UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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
--------------
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 August 6, 1999, was 32,696,937 shares.
1
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Index
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Operations - Three Months and
Six Months Ended June 30, 1999 and 1998 3
Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 13
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Part II. Other Information
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Shareholders 17
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C>
Net sales $ 772,360 $ 798,978 $ 1,513,444 $ 1,596,928
Cost of goods sold 692,013 716,445 1,354,368 1,432,308
----------- ----------- ----------- -----------
Gross margin 80,347 82,533 159,076 164,620
----------- ----------- ----------- -----------
Selling, general and administrative expenses 59,488 61,079 118,086 122,021
Depreciation and amortization 4,684 4,505 9,145 8,973
Interest expense, net 3,034 3,190 6,130 6,803
Discount on accounts receivable securitization 795 1,377 1,790 2,986
Distributions on mandatorily redeemable
preferred securities 1,774 935 3,548 935
Nonrecurring restructuring expenses (1,000) 11,200 (1,000) 11,200
----------- ----------- ----------- -----------
Total expenses 68,775 82,286 137,699 152,918
----------- ----------- ----------- -----------
Income before income taxes 11,572 247 21,377 11,702
Income tax provision 5,092 102 9,406 4,798
----------- ----------- ----------- -----------
Net income 6,480 145 11,971 6,904
Dividends on preferred stock - 604 - $ 1,898
----------- ----------- ----------- -----------
Net income (loss) attributable to common stock $ 6,480 $ (459) $ 11,971 $ 5,006
=========== =========== =========== ===========
Net income (loss) per common share-basic $ 0.20 $ (0.01) $ 0.37 $ 0.15
=========== =========== =========== ===========
Net income (loss) per common share-diluted $ 0.19 $ (0.01) $ 0.36 $ 0.15
=========== =========== =========== ===========
Cash dividends per common share $ 0.06 $ 0.05 $ 0.11 $ 0.10
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In thousands, except per share data) June 30, December 31,
1999 1998
----------- ------------
Assets (Unaudited)
<S> <C>
Current assets
Cash and cash equivalents $ 505 $ 546
Accounts and notes receivable, net
of allowance of $6,601 and $6,273 229,132 213,765
Merchandise inventories 283,393 275,094
Other current assets 13,868 14,816
-------- --------
Total current assets 526,898 504,221
Property and equipment, net of accumulated
depreciation of $49,785 and $45,812 26,408 25,608
Goodwill, net of accumulated
amortization of $25,115 and $22,843 156,003 158,276
Other assets, net 30,960 29,663
-------- --------
Total assets $740,269 $717,768
======== ========
Liabilities and shareholders' equity
Current liabilities
Accounts payable $230,776 $206,251
Accrued payroll and related liabilities 4,318 8,974
Other accrued liabilities 47,236 53,749
-------- --------
Total current liabilities 282,330 268,974
Long-term debt 150,000 150,000
Accrued pension and retirement plans 5,944 5,668
-------- --------
Total liabilities 438,274 424,642
-------- --------
Company-obligated mandatorily redeemable preferred securities of subsidiary
trust, holding solely convertible debentures of Owens & Minor, Inc. 132,000 132,000
-------- --------
Shareholders' equity
Preferred stock, par value $100 per share;
authorized - 10,000 shares
Series A; Participating Cumulative
Preferred Stock; none issued - -
Common stock, par value $2 per share;
authorized - 200,000 shares; issued and
outstanding - 32,696 shares and 32,618 shares 65,392 65,236
Paid-in capital 12,618 12,280
Retained earnings 91,985 83,610
-------- --------
Total shareholders' equity 169,995 161,126
-------- --------
Total liabilities and shareholders' equity $740,269 $717,768
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands) Six Months Ended
(Unaudited) June 30,
---------------------------
1999 1998
----------- --------------
<S> <C>
Operating activities
Net income $ 11,971 $ 6,904
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 9,145 8,973
Nonrecurring restructuring provision (1,000) 11,200
Provision for LIFO reserve 1,200 2,497
Provision for losses on accounts and notes receivable 502 224
Changes in operating assets and liabilities:
Accounts and notes receivable (15,869) (10,334)
Merchandise inventories (9,499) (45,707)
Accounts payable 59,231 73,919
Net change in other current assets
and current liabilities (9,220) (4,696)
Other 1,262 (339)
--------- ---------
Cash provided by operating activities 47,723 42,641
--------- ---------
Investing activities
Additions to property and equipment (5,355) (2,453)
Additions to computer software (3,041) (2,961)
Other, net (1,146) 38
--------- ---------
Cash used for investing activities (9,542) (5,376)
--------- ---------
Financing activities
Net proceeds from issuance of mandatorily redeemable
preferred securities - 127,610
Repurchase of preferred stock - (115,000)
Reduction of long-term debt - (32,550)
Other financing, net (34,706) (14,386)
Cash dividends paid (3,596) (6,010)
Proceeds from exercise of stock options 80 3,117
--------- ---------
Cash used for financing activities (38,222) (37,219)
--------- ---------
Net increase (decrease) in cash and cash equivalents (41) 46
Cash and cash equivalents at beginning of period 546 583
========= =========
Cash and cash equivalents at end of period $ 505 $ 629
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. Accounting Policies
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 (O&M or the company) as of June 30, 1999 and the
consolidated results of operations for the three and six month periods and
cash flows for the six month periods ended June 30, 1999 and 1998.
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 six month periods ended June 30,
1999 and 1998 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.
4. Restructuring Reserve
As a result of the Columbia/HCA Healthcare Corporation contract
cancellation in the second quarter of 1998, the company recorded a
nonrecurring restructuring charge to downsize operations. In the second
quarter of 1999 the company re-evaluated its estimate of the remaining
costs to be incurred in connection with the restructuring plan, and
reduced the reserve by $1.0 million. The following table sets forth the
activity in the restructuring reserve during the second quarter of 1999:
<TABLE>
<CAPTION>
Balance at Balance at
(In thousands) March 31, 1999 Charges Adjustments June 30, 1999
-----------------------------------------------------------------------------------------------------
<S> <C>
Losses under lease commitments $ 3,261 $ 472 $ 203 $ 2,992
Asset write-offs 3,434 16 - 3,418
Employee separations 1,388 105 (1,203) 80
Other 486 4 - 482
-----------------------------------------------------------------------------------------------------
Total $ 8,569 $ 597 $ (1,000) $ 6,972
=====================================================================================================
</TABLE>
Four employees were terminated in connection with the restructuring plan during
the three month period ended June 30, 1999.
6
<PAGE>
5. Net Income (Loss) per Common Share
The following sets forth the computation of basic and diluted net income
(loss) per common share:
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- ----------------------------
1999 1998 1999 1998
--------------- -------------- ---------------- ----------
<S> <C>
Numerator:
Net income $ 6,480 $ 145 $ 11,971 $ 6,904
Preferred stock dividends - 604 - 1,898
-----------------------------------------------------------------------------------------------------------------------------
Numerator for basic net income (loss) per common
share - net income (loss) attributable to common stock 6,480 (459) 11,971 5,006
Distributions on convertible mandatorily redeemable
preferred securities, net of income taxes 993 - 1,987 -
-----------------------------------------------------------------------------------------------------------------------------
Numerator for diluted net income (loss) per common
share - net income (loss) attributable to common stock after
assumed conversions $ 7,473 (459) 13,958 5,006
-----------------------------------------------------------------------------------------------------------------------------
Denominator:
Denominator for basic net income (loss) per
common share - weighted average shares 32,572 32,546 32,564 32,442
Effect of dilutive securities:
Conversion of mandatorily redeemable preferred
securities 6,400 - 6,400 -
Stock options and restricted stock 124 79 127 124
-----------------------------------------------------------------------------------------------------------------------------
Denominator for diluted net income (loss) per common
share - adjusted weighted average shares and
assumed conversions 39,096 32,625 39,091 32,566
-----------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share - basic $ 0.20 $ (0.01) $ 0.37 $ 0.15
Net income (loss) per common share - diluted $ 0.19 $ (0.01) $ 0.36 $ 0.15
=============================================================================================================================
</TABLE>
6. Subsequent Event
On July 30, 1999, the company acquired the net assets of Medix, Inc.
(Medix), a distributor of medical/surgical supplies, for approximately $85
million in cash, which included assumed debt. Headquartered in Waunakee,
Wisconsin, Medix's customers are primarily in the Midwest and include
acute care hospitals, long-term care facilities and clinics. The
acquisition will be accounted for as a purchase. Medix's net sales were
$183.6 million for their fiscal year ended October 2, 1998.
