members, except for credits processed near the end
of the statement period where, because of cutoff dates, the
credit will appear on the following statement.
The Designated Member will receive a copy of the
credit memo within fifteen (15) days after receipt of the
return by ADA's Primary Ordering Location.
ADA will issue credit, within fifteen (15) days, for
outdated or discontinued product(s) being recalled by the
Vendor. In the case of a Vendor recall(s), the Vendor must
have authorized the ADA to issue credit.
ADA will advise Designated Members, by the fifteenth
calendar day of each month, of any credits issued by ADA
during the previous month which remain open.
III. FREIGHT CHARGE ON RETURNED GOODS
68
<PAGE>
SCHEDULE 8
ADA vehicles or other prepaid carriers will pick up
all product returns authorized by the Primary Ordering
Location to be returned. Any freight charges incurred by
Designated Members for product returns shipped to the Vendor
will be based on the Vendor's policies.
IV. RETURN OF SHIPPING ERRORS, OVERAGES AND DAMAGED PRODUCT
ADA will authorize, via phone, the return of
product(s) shipped in error. ADA will pick up the product(s)
on ADA's next scheduled delivery to the Designated Member. If
ADA utilizes a common carrier to serve Designated Members, ADA
shall assume the freight charges for the product(s) to be
returned to ADA.
V. ADA WILL NOT ACCEPT RETURNS ON THE FOLLOWING:
a) Any product(s) purchased on a "special order" basis or
contrary to the Vendor's policy;
b) Any sterile product(s) or refrigerants, unless properly
protected;
c) Product(s), apparatus or equipment which has been used,
or is without original packaging, labeling or operating
manuals;
d) Product(s) with labeling or packaging which is
missing, damaged, defaced or other non- saleable
product(s), except as permitted by the Vendor's policy;
e) Seasonal product(s), except according to Vendor's
policy (available on request);
f) Open bottles and partial packages of product(s) will
not be accepted for return, unless the Vendor has
authorized the ADA to accept open bottles and partial
packages;
g) Any product(s) purchased direct from the Vendor.
VI. RETURN PROCEDURE
ADA will accept Contract and Noncontract Product(s)
returned from Designated Members based on the procedure
outlined herein.
a) To receive authorization for the return of product,
Designated Members shall contact the ADA Primary
Ordering Location.
b) Designated Members provide ADA with the following
information, if appropriate: (1) Designated Member
name and account number as they appear on ADA's
invoice.
(2) ADA invoice or order number and date.
(3) The quantity, product number, price paid,
form/size, description. Add lot number,
serial number and expiration date of the
product, as appropriate. NOTE: A copy of
ADA's invoice or packing slip will provide
the required information, as may the price
stickers.
(4) Purchase order number, if applicable.
(5) The reason for return.
c) To assure proper credit and handling, product returns
should be written and packaged for shipment by the
type of product being returned as follows: (1)
Refrigerants
(2) Class II through Class V (items must
meet DEA procedures)
(3) Saleable product(s)
(4) Outdated or discontinued product(s)
(5) Damaged product(s)
(6) Product(s) recalled by Vendor(s)
VII. NOTIFICATION PROCEDURE
ADA agrees to the following notification procedure:
69
<PAGE>
SCHEDULE 8
a) Designated Member claims of product shortage, damage
or overage, product(s) with an expiration date
earlier than six (6) months and products delivered in
error, will be reported to ADA in five (5) business
days from date of delivery; scheduled drugs will be
reported in two (2) business days. No restocking
charges apply.
b) In the event of dispute regarding a delivery damage
claim or a product return not received by ADA, a
receipt may be required by ADA prior to issuing
credit and to enable ADA to file a claim with the
carrier.
No hazardous materials will be accepted for return
with the exception of shipping errors and defective
merchandise. Opened, leaking or damaged containers cannot be
returned to the ADA, but should be disposed of in accordance
with applicable laws and regulations. To obtain proper credit,
contact your ADA Customer Service Representative. Return
shipments of hazardous materials must be packed, marked,
labeled and shipped in accordance with DOT regulations
governing the transportation of hazardous materials.
