<PAGE> 1
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1998
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Commission file number 340-23520
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QUINTILES TRANSNATIONAL CORP.
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(Exact name of registrant as specified in its charter)
North Carolina 56-1714315
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4709 Creekstone Dr., Suite 200
Durham, NC 27703-8411
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(Address of principal executive offices) (Zip Code)
(919) 941-2000
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes No [ ]
The number of shares of Common Stock, $.01 par value, outstanding as of October
30, 1998 was 77,837,048.
1
<PAGE> 2
Quintiles Transnational Corp. and Subsidiaries
Index
Page
----
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets -
September 30, 1998 and December 31, 1997 3
Condensed consolidated statements of
income - Three months ended
September 30, 1998 and 1997; nine months ended
September 30, 1998 and 1997 4
Condensed consolidated statements of
cash flows - Nine months ended
September 30, 1998 and 1997 5
Notes to condensed consolidated financial
statements - September 30, 1998 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure about
Market Risk 14
Part II. Other Information 14
Signatures 16
Exhibit Index 17
2
<PAGE> 3
Quintiles Transnational Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
------------ -----------
(unaudited) (Note 1)
(In thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 88,499 $ 78,007
Accounts receivable and unbilled services 295,425 210,444
Investments 44,448 44,372
Prepaid expenses 26,931 22,261
Other current assets 10,738 22,596
--------- ---------
Total current assets 466,041 377,680
Property and equipment 353,095 265,851
Less accumulated depreciation 113,939 80,479
--------- ---------
239,156 185,372
Intangibles and other assets:
Intangibles 71,369 71,976
Investments 59,514 69,089
Deferred income taxes 68,683 68,651
Deposits and other assets 33,189 26,130
--------- ---------
232,755 235,846
--------- ---------
Total assets $ 937,952 $ 798,898
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Lines of credit $ 366 $ 10,335
Accounts payable and accrued expenses 118,819 96,059
Credit arrangements, current 13,519 14,867
Unearned income 120,827 85,327
Income taxes and other current liabilities 14,843 6,234
--------- ---------
Total current liabilities 268,374 212,822
Long-term liabilities:
Credit arrangements, less current portion 153,879 149,379
Long-term obligations 24,172 20,985
Deferred income taxes and other liabilities 26,580 28,607
--------- ---------
204,631 198,971
--------- ---------
Total liabilities 473,005 411,793
Shareholders' equity:
Common stock and additional paid-in capital,
76,765,856 and 73,853,867 shares issued and
outstanding at September 30, 1998 and
December 31,1997, respectively 356,059 335,312
Retained earnings 112,379 60,008
Other equity (3,491) (8,215)
--------- ---------
Total shareholders' equity 464,947 387,105
--------- ---------
Total liabilities and shareholders' equity $ 937,952 $ 798,898
========= =========
</TABLE>
See accompanying notes.
3
<PAGE> 4
Quintiles Transnational Corp. and Subsidiaries
Condensed Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
1998 1997 1998 1997
--------- --------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenue $ 303,474 $ 206,697 $ 848,379 $ 580,762
Costs and expenses:
Direct 159,284 109,174 444,369 301,863
General and administrative 98,298 65,471 274,925 189,954
Depreciation and amortization 14,166 9,558 40,431 26,409
--------- --------- --------- ---------
271,748 184,203 759,725 518,226
--------- --------- --------- ---------
Income from operations 31,726 22,494 88,654 62,536
Other expense, net (989) (829) (1,917) (1,885)
--------- --------- --------- ---------
Income before income taxes 30,737 21,665 86,737 60,651
Income taxes 9,825 7,458 27,823 22,102
--------- --------- --------- ---------
Net income $ 20,912 $ 14,207 $ 58,914 $ 38,549
========= ========= ========= =========
Basic net income per share $ 0.27 $ 0.19 $ 0.77 $ 0.54
========= ========= ========= =========
Diluted net income per share $ 0.27 $ 0.19 $ 0.76 $ 0.52
========= ========= ========= =========
</TABLE>
See accompanying notes.
4
<PAGE> 5
Quintiles Transnational Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
Operating activities
Net income $ 58,914 $ 38,549
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 40,431 26,409
Provision for deferred income tax expense (1,484) --
Change in operating assets and liabilities (23,767) (30,855)
Other 241 (374)
Change in fiscal year of pooled entity -- (581)
-------- --------
Net cash provided by operating activities 74,335 33,148
Investing activities
Proceeds from disposition of property and equipment 4,505 2,659
Acquisition of property and equipment (72,296) (59,320)
Acquisition of intangible assets, net of cash acquired 4,307 (3,445)
Payment of non-recurring transaction costs -- (5,648)
Payment of dividend (866) --
Security investments, net 9,722 (31,000)
Change in fiscal year of pooled entity -- (17)
-------- --------
Net cash used in investing activities (54,628) (96,771)
Financing activities
(Decrease) increase in lines of credit, net (9,015) 6,021
Principal payments on credit arrangements (13,256) (28,493)
Issuance of common stock, net 12,212 95,689
Dividend paid by pooled entity -- (1,633)
Change in fiscal year of pooled entity -- 57
-------- --------
Net cash (used in) provided by financing activities (10,059) 71,641
Effect of foreign currency exchange rate changes on cash 844 (1,562)
-------- --------
Increase in cash and cash equivalents 10,492 6,456
Cash and cash equivalents at beginning of period 78,007 68,730
-------- --------
Cash and cash equivalents at end of period $ 88,499 $ 75,186
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
Quintiles Transnational Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
September 30, 1998
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. For further information, refer to
the Consolidated Financial Statements and Notes thereto included in the Annual
Report on Form 10-K for the year ended December 31, 1997 of Quintiles
Transnational Corp. (the "Company").
The balance sheet at December 31, 1997 has been derived from the audited
financial statements of the Company. The balance sheet does not include all of
the information and notes required by generally accepted accounting principles
for complete financial statements.
2. Mergers and Acquisitions
The Company acquired the following companies in the nine months ended September
30, 1998 in transactions that were accounted for as poolings of interests.
<TABLE>
<CAPTION>
Acquired Companies Date Acquired Shares Issued*
- ------------------ ------------- -------------
<S> <C> <C>
Pharma Networks, N.V. February 2, 1998 132,000 shares
Technology Assessment Group February 4, 1998 460,366 shares
T2A S.A. February 26, 1998 311,899 shares
More Biomedical Contract Research Organization Ltd. February 27, 1998 16,600 shares
Crossbox Limited t/a Cardiac Alert May 31, 1998 70,743 shares
ClinData International Pty Ltd. May 31, 1998 123,879 shares
The Royce Consultancy, Limited August 24, 1998 664,194 shares
Data Analysis Systems, Inc. September 9, 1998 358,897 shares
</TABLE>
* The Company's Common Stock was issued in exchange for all the outstanding
shares of each of the acquired companies.