7. Condensed Consolidating Financial Information
The following tables present condensed consolidating financial information
for: Owens & Minor, Inc.; on a combined basis, the guarantors of Owens &
Minor, Inc.'s 10 7/8% Senior Subordinated 10-year Notes (Notes); and the
non-guarantor subsidiaries 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 information is more
meaningful in understanding the financial position, results of operations
and cash flows of the guarantor subsidiaries.
7
<PAGE>
Condensed Consolidating Financial Information
(In thousands)
<TABLE>
<CAPTION>
Six months ended Owens & Guarantor Non-guarantor
June 30, 1999 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Statements of Operations
Net sales $ - $ 1,513,444 $ - $ - $ 1,513,444
Cost of goods sold - 1,354,368 - - 1,354,368
- -----------------------------------------------------------------------------------------------------------------------------
Gross margin - 159,076 - - 159,076
- -----------------------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 5 117,774 307 - 118,086
Depreciation and amortization - 9,145 - - 9,145
Interest expense, net 8,286 (2,156) - - 6,130
Intercompany interest expense, net (3,427) 12,572 (8,071) (1,074) -
Discount on accounts receivable securitization - 17 1,773 - 1,790
Distributions on mandatorily redeemable
preferred securities - - 3,548 - 3,548
Nonrecurring restructuring expenses - (1,000) - - (1,000)
- -----------------------------------------------------------------------------------------------------------------------------
Total expenses 4,864 136,352 (2,443) (1,074) 137,699
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (4,864) 22,724 2,443 1,074 21,377
Income tax provision (benefit) (2,141) 10,037 1,037 473 9,406
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (2,723) $ 12,687 $ 1,406 $ 601 $ 11,971
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six months ended Owens & Guarantor Non-guarantor
June 30, 1998 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Statements of Operations
Net sales $ - $ 1,596,928 $ - $ - $ 1,596,928
Cost of goods sold - 1,432,308 - - 1,432,308
- -----------------------------------------------------------------------------------------------------------------------------
Gross margin - 164,620 - - 164,620
- -----------------------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 5 121,889 127 - 122,021
Depreciation and amortization - 8,973 - - 8,973
Interest expense, net 8,595 (1,792) - - 6,803
Intercompany interest expense, net (6,705) 14,145 (6,352) (1,088) -
Discount on accounts receivable securitization - 40 2,946 - 2,986
Distribution on mandatorily redeemable
preferred securities - - 935 - 935
Nonrecurring restructuring expenses - 11,200 - - 11,200
- -----------------------------------------------------------------------------------------------------------------------------
Total expenses 1,895 154,455 (2,344) (1,088) 152,918
=============================================================================================================================
Income (loss) before income taxes (1,895) 10,165 2,344 1,088 11,702
Income tax provision (benefit) (767) 4,156 952 457 4,798
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) (1,128) 6,009 1,392 631 6,904
Dividends on preferred stock 1,898 - - - 1,898
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) attributable to common stock $ (3,026) $ 6,009 $ 1,392 $ 631 $ 5,006
=============================================================================================================================
</TABLE>
8
<PAGE>
Condensed Consolidating Financial Information
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Owens & Guarantor Non-guarantor
June 30, 1999 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Balance Sheets
Assets
Current assets
Cash and cash equivalents $ 504 - $ 1 $ - $ 505
Accounts and notes receivable, net - 91,558 137,574 - 229,132
Merchandise inventories - 283,393 - - 283,393
Intercompany advances, net 143,635 113,256 1,183 (258,074) -
Other current assets - 13,827 41 - 13,868
- ------------------------------------------------------------------------------------------------------------------------------
Total current assets 144,139 502,034 138,799 (258,074) 526,898
Property and equipment, net - 26,408 - - 26,408
Goodwill, net - 156,003 - - 156,003
Intercompany investments 303,941 15,001 136,083 (455,025) -
Other assets, net 9,235 20,329 1,396 - 30,960
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $ 457,315 $ 719,775 $ 276,278 $(713,099) $ 740,269
==============================================================================================================================
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ - $ 230,776 $ - $ - $ 230,776
Accrued payroll and related liabilities - 4,318 - - 4,318
Intercompany advances, net - 141,985 116,690 (258,675) -
Other accrued liabilities 1,314 44,575 1,347 - 47,236
- ------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,314 421,654 118,037 (258,675) 282,330
- ------------------------------------------------------------------------------------------------------------------------------
Long-term debt 150,000 - - - 150,000
Intercompany long-term debt 136,083 - - (136,083) -
Accrued pension and retirement plans - 5,944 - - 5,944
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 287,397 427,598 118,037 (394,758) 438,274
- ------------------------------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust, holding
solely convertible debentures of Owens & Minor, Inc. - - 132,000 - 132,000
- ------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Common stock 65,392 - 4,083 (4,083) 65,392
Paid-in capital 12,618 299,858 15,001 (314,859) 12,618
Retained earnings (accumulated deficit) 91,908 (7,681) 7,157 601 91,985
- ------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 169,918 292,177 26,241 (318,341) 169,995
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 457,315 $ 719,775 $ 276,278 $(713,099) $ 740,269
==============================================================================================================================
</TABLE>
9
<PAGE>
Condensed Consolidating Financial Information
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Owens & Guarantor Non-guarantor
December 31, 1998 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Balance Sheets
Assets
Current assets
Cash and cash equivalents $ 505 $ 40 $ 1 $ - $ 546
Accounts and notes receivable, net - 100,148 113,617 - 213,765
Merchandise inventories - 275,094 - - 275,094
Intercompany advances, net 148,992 90,698 1,183 (240,873) -
Other current assets - 14,816 - - 14,816
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 149,497 480,796 114,801 (240,873) 504,221
Property and equipment, net - 25,608 - - 25,608
Goodwill, net - 158,276 - - 158,276
Intercompany investments 303,941 15,001 136,083 (455,025) -
Other assets, net 9,784 19,879 - - 29,663
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 463,222 $ 699,560 $ 250,884 $(695,898) $ 717,768
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ - $ 206,251 $ - $ - $ 206,251
Accrued payroll and related liabilities - 8,974 - - 8,974
Intercompany advances, net - 148,992 92,509 (241,501) -
Other accrued liabilities 1,394 50,994 1,361 - 53,749
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,394 415,211 93,870 (241,501) 268,974
Long-term debt 150,000 - - - 150,000
Intercompany long-term debt 136,083 - - (136,083) -
Accrued pension and retirement plans - 5,668 - - 5,668
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 287,477 420,879 93,870 (377,584) 424,642
- ------------------------------------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust, holding
solely convertible debentures of Owens & Minor, Inc. - - 132,000 - 132,000
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Common stock 65,236 - 4,083 (4,083) 65,236
Paid-in capital 12,280 299,858 15,001 (314,859) 12,280
Retained earnings (accumulated deficit) 98,229 (21,177) 5,930 628 83,610
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 175,745 278,681 25,014 (318,314) 161,126
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 463,222 $ 699,560 $ 250,884 $(695,898) $ 717,768
====================================================================================================================================
</TABLE>
10
<PAGE>
Condensed Consolidating Financial Statements
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the six months ended Owens & Guarantor Non-guarantor
June 30, 1999 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Statements of Cash Flows
Operating activities
Net income (loss) $ (2,723) $ 12,687 $ 1,406 $ 601 $ 11,971
Adjustments to reconcile net income (loss) to cash
provided by (used for) operating activities:
Depreciation and amortization - 9,145 - - 9,145
Nonrecurring restructuring provision - (1,000) - - (1,000)
Provision for LIFO reserve - 1,200 - - 1,200
Provision for losses on accounts and notes receivable - 328 174 - 502
Changes in operating assets and liabilities:
Accounts and notes receivable - 8,262 (24,131) - (15,869)
Merchandise inventories - (9,499) - - (9,499)
Accounts payable - 59,231 - - 59,231
Net change in other current assets
and current liabilities (83) (9,124) (13) - (9,220)
Other, net 967 797 99 (601) 1,262
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) operating activities (1,839) 72,027 (22,465) - 47,723
- ------------------------------------------------------------------------------------------------------------------------------------
Investing activities
Additions to property and equipment - (5,355) - - (5,355)
Additions to computer software - (3,041) - - (3,041)
Other, net - 54 (1,200) - (1,146)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities - (8,342) (1,200) - (9,542)
- ------------------------------------------------------------------------------------------------------------------------------------