70
<PAGE>
Schedule 9
ADA Service Levels/ Notification Process/Penalties
<TABLE>
<CAPTION>
<S> <C>
Service Service Level Penalty Notification (check)
Fill Rates: [*] on "A" Items _____________________
[*] on Impact Items _____________________
Invoice Accuracy [*] on all invoices _____________________
Pricing Errors [*] on all invoices - Error Free _____________________
ADA Rep Visit Monthly _____________________
Reports Monthly _____________________
EOE Review Monthly _____________________
DSO Review Monthly _____________________
EDI Review Monthly _____________________
Sales Review Monthly (Contract, Noncontract, VHA PLUS(R) _____________________
Product Usage Aligned, Nonaligned, Low Velocity Manufacturer Review_____________________
</TABLE>
Fill Rates:
[*] "A" Items "A" Items are items that move 2x a month
HCO must approve their "A" Item list annually by
March 15 and if items to list change, they need to
give ADA thirty (30) day notice
All usage and changes to "A" Item list need to be
provided to ADA with thirty (30) day notice
All usage provided must be 10%+ of actual usage
HCO must provide all product numbers to ADA at time
of order All orders need to include correct product
numbers
All orders must be placed during normal ordering
times and prior to published cutoff times
[*] "Impact Products" Each Designated VHA Member is entitled to twenty-five
(25) "Impact Products" as described in Section 6.
Base ADA Services, (E) Fill Rate. All "Impact
Product" Lists must be provided to ADA by March 15 of
each year
Designated Member: ________________________________________________
Address: ________________________________________________
________________________________________________
________________________________________________
________________________________________________
Director of Materials Management
Signature: _________________________________________
Director of Materials Management Name:
(Please Print) _________________________________________
Phone Number: _________________________________________
Fax Number: _________________________________________
ADA Name and Branch Location: __________________________________________________
__________________________________________________
This serves as official thirty (30) day notification that Designated Member
intends to monitor the ADA under Schedule 16 of the VHA Agreement for possible
service performance issues. Specifically, the Designated Member is concerned
with the service checked on this form.
* [This confidential information has been omitted and filed separately with the
Commission.]
71
<PAGE>
Penalties for Failure to Perform ADA Responsibilities
1) Failure to Notify VHA and / or Designated Member not less than
forty-five (45) days prior written notice of ADA's intent to perform a
physical inventory at the Primary Ordering Location.
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
2) Failure to Provide Designated Member with complete order confirmation
within two hours of receipt of order electronically
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
3) Failure to provide on a quarterly basis by VHA Regional Office and
Distribution Focused Account Manager, Designated Member Uniform
Purchase report, identifying products and categories of products that
are not under contract through VHA, that if the above organizations are
willing to standardize to the ADA can provide above with a reduced cost
of said products for an extended period of time, based on anticipated
usage and participation of the above entities.
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
4) Failure to maintain a minimum of [*} unadjusted fill rate for "A: Items
and / or [*] unadjusted on Impact Items on for each Designated Member.
Fill rate is defined as line items ordered / line items filled first
time - first truck. "A" Items are stock items that are ordered by
Designated Member as least twice every 30 days.
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
5) Failure to provide accurate Hospital Reports by the tenth day of the
following month. VHA may modify or change the contents required in
Hospital Reports upon sixth (60) day written notice to the ADA. The ADA
is to provide each Designated Member with the following information in
the monthly report:
- Monthly Sales Reports by VHA Contract, VHA PLUS(R)
and Noncontract Purchases,
Aligned/Nonaligned "A" and Impact Items
- Fill Rates
- EOE, DSO and EDI Activity
- Distribution Service Fees and Activities
- Monthly contract, price, tier or expiration of these
items
* [This confidential information has been omitted and filed separately with the
Commission.]
72
<PAGE>
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
6) Failure to perform member Quarterly Business Review on a quarterly
calendar basis. Each ADA shall meet with each Designated Member to
discuss at a minimum the following issues:
- Quarterly Sales by VHA Contract, VHA PLUS(R), and
Noncontract Sales
- Fill Rates
- Service Levels
- EOE, DSO and EDI activity
- Quarterly Sales Purchase History for future Base
Distribution Volume Matrix Fee
- Aligned/Nonaligned Manufacturer Activity and
Incentives Taken
- Uniform Purchase Reports
- Standardization and Utilization Reports and
Activities
ADA must notify VHA Account Manager of all schedule QBRs prior to
actual QBR meeting.