All consolidated financial data for periods subsequent to January 1, 1998 have
been restated to include the results of the pooled companies. The financial data
of the pooled companies prior to January 1, 1998 were not materially different
from that previously reported by the Company, and thus have not been restated.
The results from operations of the pooled companies for the periods from January
1, 1998 through the date of each acquisition are not material.
6
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Quintiles Transnational Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited) -- Continued
3. Long Term Obligation
On May 31, 1998, the Company acquired a clinical trial production and warehouse
facility in Livingston, Scotland. The 58,000-square-foot facility in Livingston,
Scotland, will be integrated with Quintiles' two other nearby facilities, one
(at Bathgate) specializing in clinical trial packaging and distribution and the
other (at Edinburgh) providing services in all aspects of preclinical and
pharmaceutical drug development.
The Company has made a purchase commitment valued at approximately (pound)1.75
million ($2.9 million) with payment due in May, 2001.
4. Net Income Per Share
The following table sets forth the computation of basic and diluted net income
per share (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $20,912 $14,207 $58,914 $38,549
======= ======= ======= =======
Weighted average shares:
Basic weighted average shares 76,724 73,011 76,476 71,948
Effect of dilutive securities - Stock options 1,384 1,675 1,511 1,684
------- ------- ------- -------
Diluted weighted average shares 78,108 74,686 77,987 73,632
======= ======= ======= =======
Basic net income per share $ 0.27 $ 0.19 $ 0.77 $ 0.54
Diluted net income per share $ 0.27 $ 0.19 $ 0.76 $ 0.52
</TABLE>
7
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Quintiles Transnational Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited) -- Continued
5. Comprehensive Income
The Company adopted Financial Accounting Standard Board Statement No. 130,
"Reporting Comprehensive Income" in the first quarter of 1998. The adoption of
Statement No. 130 did not have an impact on the Company's financial position or
results from operations.
The following table represents the Company's comprehensive income for the three
and nine months ended September 30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------- -------- ------ --------
<S> <C> <C> <C> <C>
Net income $20,912 $ 14,207 $58,914 $ 38,549
Other comprehensive income:
Unrealized gain(loss) on marketable
securities, net of tax 165 (142) 197 17
Foreign currency adjustment 6,110 (2,474) 4,437 (8,568)
------- -------- ------- --------
Comprehensive income $27,187 $ 11,591 $63,548 $ 29,998
======= ======== ======= ========
</TABLE>
6. Subsequent Events
On October 8, 1998, the Company acquired Simirex Inc. and Simirex International
Ltd. ("Simirex"), a New Jersey-based provider of clinical packaging services for
the U.S. pharmaceutical industry. The acquisition of Simirex will be accounted
for as a pooling of interests.
On October 12, 1998, the Company acquired Groupe H2V SA ("Serval"), a
Paris-based French contract sales and marketing company. The acquisition of
Serval will be accounted for as a purchase.
On October 12, 1998, the Company acquired Q.E.D. International, Inc. ("Q.E.D."),
a New York-based provider of integrated product marketing and communication
services for pharmaceutical companies in the U.S. market. The acquisition of
Q.E.D. will be accounted for as a pooling of interests.
8
<PAGE> 9
Quintiles Transnational Corp. and Subsidiaries
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three Months Ended September 30, 1998 and 1997
Net revenue for the third quarter of 1998 was $303.5 million, an increase of
$96.8 million or 46.8% over third quarter of 1997 net revenue of $206.7 million.
Growth occurred across each of the Company's three geographic regions with
particularly strong growth in the Americas contract research services. Factors
contributing to the growth included an increase of contract service offerings,
the provision of increased services rendered under existing contracts and the
initiation of services under contracts awarded subsequent to the third quarter
of 1997.
Direct costs, which include compensation and related fringe benefits for
billable employees and other expenses directly related to contracts, were $159.3
million or 52.5% of net revenue for the third quarter of 1998 versus $109.2
million or 52.8% of net revenue for the third quarter of 1997.
General and administrative expenses, which include compensation and fringe
benefits for administrative employees, non-billable travel, professional
services, advertising, computer and facility expenses, were $98.3 million or
32.4% of net revenue for the third quarter of 1998 versus $65.5 million or 31.7%
of net revenue for the third quarter of 1997. The $32.8 million increase in
general and administrative expenses was primarily due to an increase in
personnel, facilities and locations and outside services resulting from the
Company's growth. Also included in the increase is approximately $1.2 million of
incremental costs related to the Company's Year 2000 Program.
Depreciation and amortization were $14.2 million or 4.7% of net revenue for the
third quarter of 1998 versus $9.6 million or 4.6% of net revenue for the third
quarter of 1997.
Income from operations was $31.7 million or 10.5% of net revenue for the third
quarter of 1998 versus $22.5 million or 10.9% of net revenue for the third
quarter of 1997.
The effective tax rate for the third quarter of 1998 was 32.0% versus a 34.4%
effective tax rate for the third quarter of 1997. The effective tax rate
reduction resulted from utilization of foreign net operating losses. Since the
Company conducts operations on a global basis, its effective tax rate may vary.
9
<PAGE> 10
Quintiles Transnational Corp. and Subsidiaries
Results of Operations -- Continued
Nine Months Ended September 30, 1998 and 1997
Net revenue for the nine months ended September 30, 1998 was $848.4 million, an
increase of $267.6 million or 46.1% over net revenue of $580.8 million for the
nine months ended September 30, 1997. Growth occurred across each of the
Company's three geographic regions. Factors contributing to the growth included
an increase of contract service offerings, the provision of increased services
rendered under existing contracts and the initiation of services under contracts
awarded subsequent to the nine months ended September 30, 1997.
Direct costs, which include compensation and related fringe benefits for
billable employees and other expenses directly related to contracts, were $444.4
million or 52.4% of net revenue for the nine months ended September 30, 1998
versus $301.9 million or 52.0% of net revenue for the nine months ended
September 30, 1997.
General and administrative expenses, which include compensation and fringe
benefits for administrative employees, non-billable travel, professional
services, advertising, computer and facility expenses, were $274.9 million or
32.4% of net revenue for the nine months ended September 30, 1998 versus $190.0
million or 32.7% of net revenue for the nine months ended September 30, 1997.