Financing activities
Change in intercompany advances 5,354 (29,019) 23,665 - -
Other short-term financing, net - (34,706) - - (34,706)
Cash dividends paid (3,596) - - - (3,596)
Proceeds from exercise of stock options 80 - - - 80
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) financing activities 1,838 (63,725) 23,665 - (38,222)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (1) (40) - - (41)
Cash and cash equivalents at beginning of period 505 40 1 - 546
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 504 $ - $ 1 $ - $ 505
====================================================================================================================================
</TABLE>
11
<PAGE>
Condensed Consolidating Financial Statements
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the six months ended Owens & Guarantor Non-guarantor
June 30, 1998 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Statements of Cash Flows
Operating activities
Net income (loss) $ (1,128) $ 6,009 $ 1,392 $ 631 $ 6,904
Adjustments to reconcile net income (loss) to cash
provided by (used for) operating activities:
Depreciation and amortization - 8,973 - - 8,973
Nonrecurring restructuring provision - 11,200 - - 11,200
Provision for LIFO reserve - 2,497 - - 2,497
Provision for losses on accounts and notes receivable - 105 119 - 224
Changes in operating assets and liabilities:
Accounts and notes receivable - 25,242 (35,576) - (10,334)
Merchandise inventories - (45,707) - - (45,707)
Accounts payable - 73,919 - - 73,919
Net change in other current assets
and current liabilities 1,319 (5,789) (226) - (4,696)
Other, net 554 (150) (112) (631) (339)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) operating activities 745 76,299 (34,403) - 42,641
- ------------------------------------------------------------------------------------------------------------------------------------
Investing activities
Additions to property and equipment - (2,453) - - (2,453)
Additions to computer software - (2,961) - - (2,961)
Other, net - 38 - - 38
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities - (5,376) - - (5,376)
- ------------------------------------------------------------------------------------------------------------------------------------
Financing activities
Proceeds from mandatorily redeemable preferred
securities, net (4,390) - 132,000 - 127,610
Retirement of preferred stock 115,000) - - - (115,000)
Reduction of long-term debt (32,550) - - - (32,550)
Change in intercompany advances 154,088 (56,491) (97,597) - -
Other short-term financing, net - (14,386) - - (14,386)
Cash dividends paid (6,010) - - - (6,010)
Proceeds from exercise of stock options 3,117 - - - 3,117
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) financing activities (745) (70,877) 34,403 - (37,219)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents - 46 - - 46
Cash and cash equivalents at beginning of period 505 78 - - 583
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 505 $ 124 $ - $ - $ 629
====================================================================================================================================
</TABLE>
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following management discussion and analysis describes material changes in
the financial condition of Owens & Minor, Inc. and its wholly-owned subsidiaries
(O&M or the company) since December 31, 1998. 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 management's discussion and analysis of financial condition and
results of operations included in the company's 1998 Annual Report on Form 10-K
for the year ended December 31, 1998.
Financial Condition, Liquidity and Capital Resources
Liquidity. The company's liquidity improved during the first six months of 1999.
Combined outstanding debt and off balance sheet accounts receivable
securitization levels were reduced by $10.0 million to $215.0 million at June
30, 1999, from $225.0 million at December 31, 1998. The reduction was due to the
positive impact of cash flow from operations. The capitalization ratio at June
30, 1999, including the Mandatorily Redeemable Preferred Securities (Securities)
as equity and excluding the effect of the accounts receivable securitization,
was 41.6% compared to 43.4% at December 31, 1998. This improvement was primarily
the result of positive operating cash flows.
In May 1998, O&M repurchased all of its outstanding Series B Cumulative
Preferred Stock, financing the repurchase with substantially all the net
proceeds of the $132.0 million of Securities issued by Owens & Minor Trust I
(Trust). These transactions reduced the company's overall cost of capital for
the second quarter and the first six months of 1999 compared to the same period
of 1998.
The company expects that its available financing will be sufficient to fund its
working capital needs and long-term strategic growth, although this cannot be
assured. At June 30, 1999, the company had $225.0 million of unused credit under
its revolving credit facility and approximately $68.9 million under its
receivables financing facility. The company used a portion of this available
financing to fund the acquisition of the net assets of Medix, Inc. (Medix) on
July 30, 1999.
Working Capital Management. The company's working capital increased by $9.3
million from December 31, 1998, to $244.6 million at June 30, 1999. This
increase was a result of higher levels of inventories and accounts receivable
needed to support sales growth. The company also continues to focus on the
management of inventory levels, and inventory turnover increased to 9.5 times
for the quarter from 8.4 times in the fourth quarter of 1998.
Capital Expenditures. Capital expenditures were approximately $8.4 million in
the first six months of 1999, of which approximately $6.9 million was for
computer hardware and software, including $1.8 million for system upgrades to
prepare for Year 2000. The company expects to continue to invest in technology,
including system upgrades, to support strategic initiatives and improve
operational efficiency. These capital expenditures are expected to be funded
through cash flow from operations.
Acquisition. On July 30, 1999, the company acquired the net assets of Medix, a
distributor of medical/surgical supplies, for approximately $85 million in cash,
which included assumed debt. This acquisition strengthens the company's presence
in the Midwest and is expected to provide opportunities for increased sales in
this geographic area. The success of the acquisition will depend in part on the
company's ability to integrate and capture synergies in the combined businesses.
13
<PAGE>
Results of Operations
Second quarter and first six months of 1999 compared with 1998
Net sales. Net sales decreased 3.3% to $772.4 million in the second quarter of
1999 from $799.0 million in the second quarter of 1998. Net sales decreased 5.2%
to $1.5 billion in the first six months of 1999 from $1.6 billion in the first
six months of 1998. These decreases are primarily due to the impact of the 1998
cancellation of the company's distribution contract with Columbia/HCA Healthcare
Corporation (Columbia/HCA). The decrease in sales was partially offset by both
increased penetration of existing accounts and new customer contracts. Sales in
1999 included sales from Tenet BuyPower, the company's largest new customer,
beginning in February 1999.
Gross margin. Gross margin as a percentage of net sales increased to 10.4% in
the second quarter of 1999 and increased to 10.5% in the first six months of
1999 from 10.3% in the first quarter and the first six months of 1998. This
improvement reflects the company's continued emphasis on supply chain
initiatives with key suppliers as well as the lower sales base during the first
quarter of 1999.
Selling, general and administrative expenses. Selling, general and
administrative (SG&A) expenses as a percentage of net sales increased to 7.7%
for the second quarter of 1999 and increased to 7.8% for the first six months of
1999 compared to 7.6% for the second quarter and the first six months of 1998.
The increase, as a percentage of net sales, was the result of a lower sales base
for the 1999 periods. SG&A expense decreased $1.6 million for the quarter and
$3.9 million for the first six months of 1999 from the comparable periods in
1998. This reduction was the result of cost-saving initiatives, including the
reduction of approximately 250 full-time equivalent employees since June 30,
1998.
Depreciation and amortization. Depreciation and amortization for the second
quarter and the first six months of 1999 was comparable to the same periods in
1998.
Interest expense, net, and discount on accounts receivable securitization.
Interest expense, net, and discount on accounts receivable securitization
decreased to $3.8 million in the second quarter of 1999 from $4.6 million in the
second quarter of 1998 and decreased to $7.9 million in the first six months of
1999 from $9.8 million in the first six months of 1998. This reduction has been
a result of the lower level of financing under the off balance sheet accounts
receivable securitization for the second quarter and the first six months of
1999 compared to the same periods in 1998. The company expects to continue to
manage these costs by continuing its working capital reduction initiatives and
management of interest rate risks, although the future results of these
initiatives cannot be assured.
Distributions on mandatorily redeemable preferred securities and dividends on
preferred stock. In May 1998, the Trust issued $132.0 million of the Securities.
O&M applied substantially all of the net proceeds from this transaction to
repurchase all of its outstanding Series B Cumulative Preferred Stock. As of
June 30, 1999, the company had accrued $1.2 million of distributions related to
these Securities.