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
7) Failure to provide VHA with two (2) tape reports reflecting the sales
activity for the previous month and a diskette containing the
information required in Attachment 1. Such reports shall be in the
format described in Attachment 1 to this Schedule and shall include:
sales of Contract Products and Noncontract Products by each Designated
Member, fill rate by customer, Base Distribution Service Fee,
additional service fees or charges and description of activity
performed for the charges or fee, compliance to EOE, EDI and DSO to
VHA, no later than the tenth (10) day of each month will result in the
following penalties:
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
The information required in the diskette shall also be provided in hard
copy format by the tenth of the month.
Beginning on or about March 1997 data for the reports, this information
will be required to be transmitted to VHA via EDI 867. Failure to meet
this technology requirement will result in the following penalties:
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
In addition ADA shall provide to VHA reports as specified in the
Schedules 6F and 10. VHA may amend this section at any time upon sixty
(60) day written notice to the ADA. Failure to provide the required
tapes, diskettes or information by the deadline shall result in the
following penalty payments to VHA:
*[This confidential information has been omitted and filed separately with the
Commission.]
73
<PAGE>
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
8) Failure to pay VHA Fee when due, ADA shall pay VHA in addition to the
VHA Fee, a late charge of 1.0% per month, or the maximum allowed by
law, whichever is less, on all amounts past due.
9) Failure to deliver all manufacturers tracing and rebate reports to each
manufacturer for Contract Products and Noncontract Products no later
than ten (10) days after the end of the month in which the sales
reported took place, will result in the following payment of penalties:
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
10) Failure to adhere to the ADA Agreements Return Goods Policy as
described in Schedule 8 will result in the payment of the following
penalties to VHA:
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
11) Failure to adhere to the required EDI Transaction Sets as described in
Section 8(m)/Schedule 14 will result in the following penalty payment
to VHA:
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
12) Failure to provide VHA and Designated Member with a list of Products
that have freight included in Cost of Product. Report needs to list
manufacturer, product and amount of freight charges:
First Time: Written Notice
Second Time: [*]
Third Time: [*]
Fourth and Each Additional
Failure to Notify: [*]
* [This confidential information has been omitted and filed separately with the
Commission.]
74
<PAGE>
SCHEDULE 9A
Designated Members Verification of "A" List and Impact List Items
Designated Member: ___________________________________
Address: ___________________________________
___________________________________
___________________________________
___________________________________
VHA Lic #: ___________________________________
Phone #: ___________________________________
FAX #: ___________________________________
DMM: ___________________________________
___________________________________ (Designated Member) hereby approves the "A"
and Impact Lists as provided by ___________________________________ (ADA).
Date Reviewed and Approved: ___________________________________
Name: ___________________________________
Title: ___________________________________
Signature: ___________________________________
Copies are to be maintained by: ___________________________________
Designated Member o
ADA o
VHA Account Manager o
VHA Dist. Services o
Please FAX to VHA Distribution Services at 972/830-0212.
75
<PAGE>
SCHEDULE 10
ADA Monthly Reports to Designated Members
The following reports shall be delivered to each Designated
Member by the 15th day of the month following the month's activities reflected
in such report. A copy of each Designated Member's report needs to be forwarded
to the appropriate VHA Account Manager at VHA Distribution Services by the 15th
of each month.