The $84.9 million increase in general and administrative expenses was primarily
due to an increase in personnel, facilities and locations and outside services
resulting from the Company's growth. Also included in the increase is
approximately $1.2 million of incremental costs related to the Company's Year
2000 Program.
Depreciation and amortization were $40.4 million or 4.8% of net revenue for the
nine months ended September 30, 1998 versus $26.4 million or 4.5% of net revenue
for the nine months ended September 30, 1997.
Income from operations was $88.7 million or 10.4% of net revenue for the nine
months ended September 30, 1998 versus $62.5 million or 10.8% of net revenue for
the nine months ended September 30, 1997.
The effective tax rate for the nine months ended September 30, 1998 was 32.1%
versus a 36.4% effective tax rate for the nine months ended September 30, 1997.
The effective tax rate reduction resulted from utilization of foreign net
operating losses. Since the Company conducts operations on a global basis, its
effective tax rate may vary.
10
<PAGE> 11
Quintiles Transnational Corp. and Subsidiaries
Liquidity and Capital Resources
Cash inflows from operations were $74.3 million for the nine months ended
September 30, 1998 versus cash inflows of $33.1 million for the comparable
period of 1997. Investing activities, for the nine months ended September 30,
1998, consisted primarily of capital asset purchases and investment security
purchases and maturities. Capital asset purchases required an outlay of cash of
$72.3 million for the nine months ended September 30, 1998 compared to an outlay
of $59.3 million for the same period in 1997.
As of September 30, 1998, total working capital was $197.7 million versus $164.9
million as of December 31, 1997. Net receivables from clients (accounts
receivable and unbilled services, net of unearned income) were $174.6 million at
September 30, 1998 as compared to $125.1 million at the end of 1997.
The Company has a (pound)15.0 million (approximately $25.4 million) unsecured
line of credit with a U.K. bank and a (pound)5.0 million (approximately $8.5
million) unsecured line of credit with a second U.K. bank. At September 30,
1998, the Company had (pound)19.8 million (approximately $33.6 million)
available under these arrangements.
On August 7, 1998, the Company entered into a $150 million senior unsecured
credit facility ("$150.0 million facility") with a U.S. bank. At September 30,
1998, the Company had the full $150 million available under this credit
facility. Based upon its current financing plan, the Company believes the $150.0
million facility would be available to retire its long-term credit arrangements
and obligations, if necessary.
Based on its current operating plan, the Company believes that its available
cash and cash equivalents and investments in marketable securities, together
with future cash flows from operations and borrowings under its line of credit
agreements will be sufficient to meet its foreseeable cash needs in connection
with its operations. As part of its business strategy, the Company reviews many
acquisition candidates in the ordinary course of business, and in addition to
acquisitions already made, the Company is continually evaluating new acquisition
and expansion possibilities. The Company may from time to time seek to obtain
debt or equity financing in its ordinary course of business or to facilitate
possible acquisitions or expansion.
Impact of Year 2000
The Company has established a Year 2000 Program to address the Year 2000 issue.
The Year 2000 issue could cause disruptions of the Company's operations,
including, among other things, a temporary inability to process information,
receive information, services or products from third parties, interface with
customers in the performance of contracts, or operate or communicate in some or
all of the regions in which it does business. The Company's computing
infrastructure is based on industry standard systems. The Company does not
depend on large legacy systems and does not use mainframes. Rather, the scope of
its Year 2000 Program includes unique software systems and
11
<PAGE> 12
Quintiles Transnational Corp. and Subsidiaries
Impact of Year 2000 -- Continued
tools in each of its service groups, especially its contract research service
group, embedded systems in its laboratory and manufacturing operations,
facilities such as elevators and fire alarms in over 70 offices (which also
involve embedded technology) and numerous supplier and other business
relationships. The Company has identified critical systems within each service
group and is devoting its resources to address these items first.
The framework for the Company's Year 2000 Program prescribes broad inventory,
assessment and planning phases. The Company is in the process of assessing those
systems, facilities and business relationships which it believes may be
vulnerable to the Year 2000 issue and which it believes could impact the
Company's operations. Although the Company cannot control whether and how third
parties will address the Year 2000 issue, its assessment also will include a
limited evaluation of certain services on which the Company is substantially
dependent, and the Company plans to develop contingency plans for possible
deficiencies in those services. The Company anticipates completing the
assessment for all business critical systems during 1998. As the Company
completes the assessment of its systems, the Company is developing plans to
renovate, replace or retire them, as appropriate, if they are affected by the
Year 2000 issue. Individual projects generally include launch, analysis,
remediation testing and deployment phases. The Company expects to address most
systems relating to its healthcare consulting services in 1998, with completion
expected in the first half of 1999. The Company also expects to address most of
its contract sales systems in 1998, and complete deployment in the first half of
1999. The Company's contract research services utilize numerous systems, which
the Company must address independently on disparate schedules, depending on the
magnitude and complexity of the individual system. The Company anticipates that
critical deployment of these systems (or migration to replacement systems where
necessary) will occur primarily in 1999. The Company expects to complete the
core components of its Year 2000 Program before there is a significant risk that
internal Year 2000 problems will have a material impact on its operations. Until
the Company has completed its remediation, testing and deployment plans, the
Company believes it is premature to develop contingency plans to address what
would happen if its execution of these plans were to fail to address the Year
2000 issue.
The Company faces both internal and external risks from the Year 2000 issue. If
realized, these risks could have a material adverse effect on the Company's
business, results of operations or financial condition. The Company's primary
internal risk is that its systems will not be Year 2000 compliant on time. The
magnitude of this risk depends on the Company's ability to achieve compliance of
both internally and externally developed systems or to migrate to alternate
systems in a timely fashion. The decentralized nature of the Company's business
may compound this risk if the Company is unable to coordinate efforts across its
global operations on a timely basis. The Company believes that its Year 2000
Program will successfully address these risks, however, the Company cannot
guarantee that this program will be completed in a timely manner.
Notwithstanding the Company's Year 2000 Program, the Company also faces external
risks that may be beyond its control. The Company's international operations and
its relationships with foreign third parties create additional risks for the
Company, as many countries outside the United States
12
<PAGE> 13
Quintiles Transnational Corp. and Subsidiaries
Impact of Year 2000 -- Continued
have been less attuned to the Year 2000 issue. These risks include the
possibility that infrastructural systems, such as electricity, water, natural
gas or telephony, will fail in some or all of the regions in which the Company
operates, as well as the danger that the internal systems of its foreign
suppliers, service providers and customers will fail. The Company's business
also requires considerable travel, and the Company's ability to perform services
under its customer contracts could be negatively affected if air travel is
disrupted by the Year 2000 issue.