Nonrecurring restructuring expenses. As a result of the Columbia/HCA contract
cancellation in the second quarter of 1998, the company recorded a nonrecurring
restructuring charge of approximately $6.6 million, after taxes, to downsize
operations. In the second quarter of 1999, the company re-evaluated its
restructuring reserve. Since the actions under this plan had resulted in lower
projected total costs than originally anticipated, the company recorded a
reduction in the reserve which increased net income by approximately $0.6
million, after taxes.
14
<PAGE>
Income taxes. The income tax provision was $9.4 million in the first six months
of 1999 compared with $4.8 million in the same period in 1998. The effective tax
rate was 44.0%, compared to 41.0% for the same period in 1998. This increase
results primarily from reduced deductibility of expenses related to certain
nontaxable income.
Net income. Net income increased to $6.5 million in the second quarter of 1999
from $0.1 million in the second quarter of 1998 and increased to $12.0 million
in the first six months of 1999 from $6.9 million in the same period of 1998.
The increase was due to the impact of the restructuring charge in 1998 and the
restructuring accrual adjustment in 1999, as well as lower sales during the 1999
periods. Excluding the effect of the restructuring charge in 1998 and the
related adjustment in 1999, net income for the quarter ended June 30, 1999 was
$5.9 million compared to $6.8 million in 1998, and $11.4 million and $13.5
million for the six month periods ended June 30, 1999 and 1998.
Readiness for Year 2000
The Year 2000 (Y2K) issue is the result of computer programs being written using
two-digit, rather than four-digit, year dates. O&M's computer hardware, software
and devices with embedded technology that are date-sensitive may recognize a
date code using "00" as the year 1900 rather than the year 2000. This situation
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in other normal business activities. The
company has divided its Y2K efforts into three main areas:
o computer hardware and software;
o other systems and equipment, such as telephone equipment, scanning
equipment and alarm systems; and
o suppliers and customers.
Computer Hardware and Software. In 1997, O&M completed its assessment of its
computer hardware and software, and developed a strategy of remediation. This
strategy includes retirement of outdated software and replacement or repair of
the remaining software and hardware. The company began repair and replacement
efforts in 1997. These repairs are substantially complete and replacements are
expected to be substantially complete at the end of the third quarter of 1999,
prior to any currently anticipated impact on O&M's computer hardware and
software. Testing of repairs is expected to be substantially complete in the
third quarter of 1999, but will continue through the end of the year. O&M
estimates that, as of June 30, 1999, it had completed approximately 80% of
replacement, and 85% of the testing that it believes will be necessary to fully
address potential Y2K issues relating to its computer hardware and software.
Other Systems and Equipment. The company has completed an inventory and
assessment of non-computer related systems and equipment at its operating
divisions and a similar inventory and assessment at its corporate offices. O&M
believes that the impact on operations of potential noncompliance for these
systems and equipment would be minimal. The company is continuing its program of
replacement and repair of non-compliant systems and equipment, and expects this
effort to be complete by late 1999.
15
<PAGE>
Suppliers and Customers. O&M has contacted its significant suppliers to
determine the extent to which the company is vulnerable to the suppliers'
failure to remediate their Y2K compliance issues. Of the suppliers representing
approximately 90% of O&M's sales, 91% have responded, and, of those responding,
93% have indicated that they have either remedied their Y2K compliance issues,
or plan to do so before the end of 1999. The company has successfully completed
testing with three of its largest suppliers and will continue testing with
selected suppliers during the remainder of 1999.
The company has also contacted its largest customers to determine their level of
Y2K readiness. Many customers have not yet responded to these inquiries or have
not responded with sufficient detail for O&M to determine whether they will be
Y2K compliant on a timely basis. The company is continuing its efforts to
ascertain the readiness of its customers but, since this readiness cannot be
assured, O&M has developed contingency plans to address the most likely risks of
non-compliance and is in the process of implementing those plans. The company
has successfully completed testing with over 50 customers and will continue
testing during the remainder of 1999.
The company estimates the cost of its Y2K remediation efforts will total
approximately $9.4 million of operating expenses and $6.7 million of capital
expenditures. These expenditures will be funded from operating cash flows.
Through June 30, 1999, O&M had incurred approximately $7.5 million of expenses
and $5.5 million of capital spending related to its Y2K efforts, of which $0.7
million and $1.3 million were incurred in the second quarter of 1999. For the
remainder of 1999, the company expects to incur approximately $2.0 million of
expenses and $1.1 million of capital spending. Other information technology
efforts have not been significantly delayed by Y2K initiatives.
O&M has completed its analysis of the operational problems that would be
reasonably likely to result from the failure by the company and certain third
parties to complete efforts necessary to achieve Y2K compliance on a timely
basis. Some of the possible consequences include, but are not limited to, loss
of communications, loss of utility services, and an inability to process
customer transactions or engage in similar normal business activities. The
company has developed contingency plans to address these and other possible
scenarios. In the event that the company or third party is adversely affected by
the century change, the company will implement its contingency plan for each
situation. These plans include alternate means of communication with customers
and suppliers, manual operation of certain systems, and other previously
established emergency procedures.
O&M believes the Y2K issue will not pose significant operational problems for
the company. However, if all Y2K issues are not properly identified or if
assessment, remediation and testing are not completed on a timely basis, there
can be no assurance that the Y2K issue will not have a material adverse impact
on the company's results of operations or adversely affect its relationships
with customers, suppliers or others. Additionally, there can be no assurance
that Y2K non-compliance by other entities will not have a material adverse
impact on the company's systems or results of operations.
The costs of O&M's Y2K efforts and the dates on which the company believes it
will complete these efforts are based upon management's current estimates. These
estimates used numerous assumptions regarding future events, including the
continued availability of certain resources, third party remediation plans and
other factors. There can be no assurance that these estimates will prove to be
accurate, and actual results could differ materially from those currently
anticipated.
Recent Accounting Pronouncements. In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards No.
(SFAS) 133, Accounting for Derivative Instruments and Hedging Activities. In May
1999, the FASB delayed the effective date of this standard by one year. The
company will be required to adopt the provisions of this standard beginning on
January 1, 2001. Management believes the effect of the adoption of this standard
will be limited to financial statement presentation and disclosure and will not
have a material effect on the company's financial condition or results of
operations.
16
<PAGE>
Risks
The company is subject to risks associated with changes in the medical industry,
including continued efforts to control costs, which place pressure on operating
margin, and changes in the way medical and surgical services are delivered to
patients.
Forward-looking Statements
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, readiness for
Year 2000 and changes in government regulations. Although O&M believes 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The company believes there has been no material change in its exposure to market
risk from that discussed in Item 7A in the company's Annual Report on Form 10-K
for the year ended December 31, 1998.
Part II. Other Information
Item 1. Legal Proceedings
Certain legal proceedings pending against the company are described in the
company's Annual Report on Form 10-K for the year ended December 31, 1998.
Through June 30, 1999, there have been no material developments in any legal
proceedings reported in such Annual Report.
Item 4. Submission of Matters to a Vote of Shareholders
The following matters were submitted to a vote of O&M's shareholders at its
annual meeting held on April 29, 1999, with the voting results designated below
each such matter.
(1) Election of Vernard W. Henley, G. Gilmer Minor, III and Peter S. Redding
as directors of O&M for a three-year term.
<TABLE>
<CAPTION>
Votes Against Broker
Directors Votes For Or Withheld Abstentions Non-Votes
------------------------- -------------- ------------------ --------------- --------------------
<S> <C>
Vernard W. Henley 27,752,315 817,855 0 0
G. Gilmer Minor, III 27,988,203 581,967 0 0
Peter S. Redding 27,750,823 819,347 0 0
</TABLE>
17
<PAGE>
(2) Ratification of the appointment of KPMG LLP as O&M's independent auditors.
Votes Against
Votes For Or Withheld Abstentions
---------------------- ---------------------- -------------------
28,509,953 24,511 35,706
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3 Amended and Restated Bylaws of Owens & Minor, Inc.
4 Amendment and Consent dated June 30, 1999 to 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 thereto and
NationsBank, as administrative agent.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
18
<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 August 11, 1999 /s/ Richard F. Bozard
--------------- ------------------------
Richard F. Bozard
Vice President & Treasurer
Acting Chief Financial Officer
Date August 11, 1999 /s/ Olwen B. Cape
--------------- ------------------------
Olwen B. Cape
Vice President & Controller
Chief Accounting Officer
<PAGE>
Exhibits Filed with SEC
Exhibit #
3 Amended and Restated Bylaws of Owens & Minor, Inc.
4 Amendment and Consent dated June 30, 1999 to 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 thereto and NationsBank, as administrative agent.