1) Fill Rate:
a) "A" Fill Rate - Unadjusted
b) Overall Fill Rate - Unadjusted
c) "Impact Item Fill Rate - Unadjusted
2) Sales reports listing the dollar amount and unit volume of
each and all products purchased
3) Sales of each and all products purchased broken down as
follows:
a) Contract
b) VHA PLUS(R)
c) Noncontract
d) Aligned Manufacturers
e) Non-Aligned Manufacturers
4) EOE %
5) DSO Performance
6) Number of deliveries
7) Additional Distribution Services Performed and the Fees
charged for these services
8) EDI Activity for 810 and 832
9) Contract/Price Change/Tier Change/Expiration Report
(Designated Member specific report on all their
contract/pricing/tier/expiration activity for the next thirty
(30) days)
76
<PAGE>
Schedule 11
ADA Representative Responsibilities/Designated Member
Quarterly Business Review Topics
Each ADA will provide each Designated VHA Member or Affiliate assigned
to them with a ADA representative. ADA Representative will be responsible for
the following activities at each assigned Designated VHA Member of Affiliate:
Designated Member ADA Representative Responsibilities
1) Visit on at least monthly basis
2) Address and be empowered to solve the following:
- Fill Rate Issues
- Invoice Accuracy
- Pricing Issues
- Product Stocking issues
- Product Pricing Issues
- Scheduling Issues
- DSO Issues
- EOE Issues
- EDI Issues
- Monthly Dollar Line Ordered Average Issues
3) Review all sales data
4) Assist with Activity Based Costing
5) Logistical needs of the HCO
6) Product acquisition mix
7) Maximizing the value of the incentives offered under Schedule 6
8) Support HCO's initiatives for achieving the lowest total delivered
cost of product and services
Designated Member Quarterly Business Review Topics
Including but not limited to:
1) Review prior quarter's sales by:
a) Contract
b) VHA PLUS(R)
c) Noncontract
d) Aligned Manufacturer
e) Nonaligned Manufacturer
f) Low Velocity Manufacturer and SKUs
2) Review prior quarter's activity for:
a) EOE
b) EDI: 810, 832
c) DSO
d) Monthly Line Average Dollar Amount
3) Review prior quarter's service levels:
a) Fill Rates:
- "A" Items
- Impact Items
- Overall Fill Rate
b) Invoice Accuracy
c) Pricing Errors
d) Return Goods
4) Opportunity for Standardization and Utilization
5) OPPORTUNITY Program Products and Manufacturer Utilization
77
<PAGE>
SCHEDULE 12
ADA Disaster Plan
[To be supplied by ADA]
78
<PAGE>
SCHEDULE 13
ADA Computer Capabilities and Backup Systems
79
<PAGE>
SCHEDULE 14
ADA EDI Capabilities
ADA shall be fully capable of supporting the following electronic data
interchange (EDI) transaction sets in ANSI X 12 format:
To Manufacturer:
<TABLE>
<CAPTION>
<S> <C>
850 Purchase Order Purchase Order to Supplier
855 PO Acknowledgment Purchase Order Acknowledgment
810 Invoice Supplier Invoice to ADA
844 Rebate ADA Rebate Claim to Supplier Containing Rebatable Sales
867 Sales Tracing/Rebate Distributor Sales to End Users (relatable and non-relatable) for
submission of rebate claims and marketing information
832 Price Catalog Supplier price catalog to distributor
845 Electronic Contract Notification Supplier contract notification to distributor
856 Advance Shipment Notification Supplier notification of shipment contents before delivery to
distributor
867/849/810 Link Net Billing Distributor is invoiced at best distributor cost less the rebate
amount
867/852/855/861(CRP) Continuous Replenishment Planning (CRP) of distributor
inventory
820 Electronic Fund Transfer Electronic Fund Transfer
To HCO or Receive from the HCO:
850 Purchase Order
855 PO Acknowledgment
810 Invoice
820 Electronic Funds Transfer
832 Price Catalog
856 Advance Shipment Notification
To VHA:
867 SalesTracing/Rebate Distributiion Sales to End Users (relatable and non-relatable)
for submission of rebate claims and marketing information
</TABLE>
80
<PAGE>
SCHEDULE 15
ADA Reports to VHA
No later than the tenth day of each month, ADA shall deliver to VHA the
two (2) tape reports reflecting the sales activity for the previous month and a
diskette containing the information required in Attachment 1. In addition, ADA
will be required to follow the reporting format and guidelines as detailed in
the VHA Supply Chain Management Information Technology Guidebook. Such reports
shall be in the format described in Attachment 1 to this Schedule 15 and shall
include: sales of Contract Products and Noncontract Products by each Designated
Member, fill rate by customer, Base Distribution Service Fees and total
Distribution Service Fees, including quarterly incentives, earned and paid. The
information required in the diskette shall also be provided in hard copy format
by the tenth of the month.