In addition, the Company's business depends heavily on the healthcare industry,
particularly on third party physician investigators. The healthcare industry,
and physicians' groups in particular, to date may not have focused on the Year
2000 issue to the same degreee as some other industries, especially outside of
major metropolitan centers. As a result, the Company faces increased risk that
its physician investigators will be unable to provide the Company with the data
that it needs to perform under its contracts on time. Thus, the clinical study
involved could be slowed or brought to a halt. Also, the failure of the
Company's customers to address the Year 2000 issue could negatively impact their
ability to utilize the Company's services. While the Company intends to develop
contingency plans to address certain of these risks, there can be no assurance
that any developed plans will sufficiently insulate the Company from the effects
of these risks. Any disruptions resulting from the realization of these risks
would affect the Company's ability to perform its services. If the Company is
unable to receive or process information, or if third parties are unable to
provide information or services to it, the Company may not be able to meet
milestones or obligations under its customer contracts, which could have a
material adverse effect on the Company's business and financial results.
The Company estimates that the aggregate costs of its Year 2000 Program will be
approximately $14 million, including costs already incurred. A significant
portion of these costs, approximately $6 million are not likely to be
incremental costs, but rather will represent the redeployment of existing
resources. This reallocation of resources is not expected to have a significant
impact on the day-to-day operations of the Company. Total Year 2000 Program
costs of approximately $1.6 million were incurred by the Company through
September 30, 1998, of which approximately $1.2 million represented incremental
expense. The Company's estimates regarding the cost, timing and impact of
addressing the Year 2000 issue are based on numerous assumptions of future
events, including the continued availability of certain resources, the ability
of the Company to meet its deadlines and the cooperation of third parties.
However, there can be no guarantee that the assumptions will be correct and that
these estimates will be achieved. Actual results could differ materially from
those expected by the Company.
13
<PAGE> 14
Quintiles Transnational Corp. and Subsidiaries
Cautionary Statement for Forward-Looking Information
Information set forth in this Form 10-Q, including Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains various
"forward looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Act of 1934, which statements
represent the Company's judgement concerning the future and are subject to risks
and uncertainties that could cause the Company's actual operating results and
financial position to differ materially. Such forward looking statements can be
identified by the use of forward looking terminology such as "may," "will,"
"expect," "anticipate," "estimate," "believe," or "continue," or the negative
thereof or other variations thereof or comparable terminology.
The Company cautions that any such forward looking statements are further
qualified by important factors that could cause the Company's actual operating
results to differ materially from those in the forward looking statements,
including without limitation, the ability of the Company to integrate acquired
businesses with the Company's historical operations, The costs and impact of the
year 2000 issue, the actual costs of the combining of the acquired businesses,
actual operating performance, the ability to maintain large client contracts or
to enter into new contracts and the level of demand for services. See Exhibit
99.01 for additional factors that could cause the Company's actual results to
differ.
Item 3. Quantitative and Qualitative Disclosure About Market Risk --
Not Applicable
Part II. Other Information
Item 1. Legal Proceedings -- Not applicable
Item 2. Changes in Securities
On August 24, 1998, the Company completed the acquisition of
The Royce Consultancy Limited ("Royce"), a leading
pharmaceutical sales representative recruitment and contract
sales organization in the U.K. The Company issued 664,194
shares of its Common Stock, par value $0.01 per share, in
connection with the acquisition, which shares were received
by the holders of all of the outstanding share capital of
Royce in exchange for such interests. The shares were issued
in reliance on a claim of exemption pursuant to section 4(2)
of the Securities Act of 1933, as amended, based on
representations made by the recipients in the share
acquisition agreement.
On September 9, 1998, the Company completed the acquisition
of Data Analysis Systems, Inc.("DAS"), a leader in sales
force planning and territory optimization systems for the
pharmaceutical industry. The Company issued 358,897 shares
of its Common Stock, par value $0.01 per share, in
connection with the acquisition, which shares were received
by the holders of all of the outstanding share capital of
DAS in exchange for such interests.
14
<PAGE> 15
Quintiles Transnational Corp. and Subsidiaries
Part II. Other Information -- Continued
The shares were issued in reliance on a claim of exemption
pursuant to Rule 506 of Regulation D and section 4(2) of the
Securities Act of 1933, as amended, based on representations
made by the recipients in the merger agreement.
On March 10, 1998, the Company completed an acquisition in
which the consideration paid to the acquired company's two
stockholders included 16,740 shares of the Company's Common
Stock, par value $0.01 per share. The shares were issued in
reliance on a claim of exemption pursuant to section 4(2) of
the Securities Act of 1933, as amended, based on
representations made by the recipients in the merger
agreement.
During the three months ended September 30, 1998, options to
purchase 3,200 shares of Common Stock were exercised at an
average exercise price of $4.3175 per share in reliance on
Rule 701 under the Securities Act of 1933. Such options were
issued by the Company prior to becoming subject to the
requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, pursuant to its
Non-qualified Employee Incentive Stock Option Plan.
Item 3. Defaults upon Senior Securities -- Not applicable
Item 4. Submission of Matters to a Vote of Security Holders -- Not
applicable
Item 5. Other Information -- Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description
------- -----------
10.01 Credit Agreement dated as of
August 7, 1998.
27.01 Financial Data Schedule
99.01 Risk Factors
(b) During the three months ended September 30, 1998,
the Company filed one report on Form 8-K, dated
July 22, 1998, including its press release
announcing the Company's fiscal second quarter
1998 earnings information. No other reports on
Form 8-K were filed during the three months ended
September 30, 1998. Subsequently, the Company
filed one report on Form 8-K dated October 21,
1998, including its press release announcing the
Company's fiscal third quarter 1998 earnings
information.
15
<PAGE> 16
Quintiles Transnational Corp. and Subsidiaries
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.
Quintiles Transnational Corp.