27 Financial Data Schedule
EXHIBIT 3
AMENDED AND RESTATED
BYLAWS
OF
OWENS & MINOR, INC.
ARTICLE I
Meetings of Shareholders
------------------------
1.1 Places of Meetings. All meetings of the shareholders shall be
held at such place, either within or without the Commonwealth of Virginia, as
from time to time may be fixed by the Board of Directors.
1.2 Annual Meetings. The annual meeting of the shareholders, for
the election of Directors and transaction of such other business as may come
before the meeting, shall be held in each year on the fourth Tuesday in April,
at 11:00 a.m., or on such other business day that is not earlier than the first
day of March and not later than the last day of April, or at such other time, as
shall be fixed by the Board of Directors.
1.3 Special Meetings. A special meeting of the shareholders for
any purpose or purposes may be called at any time by the Chairman of the Board,
the Chief Executive Officer, or by a majority of the Board of Directors. At a
special meeting no business shall be transacted and no corporate action shall be
taken other than that stated in the notice of the meeting.
1.4 Notice of Meetings. Written or printed notice stating the
place, day and hour of every meeting of the shareholders and, in case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be mailed not less than ten nor more than sixty days before the date of the
meeting to each shareholder of record entitled to vote at such meeting, at his
address which appears in the share transfer books of the Corporation. Such
further notice shall be given as may be required by law, but meetings may be
held without notice if all the shareholders entitled to vote at the meeting are
present in person or by proxy or if notice is waived in writing by those not
present, either before or after the meeting.
1.5 Quorum. Any number of shareholders together holding at least a
majority of the outstanding shares of capital stock entitled to vote with
respect to the business to be transacted, who shall be present in person or
represented by proxy at any meeting duly called, shall constitute a quorum for
the transaction of business. If less than a quorum shall be in attendance at the
time for which a meeting shall have been called, the meeting may be adjourned
from time to time by a majority of the shareholders present or represented by
proxy without notice other than by announcement at the meeting.
1.6 Voting. At any meeting of the shareholders each shareholder of
a class entitled to vote on any matter coming before the meeting shall, as to
such matter, have one vote, in person or by proxy, for each share of capital
stock of such class standing in his name on the books of the Corporation on the
date, not more than seventy days prior to such meeting, fixed by the Board of
Directors as the record date for the purpose of determining shareholders
entitled to vote. Every proxy shall be in writing, dated and signed by the
shareholder entitled to vote or his duly authorized attorney-in-fact.
1
<PAGE>
1.7 Inspectors. An appropriate number of inspectors for any
meeting of shareholders may be appointed by the Chairman of such meeting.
Inspectors so appointed will open and close the polls, will receive and take
charge of proxies and ballots, and will decide all questions as to the
qualifications of voters, validity of proxies and ballots, and the number of
votes properly cast.
1.8 Nomination by Shareholders. Subject to any rights of holders of
shares of the Preferred Stock of the Corporation, nominations for the election
of directors shall be made by the Board of Directors or by any shareholder
entitled to vote in elections of directors. However, any shareholder entitled to
vote in the election of directors may nominate one or more persons for election
as directors only at an annual meeting and if written notice of such
shareholders' intent to make such nomination or nominations has been given,
either by personal delivery or by United States registered or certified mail,
postage prepaid, to the Secretary of the Corporation not later than 90 days
before the anniversary of the date of the first mailing of the Corporation's
proxy statement for the immediately preceding year's annual meeting. In no event
shall the public announcement of an adjournment or postponement of an annual
meeting or the fact that an annual meeting is held after the anniversary of the
preceding annual meeting commence a new time period for the giving of a
shareholder's notice as described above. Each notice shall set forth (i) the
name and address of record of the shareholder who intends to make the
nomination, the beneficial owner, if any, on whose behalf the nomination is made
and of the person or persons to be nominated, (ii) the class and number of
shares of the Corporation that are owned by the shareholder and such beneficial
owners, (iii) a representation that the shareholder is a holder of record of
shares of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice, (iv) a description of all arrangements, understandings or
relationships between the shareholder and each nominee and any other person or
person (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder, and such other information
regarding each nominee proposed by such shareholder as would be required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required to be disclosed, pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the Board of Directors, and shall include a consent
signed by each such nominee to serve as a director of the Corporation it so
elected. In the event that a shareholder attempts to nominate any person without
complying with the procedures set forth in this Section 1.8, such person shall
not be nominated and shall not stand for election at such meeting. The Chairman
of the Board of Directors shall have the power and duty to determine whether a
nomination proposed to be brought before the meeting was made in accordance with
the procedures set forth in this Section 1.8 and, if any proposed nomination is
not in compliance with this Section 1.8, to declare that such defective proposal
shall be disregarded.
2
<PAGE>
1.9 Business Proposed by a Shareholder. To be properly brought
before a meeting of shareholders, business must be (i) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors or (iii) otherwise properly brought before
an annual meeting by a shareholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
given, either by personal delivery or by United States registered or certified
mail, postage prepaid, to the Secretary of the Corporation not later than 90
days before the anniversary of the date of the first mailing of the
Corporation's proxy statement for the immediately preceding year's annual
meeting. In no event shall the public announcement of an adjournment or
postponement of an annual meeting or the fact that an annual meeting is held
after the anniversary of the preceding annual meeting commence a new time period
for the giving of a shareholder's notice as described above. A shareholder's
notice to the Secretary shall set forth as to each matter the shareholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting, including the complete text of any
resolutions to be presented at the meeting with respect to such business, and
the reasons for conducting such business at the meeting, (ii) the name and
address of record of the shareholder proposing such business and the beneficial
owner, if any, on whose behalf the proposal is made, (iii) the class and number
of shares of the Corporation that are owned by the shareholder and such
beneficial owner and (iv) any material interest of the shareholder and such
beneficial owner, in such business. In the event that a shareholder attempts to
bring business before a meeting without complying with the procedures set forth
in this Section 1.9, such business shall not be transacted at such meeting. The
Chairman of the Board of Directors shall have the power and duty to determine
whether any proposal to bring business before the meeting was made in accordance
with the procedures set forth in this Section 1.9 and, if any business is not
proposed in compliance with this Section 1.9, to declare that such defective
proposal shall be disregarded and that such proposed business shall not be
transacted at such meeting.
ARTICLE II
Directors
---------
2.1 General Powers. The property, affairs and business of the
Corporation shall be managed under the direction of the Board of Directors, and,
except as otherwise expressly provided by law, the Articles of Incorporation or
these Bylaws, all of the powers of the Corporation shall be vested in such
Board.
2.2 Number of Directors. The number of Directors constituting the
Board of Directors shall be eleven (11). The Directors shall be divided into
three (3) classes, each class to be as nearly equal in number as possible.
2.3 Election and Removal of Directors; Quorum.
(a) At each annual meeting of shareholders, (i) the
number of Directors equal to the number in the class whose term expires at the
time of such meeting shall be elected to hold office until the third succeeding
annual meeting and until their successors are elected, and (ii) any other
vacancies then existing shall be filled.
(b) Any Director may be removed from office at a meeting
called expressly for that purpose by the vote of shareholders holding not less
than a majority of the shares entitled to vote at an election of Directors.
3
<PAGE>
(c) Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of the majority of the remaining
Directors though less than a quorum of the Board, and the term of office of any
Director so elected shall expire at the next shareholders' meeting at which
directors are elected.
(d) A majority of the number of Directors fixed by
these Bylaws shall constitute a quorum for the transaction of business. The
act of a majority of Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. Less than a quorum may adjourn any
meeting.
2.4 Meetings of Directors. An annual meeting of the Board of
Directors shall be held as soon as practicable after the adjournment of the
annual meeting of shareholders at such place as the Board may designate. Other
meetings of the Board of Directors shall be held at places within or without the
Commonwealth of Virginia and at times fixed by resolution of the Board, or upon
call of the Chairman of the Board, the Chief Executive Officer or a majority of
the Directors. The Secretary or officer performing the Secretary's duties shall
give not less than twenty-four hours' notice by letter, telegraph or telephone
(or in person) of all meetings of the Board of Directors, provided that notice
need not be given of the annual meeting or of regular meetings held at times and
places fixed by resolution of the Board. Meetings may be held at any time
without notice if all of the Directors are present, or if those not present
waive notice in writing either before or after the meeting. The notice of
meetings of the Board need not state the purpose of the meeting.