ADA shall also provide VHA with the following reports by the fifteenth
of each month:
o List of additional services provided to Designated Member
pursuant to Section 7(G)
o List of Contract Vendor back orders for the month. For each
Contract Vendor with back orders, ADA
shall report lines ordered and lines delivered.
All reports to VHA shall be directed to VHA's Distribution Services.
81
<PAGE>
Schedule 16 (Page 1 of 2)
Standards of Performance
The following are the Standards of Performance for Manufacturers, ADAs,
Designated Members and VHA to adhere to for the realignment of the Supply
Channel:
Manufacturer to ADA:
Standard Points
1) Cash Discount: 1.0% - 1.5% 3 points
1.6% - 2.0% 5 points
2) EDI:
850 100% 1 point
856 100% 1 point
832 100% 1 point
845/816 100% 1 point
810 100% 1 point
3) Price/Contract Change
Notification 45-60 Days 5 points
4) Fill Rates 95 % 5 points
90-94 % 3 points
85-89 % 2 points
Total 20 points
All the above Standards of Performance are applied to the Aligned Manufacturers
located on Schedule 17.
Phase 1 of implementation of the Standards of Performance for Manufacturers to
Distributors will required a minimum of 9 of 20 points, with a minimum of 3
points coming from Cash Discounts for prompt pay being operational by 6/30/97.
Phase 2 of implementation of the Standards of Performance for Manufacturers to
Distributors will require a minimum of 15 of 20 points, with a minimum of 3
points coming from Cash Discount for prompt pay being operational by 12/31/97.
ADA to Manufacturer: Standard
1) Adhere to all terms and conditions of the
ADA Agreement (i.e., stocking, ordering, etc.) 100%
2) EDI:
850 100%
844 100%
867 100%
820 100%
ADA to Designated Member: Standard
1) [*] Unadjusted Fill Rate on "A" Items 100%
2) [*] Unadjusted Fill Rate on Impact Items 100%
3) 45 Price and Contract Change Notification 100%
4) Designated Member Monthly Activity Report 100%
5) Designated Member/ADA QBR 100%
6) Support Designated Members Electronic Commerce Needs 100%
Designated Member to ADA Standard
1) Pay invoices twice monthly 100%
2) [*] EOE on all orders 100%
3) Standardize on aligned manufacturers 100%
4) Support EDI 810/832 100%
5) Provide accurate product usage for all products,
"A" and Impact Items 100%
6) Sign off on "A" and Impact Item Lists 100%
* [This confidential information has been omitted and filed separately with the
Commission.]
82
<PAGE>
Schedule 16 (Page 2 of 2)
ADA to VHA Standard
1) Support and adhere to all terms and conditions
of ADA Agreement 100%
2) EDI 867 100%
VHA to ADA Standard
1) 60-day price/contract change notification 100%
2) Support ADA's electronic commerce needs 100%
3) Support ADA's initiatives with aligned manufacturers 100%
VHA Contract Manufacturer to VHA Standard
1) EDI 845/816 100%
83
<PAGE>
Schedule 17
Aligned Manufacturers
<TABLE>
<CAPTION>
<S> <C>
Manufacturer Manufacturer Divisions VHA Status
3M a) 3M MedSurg Division a) Contract MS646
b) 3M Orthopedic Division b) Contract MS647
c) 3M Inf. Pumps Cassettes c) Contract MS071