-----------------------------
Registrant
Date November 12, 1998 /s/ Dennis B. Gillings
----------------- ---------------------------------------------
Dennis B. Gillings, Chief Executive Officer
Date November 12, 1998 /s/ Rachel R. Selisker
----------------- ---------------------------------------------
Rachel R. Selisker, Chief Financial Officer
16
<PAGE> 17
Quintiles Transnational Corp. and Subsidiaries
EXHIBIT INDEX
Exhibit Description
------- -----------
10.01 Credit Agreement dated as of August 7, 1998.
27.01 Financial Data Schedule
99.01 Risk Factors
17
<PAGE> 1
================================================================================
CREDIT AGREEMENT
dated as of August 7, 1998
by and among
QUINTILES TRANSNATIONAL CORP.,
as Borrower,
the Lenders referred to herein,
and
FIRST UNION NATIONAL BANK,
as Administrative Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS........................................................1
SECTION 1.1 Definitions.................................................1
SECTION 1.2 General....................................................14
SECTION 1.3 Other Definitions and Provisions...........................14
ARTICLE II REVOLVING CREDIT FACILITY........................................15
SECTION 2.1 Revolving Credit Loans.....................................15
SECTION 2.2 Procedure for Advances of Revolving Credit Loans...........15
SECTION 2.3 Repayment of Loans.........................................16
SECTION 2.4 Revolving Credit Loans.....................................18
SECTION 2.5 Permanent Reduction of the Aggregate Commitment............18
SECTION 2.6 Termination of Credit Facility.............................19
SECTION 2.7 Use of Proceeds............................................19
ARTICLE III LETTER OF CREDIT FACILITY.......................................19
SECTION 3.1 L/C Commitment.............................................19
SECTION 3.2 Procedure for Issuance of Letters of Credit................20
SECTION 3.3 Commissions and Other Charges..............................20
SECTION 3.4 [Intentionally Omitted]....................................20
SECTION 3.5 Reimbursement Obligation of the Borrower...................20
SECTION 3.6 Obligations Absolute.......................................21
SECTION 3.7 Effect of Application......................................21
ARTICLE IV GENERAL LOAN PROVISIONS..........................................21
SECTION 4.1 Interest...................................................21
SECTION 4.2 Notice and Manner of Conversion or
Continuation of Loans......................................24
SECTION 4.3 Fees.......................................................25
SECTION 4.4 Manner of Payment..........................................25
SECTION 4.5 Crediting of Payments and Proceeds.........................26
SECTION 4.6 Adjustments................................................27
SECTION 4.7 Nature of Obligations of Lenders Regarding
Extensions of Credit; Assumption by the
Administrative Agent.......................................27
SECTION 4.8. Mandatory Redenomination of Alternative
Currency Loans.............................................28
SECTION 4.9. Regulatory Limitation......................................28
SECTION 4.10 Changed Circumstances......................................29
SECTION 4.11 Indemnity..................................................31
SECTION 4.12 Capital Requirements.......................................31
SECTION 4.13 Taxes......................................................32
i
<PAGE> 3
ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING......................33
SECTION 5.1 Closing....................................................33
SECTION 5.2 Conditions to Closing and Initial Extensions of Credit.....34
SECTION 5.3 Conditions to All Extensions of Credit.....................36
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER...................37
SECTION 6.1 Representations and Warranties.............................37
SECTION 6.2 Survival of Representations and Warranties, Etc............43
ARTICLE VII FINANCIAL INFORMATION AND NOTICES...............................43
SECTION 7.1 Financial Statements and Projections.......................43
SECTION 7.2 Officer's Compliance Certificate...........................44
SECTION 7.3 Accountants' Certificate...................................44
SECTION 7.4 Other Reports..............................................44
SECTION 7.5 Notice of Litigation and Other Matters.....................45
SECTION 7.6 Accuracy of Information....................................46
ARTICLE VIII AFFIRMATIVE COVENANTS..........................................46
SECTION 8.1 Preservation of Corporate Existence and Related Matters....46
SECTION 8.2 Maintenance of Property....................................46
SECTION 8.3 Insurance..................................................46
SECTION 8.4 Accounting Methods and Financial Records...................47
SECTION 8.5 Payment and Performance of Obligations.....................47
SECTION 8.6 Compliance With Laws and Approvals.........................47
SECTION 8.7 Environmental Laws.........................................47
SECTION 8.8 Compliance with ERISA......................................47
SECTION 8.9 Compliance With Agreements.................................48
SECTION 8.10 Conduct of Business........................................48
SECTION 8.11 Visits and Inspections.....................................48
SECTION 8.12 Additional Guarantors......................................48
SECTION 8.13 [Intentionally Omitted]....................................48
SECTION 8.14 Year 2000 Compatibility....................................48
SECTION 8.15 Further Assurances.........................................49
ARTICLE IX FINANCIAL COVENANTS..............................................49
ARTICLE X NEGATIVE COVENANTS................................................49
SECTION 10.1 Limitations on Debt and Guaranty Obligations...............49
SECTION 10.2 [Reserved].................................................50
SECTION 10.3 Limitations on Liens.......................................50
ii
<PAGE> 4
SECTION 10.4 Limitations on Loans, Advances, Investments and
Acquisitions...............................................51
SECTION 10.6 Limitations on Sale of Assets..............................53
SECTION 10.7 Limitations on Dividends and Distributions.................53
SECTION 10.8 Limitations on Exchange and Issuance of Capital Stock......54
SECTION 10.9 Transactions with Affiliates...............................54
SECTION 10.10 Certain Accounting Changes.................................54
SECTION 10.11 Amendments; Payments and Prepayments of
Subordinated Debt..........................................54
SECTION 10.12 Restrictive Agreements.....................................55
ARTICLE XI DEFAULT AND REMEDIES.............................................55
SECTION 11.1 Events of Default..........................................55
SECTION 11.2 Remedies...................................................57
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc............58
SECTION 11.4. Judgment Currency..........................................59
ARTICLE XII THE ADMINISTRATIVE AGENT........................................59
SECTION 12.1 Appointment................................................59
SECTION 12.2 Delegation of Duties.......................................59
SECTION 12.3 Exculpatory Provisions.....................................60
SECTION 12.4 Reliance by the Administrative Agent.......................60
SECTION 12.5 Notice of Default..........................................61
SECTION 12.6 Non-Reliance on the Administrative Agent and
Other Lenders..............................................61