2.5 Compensation. By resolution of the Board, Directors may be
allowed a fee and expenses for attendance at all meetings, but nothing herein
shall preclude Directors from serving the Corporation in other capacities and
receiving compensation for such other services.
2.6 Eligibility for Service as a Director. Except for any present
Director who is more than 65 years of age on December 14, 1998, no person shall
be appointed or be eligible for election to the Board of Directors of the
Corporation if such person, at the time of the prospective appointment or
election, is then more than 67 years of age (so that no such person shall be
more than 70 years of age at the expiration of his or her term as a Director of
the Corporation). Any present Director who is more than 65 years of age on
December 14, 1998 shall not be appointed or be eligible for election to the
Board if such Director is more than 72 years of age at the time of the
prospective appointment or election (so that no such Director shall be more than
75 years of age at the expiration of his or her term as a Director of the
Corporation).
2.7 Director Emeritus. The Board of Directors may from time to time
elect one or more former directors as Directors Emeriti. Election as a Director
Emeritus shall be in recognition of contributions during his or her tenure on
the Board of Directors and in appreciation for loyal and dedicated service. A
Director Emeritus shall be elected for a term expiring on the date of the next
annual meeting of the Board and will be recognized at the annual meeting. A
Director Emeritus is an honorary non-compensated position and not considered a
"Director" or Section 16 Insider for the purposes of these bylaws or for any
other purpose. Therefore, Director Emeriti shall attend Board meetings and
participate in other Board events only at the invitation of the Chairman.
4
<PAGE>
ARTICLE III
Committees
----------
3.1 Executive Committee. The Board of Directors, by resolution
adopted by a majority of the number of Directors fixed by these Bylaws, may
elect an Executive Committee which shall consist of not less than three
Directors, including the Chief Executive Officer (if the Chief Executive Officer
is also a Director). When the Board of Directors is not in session, the
Executive Committee shall have all power vested in the Board of Directors by
law, by the Articles of Incorporation, or by these Bylaws, provided that the
Executive Committee shall not have power to (i) approve or recommend to
shareholders action that the Virginia Stock Corporation Act requires to be
approved by shareholders; (ii) fill vacancies on the Board or on any of its
committees; (iii) amend the Articles of Incorporation pursuant to ss.13.1-706 of
the Virginia Code; (iv) adopt, amend, or repeal the Bylaws; (v) approve a plan
of merger not requiring shareholder approval; (vi) authorize or approve a
distribution, except according to a general formula or method prescribed by the
Board of Directors; or (vii) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative rights,
preferences, and limitations of a class or series of shares, other than within
limits specifically prescribed by the Board of Directors. The Executive
Committee shall report at the next regular or special meeting of the Board of
Directors all action that the Executive Committee may have taken on behalf of
the Board since the last regular or special meeting of the Board of Directors.
3.2 Other Committees. The Board of Directors, by resolution
adopted by a majority of the number of Directors fixed by these Bylaws, may
establish such other standing or special committees of the Board as it may deem
advisable, consisting of not less than two Directors; and the members, terms and
authority of such committees shall be as set forth in the resolutions
establishing the same.
3.3 Meetings. Regular and special meetings of any Committee
established pursuant to this Article may be called and held subject to the same
requirements with respect to time, place and notice as are specified in these
Bylaws for regular and special meetings of the Board of Directors.
3.4 Quorum and Manner of Acting. A majority of the number of
members of any Committee shall constitute a quorum for the transaction of
business at such meeting. The action of a majority of those members present at a
Committee meeting at which a quorum is present shall constitute the act of the
Committee.
3.5 Term of Office. Members of any Committee shall be elected as
above provided and shall hold office until their successors are elected by the
Board of Directors or until such Committee is dissolved by the Board of
Directors.
3.6 Resignation and Removal. Any member of a Committee may resign
at any time by giving written notice of his intention to do so to the Chief
Executive Officer or the Secretary of the Corporation, or may be removed, with
or without cause, at any time by such vote of the Board of Directors as would
suffice for his election.
5
<PAGE>
3.7 Vacancies. Any vacancy occurring in a Committee resulting from
any cause whatever may be filled by a majority of the number of Directors fixed
by these Bylaws.
ARTICLE IV
Officers
--------
4.1 Election of Officers: Terms. The officers of the Corporation
shall consist of a Chief Executive Officer, a President, a Secretary and a
Treasurer. Other officers, including a Chairman of the Board, one or more Vice
Presidents (whose seniority and titles, including Executive Vice Presidents and
Senior Vice Presidents, may be specified by the Board of Directors), and
assistant and subordinate officers, may from time to time be elected by the
Board of Directors. All officers shall hold office until the next annual meeting
of the Board of Directors and until their successors are elected. . Any two or
more officers may be combined in the same person as the Board of Directors may
determine.
4.2 Removal of Officers: Vacancies. Any officer of the Corporation
may be removed summarily with or without cause, at any time, by the Board of
Directors. Vacancies may be filled by the Board of Directors.
4.3 Duties. The officers of the Corporation shall have such duties
as generally pertain to their offices, respectively, as well as such powers and
duties as are prescribed by law or are hereinafter provided or as from time to
time shall be conferred by the Board of Directors. The Board of Directors may
require any officer to give such bond for the faithful performance of his duties
as the Board may see fit.
4.4 Duties of the Chief Executive Officer. The Chief Executive
Officer shall be either the Chairman of the Board or the President of the
Corporation, as designated by the Board of Directors. Subject to the direction
and control of the Board of Directors, the Chief Executive Officer shall
supervise and control the management of the Corporation, shall be primarily
responsible for the implementation of policies of the Board of Directors and
shall have such duties and authority as are normally incident to the position of
chief executive officer of a corporation and such other duties and authority as
may be prescribed from time to time by the Board of Directors or as are provided
elsewhere in these Bylaws. The Chief Executive Officer may sign and execute in
the name of the Corporation share certificates, deeds, mortgages, bonds,
contracts or other instruments except in cases where the signing and execution
thereof shall be expressly delegated by these Bylaws to some other officer or
agent of the Corporation or shall be required by law otherwise to be signed or
executed.
4.5 Duties of the Chairman of the Board. The Board of Directors
may, but need not, appoint from among its members an officer designated as the
Chairman of the Board. The Chairman of the Board shall, when present, preside
over meetings of the Board of Directors and shall have such other duties and
authority as may be prescribed from time to time by the Board of Directors or as
are provided for elsewhere in these Bylaws.
4.6 Duties of the President. Subject to the direction and control
of the Board of Directors and the Chief Executive Officer (if the President is
not also the Chief Executive Officer), the President shall supervise and control
the operations of the Corporation and shall have such other duties as may be
prescribed from time to time by the Board of Directors or the Chief Executive
Officer (if the President is not also the Chief Executive Officer) or as are
provided elsewhere in these Bylaws. The President may sign and execute in the
name of the Corporation share certificates, deeds, mortgages, bonds, contracts
or other instruments except in cases where the signing and execution thereof
shall be expressly delegated by the Board of Directors or the Chief Executive
Officer to some other officer or agent of the Corporation or shall be required
by law otherwise to be signed or executed.
6
<PAGE>
4.7 Duties of the Vice Presidents. Each Vice President (which term
includes any Senior Executive Vice President, Executive Vice President and
Senior Vice President), if any, shall have such powers and duties as may from
time to time be assigned to him by the Chief Executive Officer or the Board of
Directors. Any Vice President may sign and execute in the name of the
Corporation deeds, mortgages, bonds, contracts or other instruments authorized
by the Board of Directors, except where the signing and execution of such
documents shall be expressly delegated by the Board of Directors or the Chief
Executive Officer to some other officer or agent of the Corporation or shall be
required by law or otherwise to be signed or executed.
4.8 Duties of the Treasurer. The Treasurer shall have charge of
and be responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit all monies and securities of the Corporation in
such banks and depositories as shall be designated by the Board of Directors. He
shall be responsible (i) for maintaining adequate financial accounts and records
in accordance with generally accepted accounting practices; (ii) for the
preparation of appropriate operating budgets and financial statements; (iii) for
the preparation and filing of all tax returns required by law; and (iv) for the
performance of all duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the Board of Directors or
the Chief Executive Officer. The Treasurer may sign and execute in the name of
the Corporation share certificates, deeds, mortgages, bonds, contracts or other
instruments, except in cases where the signing and the execution thereof shall
be expressly delegated by the Board of Directors or by these Bylaws to some
other officer or agent of the Corporation or shall be required by law or
otherwise to be signed or executed.