Abbott a) Abbott IV Pumps PCA a) Contract RX120
b) VHA PLUS(R) Suction b) Contract MS137
Canisters
c) Abbott IV Pumps c) Contract MS651
d) Abbott Critical Care Sys. d) Contract CV712
e) Abbott Critical Care e) Contract CV706
f) Abbott IV Sets & Solutions f) Contract RX101
g) VHA PLUS(R)Anesthesia g) Contract RX148
Products I) Noncontract
I) Respiratory
Acme a) VHA PLUS Procedure a) Contract MS101
Tray
Albahealth a) VHA PLUS(R) Patient a) Contract MS145
Slipper
Allegiance a) VHA PLUS(R) Sterile Cust. a) Contract MS124
Trays
b) Non-Sterile Kits b) Contract MS125
c) PBDS c) Contract MS679
d) Surgeon Gloves d) Contract MS676
e) VHA PLUS(R)Hot & Cold e) Contract MS130
Packs
f) Convertors f) Noncontract
g) Respiratory g) Noncontract
American Health Products a) VHA PLUS(R)P-F Exam a) Contract MS142
Gloves
b) VHA PLUS(R) Exam Gloves b) Contract MS133
c) VHA PLUS(R) Synthetic c) Contract MS157
Exam Gloves
Ansell Perry a) VHA PLUS(R) Exam Gloves a) Contract MS074
b) Ansell-Surgical Gloves b) Noncontract
Arrow a) Arrow a) Noncontract
Augustine Medical a) Convective Air Warming a) Contract MS160
AVCOR a) VHA PLUS(R)Velcro a) Contract MS161
Electric Bandages
B. Braun Medical a) B. Braun Anesthesia Trays a) Contract MS682
</TABLE>
84
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Manufacturer Manufacturer Divisions VHA Status
B. G. Industries 1 a) B. G. Industries a) Contract MS643
B-D a) IV Access & Fluid Mgmt. a) Contract MS604
b) B-D Acute Care b) Contract MS626
c) B-D Vacutainers c) Contract Lab423
d) B-D Division d) Noncontract
Ballard a) VHA PLUS(R) a) Contract MS690
Antimicrobial Scrub-Foam
Baxter IV Sets & Solutions a) IV Sets & Solutions a) Noncontract
Bayer-Ames a) Bayer-Ames a) Noncontract
Bio Clinic a) Bio Clinic a) Contract MS635
Boehringer Mannheim a) Boehringer Mannheim a) Noncontract
C.R. Bard/Davol a) Bard Urological a) Contract MS628
b) Davol Suction b) Contract MS658
c) Davol Closed Wound c) Contract MS640
Drain. d) Contract MS112
d) VHA PLUS(R) Irrigation
Trays
Clinipad Corp a) EZ Prep Patient Prep. a) Contract MS689
Systems
b) All other Noncontract b) Noncontract
Concord Portex a) Concord Portex a) Contract RT022
Conmed a) Conmed a) Noncontract
Convatec a) Calgon Wound a) Contract MS670
Management
Cottrell a) VHA PLUS(R)SDS Solution a) Contract MS110
Critikon a) Critikon a) Contract CE116
Cypress a) VHA PLUS(R)Crutches a) Contract MS150
DeRoyal Industries** a) DeRoyal Sterile CPTs a) Noncontract
b) DeRoyal Softgoods b) Contract MS060
DeRoyal Thermal Products Contract MS060T
c) DeRoyal Trace Pak System c) Contract MS680
d) VHA PLUS Endoscopic d) Contract MS139
Accessories
Dowling Health a) Dowling Health a) Noncontract
</TABLE>
- --------
1These manufacturers are Aligned and primarily deal with
Equipment which may go through the ADAs. These Aligned Manufacturers'
product lines that are Equipment and go through the ADAs with
individual product line sales of greater than $1,000 will be subject to
local negotiation for price, distribution services, handling and
freight charges, where appropriate.