SECTION 12.7 Indemnification............................................62
SECTION 12.8 The Administrative Agent in Its Individual Capacity........62
SECTION 12.9 Resignation of the Administrative Agent;
Successor Administrative Agent.............................62
ARTICLE XIII MISCELLANEOUS..................................................63
SECTION 13.1 Notices....................................................63
SECTION 13.2 Expenses; Indemnity........................................64
SECTION 13.3 Set-off....................................................65
SECTION 13.4 Governing Law..............................................65
SECTION 13.5 Consent to Jurisdiction....................................65
SECTION 13.6 Binding Arbitration; Waiver of Jury Trial..................65
SECTION 13.7 Reversal of Payments.......................................67
SECTION 13.8 Injunctive Relief; Punitive Damages........................67
SECTION 13.9 Accounting Matters.........................................67
SECTION 13.10 Successors and Assigns; Participations.....................67
SECTION 13.11 Amendments, Waivers and Consents...........................71
SECTION 13.12 Performance of Duties......................................72
SECTION 13.13 All Powers Coupled with Interest...........................72
SECTION 13.14 Survival of Indemnities....................................72
SECTION 13.15 Titles and Captions........................................72
SECTION 13.16 Severability of Provisions.................................72
iii
<PAGE> 5
SECTION 13.17 Counterparts...............................................72
SECTION 13.18 Term of Agreement..........................................72
SECTION 13.19 Inconsistencies with Other Documents;
Independent Effect of Covenants............................73
iv
<PAGE> 6
EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Account Designation
Exhibit D - Form of Notice of Prepayment
Exhibit E - Form of Notice of Conversion/Continuation
Exhibit F - Form of Officer's Compliance Certificate
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Guaranty Agreement
SCHEDULES
Schedule 1 - Lenders and Commitments
Schedule 6.1(a) - Jurisdictions of Organization and Qualification
Schedule 6.1(b) - Subsidiaries and Capitalization
Schedule 6.1(i) - ERISA Plans
Schedule 6.1(l) - Material Contracts
Schedule 6.1(t) - Debt and Guaranty Obligations
Schedule 6.1(u) - Litigation
Schedule 10.3 - Existing Liens
Schedule 10.4(a) - Existing Loans, Advances and Investments
Schedule 10.4(b) - Investment Policy
v
<PAGE> 7
CREDIT AGREEMENT, dated as of the 7th day of August, 1998, by and
among QUINTILES TRANSNATIONAL CORP., a North Carolina corporation (the
"Borrower"), the Lenders who are or may become a party to this Agreement, and
FIRST UNION NATIONAL BANK, as Administrative Agent for the Lenders.
STATEMENT OF PURPOSE
The Borrower has requested, and the Lenders have agreed, to extend
certain credit facilities to the Borrower on the terms and conditions of this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms when used in this
Agreement shall have the meanings assigned to them below:
"Adjusted EBITR" means, for any period, the sum of the following,
determined on a consolidated basis, without duplication, for the Borrower and
its Subsidiaries in accordance with GAAP: (a) EBITR for such period plus (b)
nonrecurring or restructuring charges incurred during such period in connection
with any acquisition consummated during such period provided that all such
charges included in this adjustment shall not exceed thirty percent (30%) of
EBITR for such period.
"Administrative Agent" means First Union in its capacity as
Administrative Agent hereunder, and any successor thereto appointed pursuant to
Section 12.9.
"Administrative Agent's Correspondent" means First Union National
Bank, London Branch, or any other financial institution designated by the
Administrative Agent, with notice to the Borrower, to act as its correspondent
hereunder with respect to the distribution and payment of Alternative Currency
Loans.
"Administrative Agent's Office" means the office of the
Administrative Agent specified in or determined in accordance with the
provisions of Section 13.1(c).
"Affiliate" means, with respect to any Person, any other Person
(other than a Subsidiary) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person or any of its Subsidiaries. The term "control" means (a) the
power to vote five percent (5%) or more of the securities or other equity
interests of a Person having ordinary voting power, or (b) the possession,
directly or indirectly, of any other power to
<PAGE> 8
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise.
"Aggregate Commitment" means the aggregate amount of the Lenders'
Commitments hereunder, as such amount may be reduced or modified at any time or
from time to time pursuant to the terms hereof. On the Closing Date, the
Aggregate Commitment shall be One Hundred Fifty Million Dollars ($150,000,000).
"Agreement" means this Credit Agreement, as amended, restated or
otherwise modified.
"Alternative Currency" means Canadian Dollars, French Francs,
Deutsche Marks, Pounds Sterling, Swiss Francs or Japanese Yen, and, with the
prior written consent of the Administrative Agent and the Lenders, any other
lawful currency (other than Dollars) which is freely transferable and
convertible into Dollars in the United States currency market and freely
available to all of the Lenders in the London interbank deposit market.
"Alternative Currency Amount" means with respect to each Loan made or
continued (or to be made or continued) in an Alternative Currency, the amount of
such Alternative Currency which is equivalent to the principal amount in Dollars
of such Loan at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it at approximately 11:00 a.m.
(Charlotte time) two (2) Business Days before such Loan is made or continued (or
to be made or continued). When used with respect to any other sum expressed in
Dollars, "Alternative Currency Amount" shall mean the amount of such Alternative
Currency which is equivalent to the amount so expressed in Dollars at the most
favorable spot exchange rate determined by the Administrative Agent to be
available to it at the relevant time.
"Alternative Currency Commitment" means the lesser of (a) One Hundred
Fifty Million Dollars ($150,000,000) and (b) the Aggregate Commitment, in each
case, as such amount may be reduced or modified at any time or from time to time
pursuant to the terms hereof.
"Alternative Currency Loan" means any Loan denominated in an
Alternative Currency.
"Applicable Law" means all applicable provisions of constitutions,
laws, statutes, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of courts or Governmental Authorities and
all orders and decrees of all courts and arbitrators.
"Applicable Margin" shall have the meaning assigned thereto in
Section 4.1(c).
"Application" means an application, in the form specified by the
Issuing Lender from time to time, requesting the Issuing Lender to issue a
Letter of Credit.
"Assignment and Acceptance" shall have the meaning assigned thereto
in Section 13.10.
2
<PAGE> 9
"Available Commitment" means, as to any Lender at any time, an amount
equal to (a) such Lender's Commitment less (b) such Lender's Extensions of
Credit.
"Base Rate" means, at any time, the higher of (a) the Prime Rate and
(b) the sum of (i) the Federal Funds Rate plus (ii) 1/2 of 1%; each change in
the Base Rate shall take effect simultaneously with the corresponding change or
changes in the Prime Rate or the Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate based upon
the Base Rate as provided in Section 4.1(a).
"Borrower" shall have the meaning assigned thereto in the preamble
hereof.