4.9 Duties of the Secretary. The Secretary shall act as secretary
of all meetings of the Board of Directors and shareholders of the Corporation.
When requested, he shall also act as secretary of the meetings of the committees
of the Board. He shall keep and preserve the minutes of all such meetings in
permanent books. He shall see that all notices required to be given by the
Corporation are duly given and served; shall have custody of the seal of the
Corporation and shall affix the seal or cause it to be affixed by facsimile or
otherwise to all share certificates of the Corporation and to all documents the
execution of which on behalf of the Corporation under its corporate seal is
required in accordance with law or the provisions of these Bylaws; shall have
custody of all deeds, leases, contracts and other important corporate documents;
shall have charge of the books, records and papers of the Corporation relating
to its organization and management as a Corporation; shall see that all reports,
statements and other documents required by law (except tax returns) are properly
filed; and shall in general perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors or the Chief Executive Officer.
4.10 Compensation. The Board of Directors shall have authority
to fix the compensation of all officers of the Corporation.
7
<PAGE>
ARTICLE V
Capital Stock
-------------
5.1 Certificates. The shares of capital stock of the Corporation
shall be evidenced by certificates in forms prescribed by the Board of Directors
and executed in any manner permitted by law and stating thereon the information
required by law. Transfer agents and/or registrars for one or more classes of
shares of the Corporation may be appointed by the Board of Directors and may be
required to countersign certificates representing shares of such class or
classes. If any officer whose signature or facsimile thereof shall have been
used on a share certificate shall for any reason cease to be an officer of the
Corporation and such certificate shall not then have been delivered by the
Corporation, the Board of Directors may nevertheless adopt such certificate and
it may then be issued and delivered as though such person had not ceased to be
an officer of the Corporation.
5.2 Lost, Destroyed and Mutilated Certificates. Holders of the
shares of the Corporation shall immediately notify the Corporation of any loss,
destruction or mutilation of the certificate therefor, and the Board of
Directors may in its discretion cause one or more new certificates for the same
number of shares in the aggregate to be issued to such shareholder upon the
surrender of the mutilated certificate or upon satisfactory proof of such loss
or destruction, and the deposit of a bond in such form and amount and with such
surety as the Board of Directors may require.
5.3 Transfer of Shares. The shares of the Corporation shall be
transferable or assignable only on the books of the Corporation by the holder in
person or by attorney on surrender of the certificate for such shares duly
endorsed and, if sought to be transferred by attorney, accompanied by a written
power of attorney to have the same transferred on the books of the Corporation.
The Corporation will recognize, however, the exclusive right of the person
registered on its books as the owner of shares to receive dividends or other
distributions and to vote as such owner. To the extent that any provision of the
Amended and Restated Rights Agreement between the Corporation and Bank of New
York, as Rights Agent, dated as of February 9, 1998, is deemed to constitute a
restriction on the transfer of any securities of the Corporation, including,
without limitation, the Rights, as defined therein, such restriction is hereby
authorized by these Bylaws.
5.4 Fixing Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. If no record date
is fixed for the determination of shareholders entitled to notice of or to vote
at a meeting of shareholders, or shareholders entitled to receive payment of a
dividend or other distribution, the date on which notices of the meeting are
mailed or the date on which the resolution of the Board of Directors declaring
such dividend or other distribution is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof unless the Board of Directors fixes a new record date, which it shall do
if the meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting.
8
<PAGE>
5.5 Control Share Acquisition Statute. Article 14.1 of the Virginia
Stock Corporation Act shall not apply to acquisitions of shares of capital stock
of the Corporation.
ARTICLE VI
Miscellaneous Provisions
------------------------
6.1 Seal. The seal of the Corporation shall consist of a circular
design with the words "Owens & Minor, Inc." around the top margin thereof,
"Richmond, Virginia" around the lower margin thereof and the word "Seal" in the
center thereof.
6.2 Fiscal Year. The fiscal year of the Corporation shall end on
such date and shall consist of such accounting periods as may be fixed by the
Board of Directors.
6.3 Checks, Notes and Drafts. Checks, notes, drafts and other
orders for the payment of money shall be signed by such persons as the Board of
Directors from time to time may authorize. When the Board of Directors so
authorizes, however, the signature of any such person may be a facsimile.
6.4 Amendment of Bylaws. Unless proscribed by the Articles of
Incorporation, these Bylaws may be amended or altered at any meeting of the
Board of Directors by affirmative vote of a majority of the number of Directors
fixed by these Bylaws. The shareholders entitled to vote in respect of the
election of Directors, however, shall have the power to rescind, amend, alter or
repeal any Bylaws and to enact Bylaws which, if expressly so provided, may not
be amended, altered or repealed by the Board of Directors.
6.5 Voting of Shares Held. Unless otherwise provided by resolution
of the Board of Directors or of the Executive Committee, if any, the Chief
Executive Officer may cast the vote which the Corporation may be entitled to
cast as a shareholder or otherwise in any other corporation, any of whose
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation, or to consent in writing
to any action by any such other corporation, or in lieu thereof, from time to
time appoint an attorney or attorneys or agent or agents of the Corporation, in
the name and on behalf of the Corporation, to cast such votes or give such
consents. The Chief Executive Officer shall instruct any person or persons so
appointed as to the manner of casting such votes or giving such consent and may
execute or cause to be executedon behalf of the Corporation, and under its
corporate seal or otherwise, such written proxies, consents, waivers or other
instruments as may be necessary or proper.
ARTICLE VII
Emergency Bylaws
----------------
7.1 The Emergency Bylaws provided in this Article VII shall be
operative during any emergency, notwithstanding any different provision in the
preceding Articles of these Bylaws or in the Articles of Incorporation of the
Corporation or in the Virginia Stock Corporation Act (other than those
provisions relating to emergency bylaws). An emergency exists if a quorum of the
Corporation's Board of Directors cannot readily be assembled because of some
catastrophic event. To the extent not inconsistent with these Emergency Bylaws,
the Bylaws provided in the preceding Articles shall remain in effect during such
emergency and upon the termination of such emergency the Emergency Bylaws shall
cease to be operative unless and until another such emergency shall occur.
9
<PAGE>
7.2 During any such emergency:
(a) Any meeting of the Board of Directors may be
called by any officer of the Corporation or by any Director. The notice
thereof shall specify the time and place of the meeting. To the extent feasible,
notice shall be given in accord with Section 2.4 above, but notice may be given
only to such of the Directors as it may be feasible to reach at the time, by
such means as may be feasible at the time, including publication or radio, and
at a time less than twenty-four hours before the meeting if deemed necessary by
the person giving notice. Notice shall be similarly given, to the extent
feasible, to the other persons referred to in (b) below.
(b) At any meeting of the Board of Directors, a quorum
shall consist of a majority of the number of Directors fixed at the time by
these Bylaws. If the Directors present at any particular meeting shall be fewer
than the number required for such quorum, other persons present as referred to
below, to the number necessary to make up such quorum, shall be deemed Directors
for such particular meeting as determined by the following provisions and in the
following order of priority:
(i) Vice-Presidents not already serving as
Directors, in the order of their seniority of first election to such offices,
or if two or more shall have been first elected to such offices on the same
day, in the order of their seniority in age;
(ii) All other officers of the Corporation in the
order of their seniority of first election to such offices, or if two or more
shall have been first elected to such offices on the same day, in the order of
their seniority in age; and
(iii) Any other persons that are designated on a list
that shall have been approved by the Board of Directors before the emergency,
such persons to be taken in such order of priority and subject to such
conditions as may be provided in the resolution approving the list.
(c) The Board of Directors, during as well as before any
such emergency, may provide, and from time to time modify, lines of succession
in the event that during such an emergency any or all officers or agents of the
Corporation shall for any reason be rendered incapable of discharging their
duties.
(d) The Board of Directors, during as well as before
any such emergency, may, effective in the emergency, change the principal
office, or designate several alternative offices, or authorize the officers so
to do.
7.3 No officer, Director or employee shall be liable for action
taken in good faith in accordance with these Emergency Bylaws.
10
<PAGE>
7.4 These Emergency Bylaws shall be subject to repeal or change by
further action of the Board of Directors or by action of the shareholders,
except that no such repeal or change shall modify the provisions of the next
preceding paragraph with regard to action or inaction prior to the time of such
repeal or change. Any such amendment of these Emergency Bylaws may make any
further or different provision that may be practical and necessary for the
circumstances of the emergency.