85
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Manufacturer Manufacturer Divisions VHA Status
DSP-World Deknatel a) Deknatel-Chest Drainage a) Contract MS661
Duracell a) Duracell Batteries a) Contact SVC809
E-Z-M a) VHA PLUS(R)Barium a) Contract XR093
b) VHA PLUS(R) UltraSound b) Contract XR094
Gel
Ecolab a) Ecolab Professional a) Contract MS134
Products
b) Ecolab b) Contract HSK300
Gaymar a) Gaymar a) Contract MS075
Graphic Control/Devon a) Graphic Control/Devon a) Noncontract
H&P Industries a) VHA PLUS(R)Wet Pack a) Contract MS135
Products
Heritage Bag a) VHA PLUS(R)Can Liners a) Contract WM010
Hollister a) Hollister a) Contract MS669
Hudson RCI a) Hudson Oxygen (RCI) a) Contract RT021
Intermetro2 a) Intermetro a) Contract CE176
b) Intermetro Industries b) Contract CE013
Intertech Resources a) Intertech Resources a) Contract MS660
Isolyzer a) Isolyzer a) Noncontract
Johnson & Johnson a) Ethicon Endo-Surgery a) Contract MS606
(Lifescan - NonAligned) b) Ethicon b) Contract MS607
c) Surgikos c) Noncontract
d) JJMI d) Noncontract
Kendall a) Kendall Wound Care a) Contract MS642
b) Kendall Vascular b) Contract MS609
SCD/TED c) Contract MS633
c) Kendall Anesthesia d) Contract MS153
d) VHA PLUS(R)Endotrachael
Tubes&Open Suction
Kimberly Clark a) Kimberly Clark a) Contract MS629
King Systems a) King Systems a) Noncontract
Komko a) VHA PLUS(R)Non-Sterile a) Contract MS140
Kits
</TABLE>
- --------
2These manufacturers are Aligned and primarily deal with
Equipment which may go through the ADAs. These Aligned Manufacturers'
product lines that are Equipment and go through the ADAs with
individual product line sales of greater than $1,000 will be subject to
local negotiation for price, distribution services, handling and
freight charges, where approrpriate.
86
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Manufacturer Manufacturer Divisions VHA Status
M.D. Industries a) VHA PLUS(R) Specialty a) Contract MS155
Bags
b) VHA PLUS(R) Sterilization b) Contract MS154
Packing
Mallinckrodt a) Contrast Media a) Noncontract
b) Anesthesia Products b) Noncontract
Maxxim a) CPTs a) Contract MS678
(including Argon) b) VHA PLUS(R)Maxxim Non- b) Contract MS141
Sterile Kit
McGaw IV Sets & a) IV Sets & Solutions a) Noncontract
Solutions
Medical Action Industries a) VHA PLUS(R)Lap Sponges a) Contract MS107
& O.R. Towels
b) Medical Action b) Contract MS637
c) VHA PLUS(R) O.R. c) Contract MS128
Accessories
d) SBW Medical d) Noncontract
Medline Industries a) VHA PLUS(R) Disposable a) Contract MS158
Pillows
b) Medline Industries DME b) Contract MS692
Midmark3 a) Midmark a) Noncontract
Nellcor Puritan Bennett a) Nellcor a) Contract CE172
PaperPak a) VHA PLUS(R)Personal a) Contract MS138
Absorbent Products
b) VHA PLUS(R)Adult Incont. b) Contract MS143
Briefs
Pedigo Products3 a) Pedigo Products a) Contract CE194
Precision Dynamics a) VHA PLUS(R) Identification a) Contract MS146
Bands
Premium Plastics a) VHA PLUS(R)Patient Care a) Contract MS149
Plastics
Proctor - Gamble a) Infant Diapers a) Contract MS500
Purdue Frederick a) Purdue Frederick a) Contract RX059
Regent a) Regent/Surgical Gloves a) Contract MS663
</TABLE>
- --------
3These manufacturers are Aligned and primarily deal with
Equipment which may go through the ADAs. These Aligned Manufacturers'
product lines that are Equipment and go through the ADAs with
individual product line sales of greater than $1,000 will be subject to
local negotiation for price, distribution services, handling and
freight charges, where appropriate.