"Business Day" means (a) for all purposes other than as set forth in
clause (b) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Charlotte, North Carolina and New York, New York, are open for
the conduct of their domestic or international commercial banking business, as
applicable, and (b) with respect to all notices and determinations in connection
with, and payments of principal and interest on, any LIBOR Rate Loan or LIBOR
Market Rate Loan any day (i) that is a Business Day described in clause (a) and
that is also a day for trading by and between banks in deposits for the
applicable Permitted Currency in the London interbank market and (ii) on which
banks are open for the conduct of their domestic and international banking
business in the place where the Administrative Agent or the Administrative
Agent's Correspondent shall make available Loans in such Permitted Currency.
"Capital Lease" means, with respect to the Borrower and its
Subsidiaries, any lease of any property that should, in accordance with GAAP, be
classified and accounted for as a capital lease on a Consolidated balance sheet
of the Borrower and its Subsidiaries.
"Change in Control" shall have the meaning assigned thereto in
Section 11.1(j).
"Closing Date" means the date of this Agreement or such later
Business Day upon which each condition described in Section 5.1 and Section 5.2
shall be satisfied or waived in all respects in a manner acceptable to the
Administrative Agent, in its sole discretion.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended, supplemented or otherwise modified.
"Commitment" means, as to any Lender, the obligation of such Lender
to make Loans to and issue or participate in Letters of Credit issued for the
account of the Borrower hereunder in an aggregate principal or face amount at
any time outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule 1 hereto, as the same may be reduced or modified at any time or
from time to time pursuant to the terms hereof.
3
<PAGE> 10
"Commitment Percentage" means, as to any Lender at any time, the
ratio of (a) the amount of the Commitment of such Lender to (b) the Aggregate
Commitment of all of the Lenders.
"Consolidated" means, when used with reference to financial
statements or financial statement items of the Borrower and its Subsidiaries,
such statements or items on a consolidated basis in accordance with applicable
principles of consolidation under GAAP.
"Credit Facility" means the collective reference to the Revolving
Credit Facility and the L/C Facility.
"Debt" means, with respect to the Borrower and its Subsidiaries at
any date, the sum of the following determined on a consolidated basis, without
duplication, in accordance with GAAP: (a) all liabilities, obligations and
indebtedness for borrowed money, including, but not limited to, obligations
evidenced by bonds, debentures, notes or other similar instruments of the
Borrower or any Subsidiary thereof, (b) all obligations to pay the deferred
purchase price of property or services of the Borrower or any Subsidiary
thereof, including, but not limited to, all obligations under non-competition
agreements, except (i) trade payables arising in the ordinary course of business
not more than ninety (90) days past due and (ii) so long as there is sufficient
cash, cash equivalents and/or marketable securities then reflected on the
balance sheet of the Borrower to cover the full payment thereof, the Thirteen
Million Pounds Sterling ((pound) 13,000,000) in long term obligations of
Quintiles Scotland Limited, a Wholly-Owned Subsidiary of the Borrower, entered
into in connection with the March, 1995 purchase of the assets of a drug
development facility in Edinburgh, Scotland from Syntex Pharmaceuticals Limited,
as reflected in the notes to the balance sheet of the Borrower dated December
31, 1997, (c) all obligations of the Borrower or any Subsidiary thereof as
lessee under capital leases, (d) all asset securitizations of the Borrower or
any Subsidiary thereof involving trade receivables which are recourse to either
the Borrower or any of its Subsidiaries or which are otherwise classified as
debt thereof in accordance with GAAP, (e) all debt of any other Person secured
by a lien on any asset of the Borrower or any Subsidiary thereof, (f) all
guaranty obligations of the Borrower or any Subsidiary thereof in respect of any
liabilities, obligations or indebtedness for borrowed money of the types
described in (a) through (e) and (g) through (i) hereof, (g) all obligations,
contingent or otherwise, of the Borrower or any Subsidiary thereof relative to
the face amount of letters of credit, whether or not drawn and banker's
acceptances issued for the account of the Borrower or any Subsidiary thereof,
(h) all obligations to redeem, repurchase, exchange, defease or otherwise make
payments in respect of capital stock or other securities of the Borrower or any
Subsidiary thereof and (i) all termination payments which are due and payable by
the Borrower or any Subsidiary thereof pursuant to any Hedging Agreement or any
foreign currency exchange agreement.
"Debt to Capitalization Ratio" shall have the meaning assigned
thereto in Section 4.1(c).
"Default" means any of the events specified in Section 11.1 which
with the passage of time or the giving of notice would constitute an Event of
Default.
4
<PAGE> 11
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"Dollar Amount" means (a) with respect to each Loan made or continued
(or to be made or continued) in Dollars, the principal amount thereof and (b)
with respect to each Loan made or continued (or to be made or continued) in an
Alternative Currency, the amount of Dollars which is equivalent to the principal
amount of such Loan at the most favorable spot exchange rate determined by the
Administrative Agent at approximately 11:00 a.m. (Charlotte time) two (2)
Business Days before such Loan is made or continued (or to be made or
continued). When used with respect to any other sum expressed in an Alternative
Currency, "Dollar Amount" shall mean the amount of Dollars which is equivalent
to the amount so expressed in such Alternative Currency at the most favorable
spot exchange rate determined by the Administrative Agent to be available to it
at the relevant time.
"EBIT" means, for any period, the sum of the following determined on
a consolidated basis, without duplication, for the Borrower and its Subsidiaries
in accordance with GAAP: (a) net income for such period plus (b) the sum of the
following to the extent deducted in determining net income: (i) income and
franchise taxes, (ii) Interest Expense and (iii) extraordinary losses, less (c)
interest income and any extraordinary gains.
"EBITR" means, for any period, the sum of the following determined on
a consolidated basis, without duplication, for the Borrower and its Subsidiaries
in accordance with GAAP: (a) net income for such period plus (b) the sum of the
following to the extent deducted in determining net income: (i) income and
franchise taxes, (ii) Interest Expense, (iii) extraordinary losses, and (iv)
Rental Expense less (c) interest income and any extraordinary gains.
"Eligible Assignee" means, with respect to any assignment of the
rights, interest and obligations of a Lender hereunder, a Person that is at the
time of such assignment (a) a commercial bank organized under the laws of the
United States or any state thereof, having combined capital and surplus in
excess of $500,000,000, (b) a commercial bank organized under the laws of any
other country that is a member of the Organization of Economic Cooperation and
Development, or a political subdivision of any such country, having combined
capital and surplus in excess of $500,000,000, (c) a finance company, insurance
company or other financial institution which in the ordinary course of business
extends credit of the type extended hereunder and that has total assets in
excess of $1,000,000,000, (d) already a Lender hereunder (whether as an original
party to this Agreement or as the assignee of another Lender), (e) the successor
(whether by transfer of assets, merger or otherwise) to all or substantially all
of the commercial lending business of the assigning Lender, or (f) any other
Person that has been approved in writing as an Eligible Assignee by the Borrower
and the Administrative Agent.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of the
Borrower or any ERISA Affiliate or (b) has at any time within the preceding six
years been maintained for the employees of the Borrower or any current or former
ERISA Affiliate.