11
EXHIBIT 4
AMENDMENT AND CONSENT
THIS AMENDMENT AND CONSENT dated as of June 30, 1999 (this
"Amendment") relating to the Credit Agreement referenced below is by and among
OWENS & MINOR, INC., a Virginia corporation (the "Borrower"), the Subsidiaries
of the Borrower identified on the signature pages hereto (the "Guarantors"), the
various banks and lending institutions identified on the signature pages hereto
(the "Banks") and NATIONSBANK, as Administrative Agent (in such capacity, the
"Administrative Agent"). Terms used but not otherwise defined shall have the
meanings provided in the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $225 million credit facility has been extended to the
Borrower pursuant to the terms of that Credit Agreement dated as of September
15, 1997 (as amended and modified the "Credit Agreement") among the Borrower,
the Guarantors, the Banks, Bank of America NT & SA and Crestar Bank, as
co-agents, and NationsBank, N.A., as Administrative Agent;
WHEREAS, the Borrower and Owens & Minor Medical, Inc. have entered
into an agreement to acquire (the "Medix Acquisition") substantially all of the
assets of Medix, Inc. ("Medix"), pursuant to the terms of that certain Asset
Purchase Agreement dated as of July 5, 1999 by and between the Borrower and
Medix (the "Purchase Agreement") for total consideration of approximately $85
million, consisting of approximately $65 million in cash and the assumption of
approximately $20 million of Indebtedness;
WHEREAS, the total consideration of the Medix Acquisition is in
excess of the limit set forth in Section 7.05(b) of the Credit Agreement;
WHEREAS, the Borrower has requested that the Required Banks consent
to the Medix Acquisition and certain modifications to the Credit Agreement in
connection with the Medix Acquisition;
WHEREAS, the Required Banks have consented to the requested
modifications on the terms and conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Credit Agreement is amended in the following respects:
1.1 The following definition is added to Section
1.01:
"Medix Acquisition" means the acquisition by the
Borrower of substantially all of the assets of Medix, Inc.
pursuant to the terms of that certain Asset Purchase
Agreement dated as of July 5, 1999 by and among the
Borrower, Owens & Minor Medical, Inc. and Medix, Inc.
1.2 Section 6.11(b) is amended to read as follows:
(b) Consolidated Tangible Net Worth. The Borrower
will maintain Consolidated Tangible Net Worth, as
determined on each Determination Date to occur on or after
September 30, 1999, of not less than $75,000,000; provided,
however, the minimum Consolidated Tangible Net Worth
required hereunder shall be increased on the last day of
each of the Borrower's fiscal quarters to occur thereafter
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).
1.3 Clauses (h) and (i) of Section 7.01 are renumbered as
clauses (i) and (j), and a new clause (h) is added to read
as follows:
1
<PAGE>
(h) Purchase money Indebtedness assumed in
connection with the Medix Acquisition provided that (i) the
total of all such Indebtedness shall not exceed an
aggregate principal of $20,000,000 and (ii) the total of
all such Indebtedness shall be repaid in full within ten
(10) days of the closing date of the Medix Acquisition.
1.4 A new clause (d) is added to Section 10.03 to
read as follows:
(d) Notwithstanding anything to the contrary
contained herein, any Bank, (a "Granting Lender") may grant
to a special purpose funding vehicle (an "SPC") the option
to fund all or any part of any Loan that such Granting
Lender would otherwise be obligated to fund pursuant to
this Agreement; provided that (i) nothing herein shall
constitute a commitment by any SPC to fund any Loan, and
(ii) if an SPC elects not to exercise such option or
otherwise fails to fund all or any part of such Loan, the
Granting Lender shall be obligated to fund such Loan
pursuant to the terms hereof. The funding of a Loan by an
SPC hereunder shall utilize the Revolving Credit Commitment
of the Granting Lender to the same extent, and as if, such
Loan were funded by such Granting Lender. Each party hereto
hereby agrees that no SPC shall be liable for any indemnity
or payment under this Agreement for which a Lender would
otherwise be liable for so long as, and to the extent, the
Granting Lender provides such indemnity or makes such
payment. Nothing contained herein shall relieve the
Granting Lender of its obligations under the Credit
Agreement. Neither the Administrative Agent nor the Credit
Parties shall have any duty to acknowledge or evidence the
interest of the SPC as separate or apart from the interest
of the Granting Lender. Notwithstanding anything to the
contrary contained in this Agreement, any SPC may disclose
on a confidential basis any non-public information relating
to its funding of Loans to any rating agency, commercial
paper dealer or provider of any surety or guarantee to such
SPC. This paragraph may not be amended without the prior
written consent of each Granting Lender, all or any part of
whose Loan is being funded by an SPC at the time of such
amendment.
2. The Required Banks hereby consent to the Medix Acquisition
pursuant to the terms of the Purchase Agreement for total consideration of
approximately $85 million, consisting of approximately $65 million in cash and
the assumption of approximately $20 million of Indebtedness. The Required Banks
further agree that the total consideration up to $85 million paid in the Medix
Acquisition shall not be included in any calculation of the limit on aggregate
consideration paid in connection with acquisitions set forth in Section 7.05(b).
3. This Amendment shall be effective upon satisfaction of the
following conditions:
(a) execution of this Amendment by the Credit Parties
and the Required Banks; and
(b) receipt by the Administrative Agent, for the
ratable benefit of each of the Banks which executes this Amendment,
of an amendment fee equal to 5 basis points (0.05%) on the aggregate
amount of Commitments of each Bank which executes this Amendment.
4. The Borrower hereby represents and warrants in connection
herewith that as of the date hereof (after giving effect hereto) (i) the
representations and warranties set forth in Section 5 of the Credit Agreement
are true and correct in all material respects (except those which expressly
relate to an earlier date), and (ii) no Default or Event of Default presently
exists under the Credit Agreement.
5. Except as expressly modified hereby, all of the terms and
provisions of the Credit Agreement remain in full force and effect.
6. The Borrower agrees to pay all reasonable costs and
expenses in connection with the preparation, execution and delivery of this
Amendment, including the reasonable fees and expenses of the Administrative
Agent's legal counsel.
6. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original. It shall not be necessary in making proof of this Amendment to produce
or account for more than one such counterpart.
2
<PAGE>
7. This Amendment, as the Credit Agreement, shall be deemed to
be a contract under, and shall for all purposes be construed in accordance with,
the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
BORROWER: OWENS & MINOR, INC.,
- -------- a Virginia corporation
By: /s/Richard F. Bozard
-------------------------------------------
Name: Richard F. Bozard
Title: Vice President & 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: /s/Richard F. Bozard
-------------------------------------------
Name: Richard F. Bozard
Title: Vice President & Treasurer
of each of the Guarantors listed above
3
<PAGE>
BANKS: NATIONSBANK, N.A.,
- ----- individually in its capacity as a
Bank and in its capacity as Agent and
Administrative Agent
By: /s/Philip S. Durand
-------------------------------------------
Name: Philip S. Durand
Title: Principal
BANK OF AMERICA NT & SA
By: /s/Philip S. Durand
-------------------------------------------
Name: Philip S. Durand
Title: Principal
CRESTAR BANK
By: /s/T. Patrick Collins
-------------------------------------------
Name: T. Patrick Collins
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/David E. Branley
-------------------------------------------
Name: David E. Branley
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/Douglas S. King
-------------------------------------------
Name: Douglas S. King
Title: Vice President
THE BANK OF NEW YORK
By: /s/Ann Marie Hughes
-------------------------------------------
Name: Ann Marie Hughes
Title: Vice President
MELLON BANK, N.A.
By: /s/Maria N. Sisto
-------------------------------------------
Name: Maria N. Sisto
Title: Assistant Vice President
4
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/Andrea S. Kantor
-------------------------------------------
Name: Andrea S. Kantor
Title: Vice President
THE SANWA BANK LTD.
By: /s/John T. Feeney
-------------------------------------------
Name: John T. Feeney
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/E. Turner Coggin
-------------------------------------------
Name: E. Turner Coggin
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/J. R. Trimble
-------------------------------------------
Name: J. R. Trimble
Title: Senior Relationship Manager
5
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<S> <C>
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<PERIOD-END> JUN-30-1999
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132,000
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