87
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Manufacturer Manufacturer Divisions VHA Status
Richard Alan a) VHA PLUS(R)Skin Staplers a) Contract MS113
Safeskin a) Safeskin Gloves a) Noncontract
Sage Products a) VHA PLUS(R)Sharps a) Contract WM012
Containers/EXT
b) VHA PLUS(R) Specimen b) Contract LAB431
Containers
Sherwood Davis Geck a) Sherwood Medical a) Contract MS644
b) Argyle - Chest Drainage b) Contract MS691
c) Davis Geck - Suture c) Noncontract
Smith Industries Medical a) VHA PLUS(R) Core a) Contract MS672
Systems (SIMS) Temperature Monitors
b) Concord Portex b) Contract RT022
c) VHA PLUS(R) Anesthesia c) Contract MS660
Masks & Circuits
Smith Nephew United a) Smith Nephew Wound a) Contract MS671
Management
b) VHA PLUS(R) Skin Care b) Contract MS148
Products
Steris a) Calgon Vestal Skin Care a) Contract MS670
Products
b) VHA PLUS(R) Infection b) Contract MS147
Control Products
Tecnol a) VHA PLUS(R) Surgical a) Contract MS118
Masks
b) VHA PLUS(R) Ice Packs b) Contract MS132
Texfi a) VHA PLUS(R) Elastic a) Contract MS116
Bandages
TIDI a) VHA PLUS(R)Exam Table a) Contract MS156
Paper
b) Exam Paper Products b) Contract MS707
US Surgical a) Endo Mechanical a) Noncontract
b) Sutures b) Noncontract
Valley Labs a) Valley Labs a) Contract CE008
Vital Signs a) Vital Signs a) Noncontract
Vollrath a) Vollrath Stainless Steel a) Contract MS684
Products
Welch Allyn, Inc a) Welch Allyn, Inc a) Contract CE324
b) Diatek b) Contract CE010
Zimmer a) Tourniquet Cuffs a) Contract MS686
b) Thermal Products b) Contract MS687T
</TABLE>
88
<PAGE>
SCHEDULE 18
Products On Which No VHA Fee Is Due
89
<PAGE>
Schedule 19
Request for Change of ADA Notification Form
A Designated VHA Member or Affiliate can change their ADA choice/Assignment
based on two issues:
- Service
- Strategic
For either issue, Designated VHA Member or Affiliate must fill out Schedule 19
and send to VHA Distribution Services. Based on the nature of the request for
change of ADA, the following is the process that will be followed:
Service:
- - Schedule 19 sent to VHA, outlining particular service issues
- - VHA acknowledges receipt of Designated VHA Member or Affiliates
Schedule 19 and by copy to ADA, notifies the ADA that they have thirty
(30) days to address the service issues raised by the Designated
VHA Member or Affiliate
- - VHA Account Manager and Distribution Service Manager/Team Leader for
Medical Surgical Distribution will manage the Request for Change of ADA
- - At the conclusion of the thirty (30) day period, the
Designated VHA Member or Affiliate may declare the issues resolved, if
issues are not resolved the choice available is to extend the cure
time period to a mutually agreed upon period time or can ask VHA to
assist them in declaring a new ADA from those that serve that market
place.
Strategic:
- - Based on the strategic nature of Designated VHA Member or Affiliate
request, the existing ADA maybe given a specific agreed upon time to
meet the Designated VHA Member or Affiliates strategic needs or VHA
will assist the Designated VHA Member or Affiliate in declaring a
business partner that can meet their distribution needs.
Designated VHA Member or Affiliate Name: ______________________________
Address: ______________________________
______________________________
______________________________
Phone Number: ______________________________
______________________________
Fax Number: ______________________________
Director of Materials Management or Individual
Requesting Change of ADA: ______________________________
Date: ______________________________
90
<PAGE>
Reason for Request of Change of ADA Service________Strategic_________
Please provide the specifics for requesting the change of ADA whether it be
Service or Strategic:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Please fax to VHA Distribution Services (972) 830-0212
91
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 671
<SECURITIES> 0
<RECEIVABLES> 186,487
<ALLOWANCES> 6,404
<INVENTORY> 282,782
<CURRENT-ASSETS> 487,771
<PP&E> 67,875
<DEPRECIATION> 40,186
<TOTAL-ASSETS> 704,939
<CURRENT-LIABILITIES> 291,856
<BONDS> 150,000
0
115,000
<COMMON> 64,244
<OTHER-SE> 74,354
<TOTAL-LIABILITY-AND-EQUITY> 704,939
<SALES> 2,312,123
<TOTAL-REVENUES> 2,312,123
<CGS> 2,080,099
<TOTAL-COSTS> 2,265,577
<OTHER-EXPENSES> 5,002
<LOSS-PROVISION> 182
<INTEREST-EXPENSE> 11,634
<INCOME-PRETAX> 29,728
<INCOME-TAX> 12,486
<INCOME-CONTINUING> 17,242
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,242
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>