5
<PAGE> 12
"Environmental Laws" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974,
and the rules and regulations thereunder, each as amended, supplemented or
otherwise modified.
"ERISA Affiliate" means any Person who together with the Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"ESOP" means that certain Employee Stock Ownership Plan amended and
restated effective September 1, 1997, and as in effect on the Closing Date.
"Eurodollar Reserve Percentage" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of eurocurrency liabilities or any similar category of liabilities for a
member bank of the Federal Reserve System in New York City.
"Event of Default" means any of the events specified in Section 11.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Extensions of Credit" means, as to any Lender at any time, an amount
equal to the sum of (a) the aggregate principal amount of all Loans made by such
Lender then outstanding and (b) such Lender's Commitment Percentage of the L/C
Obligations then outstanding.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"Federal Funds Rate" means, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not available, then "Federal Funds Rate" shall mean a daily rate
which is determined, in the opinion of the Administrative Agent, to be the rate
at which federal funds are being offered for sale in the national federal funds
market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be
the same as the rate for the most immediate preceding Business Day.
6
<PAGE> 13
"First Union" means First Union National Bank, a national banking
association, and its successors.
"Fiscal Year" means the fiscal year of the Borrower and its
Subsidiaries ending on December 31.
"GAAP" means generally accepted accounting principles, as recognized
by the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Borrower and its Subsidiaries throughout the period indicated.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all Governmental Authorities.
"Governmental Authority" means any nation, province, state or
political subdivision thereof, and any government or any Person exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guarantors" means the collective reference to the Material
Subsidiaries of the Borrower (a) executing the Guaranty Agreement on the Closing
Date or (b) executing a joinder in form and substance satisfactory to the
Administrative Agent to the Guaranty Agreement pursuant to Section 8.12 hereof
subsequent to the Closing Date.
"Guaranty Agreement" means the Unconditional Guaranty Agreement of
even date executed by the Guarantors in favor of the Administrative Agent for
the ratable benefit of itself and the Lenders substantially in the form of
Exhibit H hereto, as amended, restated or otherwise modified.
"Guaranty Obligation" means, with respect to the Borrower and its
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Guaranty
Obligation shall not include endorsements for collection or deposit in the
ordinary course of business.
"Hazardous Materials" means any substances or materials (a) which are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or
7
<PAGE> 14
mixtures or toxic substances under any Applicable Law, (b) which are toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise harmful to human health or the environment and are or
become regulated by any Governmental Authority, (c) the presence of which
require investigation or remediation under any Applicable Law, (d) the discharge
or emission or release of which requires a permit or license under any
Applicable Law or other Governmental Approval, (e) which are deemed by any
Governmental Authority to constitute a nuisance, a trespass or pose a health or
safety hazard to persons or neighboring properties, (f) which consist of
underground or aboveground storage tanks, whether empty, filled or partially
filled with any substance, or (g) which contain, without limitation, asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum
hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel,
natural gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to an interest
rate swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrower, and any confirming letter
executed pursuant to such hedging agreement, all as amended, restated or
otherwise modified.
"Interest Expense" means, for any period, total interest expense
(including, without limitation, interest expense attributable to capital leases
or asset securitizations) determined on a consolidated basis, without
duplication, for the Borrower and its Subsidiaries in accordance with GAAP.
"Interest Period" shall have the meaning assigned thereto in Section
4.1(b).
"Issuing Lender" means First Union, in its capacity as issuer of any
Letter of Credit, or any successor thereto.
"Investment Policy" shall have the meaning assigned thereto in
Section 10.4.
"L/C Commitment" means the lesser of (a) One Hundred Fifty Million
Dollars ($150,000,000) and (b) the Aggregate Commitment.
"L/C Facility" means the letter of credit facility established
pursuant to Article III hereof.
"L/C Obligations" means at any time, an amount equal to the sum of
(a) the aggregate undrawn and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants" means the collective reference to all the Lenders
other than the Issuing Lender.
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"Lender" means each Person executing this Agreement as a Lender
(including, without limitation, the Issuing Lender unless the context requires
otherwise) set forth on the signature pages hereto and each Person that
hereafter becomes a party to this Agreement as a Lender pursuant to Section
13.10.
"Lending Office" means, with respect to any Lender, the office of
such Lender maintaining such Lender's Commitment Percentage of the Extensions of
Credit.
"Letters of Credit" shall have the meaning assigned thereto in
Section 3.1.
"LIBOR" means the rate of interest per annum determined on the basis
of the rate for deposits in Dollars in minimum amounts of at least $5,000,000
(or the Alternative Currency Amount thereof with respect to a borrowing to be
made in an Alternative Currency) for a period equal to the applicable Interest
Period which appears on the Dow Jones Markets screen 3750 at approximately 11:00
a.m. (London time) two (2) Business Days prior to the first day of the
applicable Interest Period (rounded upward, if necessary, to the nearest
one-sixteenth of one percent (1/16%)). If, for any reason, such rate does not
appear on Dow Jones Markets screen 3750, then "LIBOR" shall be determined by the
Administrative Agent to be the arithmetic average (rounded upward, if necessary,
to the nearest one-sixteenth of one percent (1/16%)) of the rate per annum at
which deposits in the Permitted Currency in which the applicable Loan is
denominated would be offered by first class banks in the London interbank market
to the Administrative Agent (or the Administrative Agent's Correspondent)
approximately 11:00 a.m. (London time) two (2) Business Days prior to the first
day of the applicable Interest Period for a period equal to such Interest Period
and in an amount substantially equal to the amount of the applicable Loan. Each
calculation by the Administrative Agent of the LIBOR Rate shall be conclusive
and binding for all purposes, absent manifest error.
"LIBOR Market Rate" means a fluctuating rate per annum (rounded
upward, if necessary, to the nearest one-hundredth of one percent (1/100%))
determined by the Administrative Agent pursuant to the following formula:
LIBOR Market Index Rate
LIBOR Market Rate = -------------------------------------
1.00 - Eurodollar Reserve Requirement
For the purposes of this definition: "LIBOR Market Index Rate" means, for any
day, the percentage rate of interest per annum (rounded upward, if necessary, to
the nearest one-sixteenth of one percent (1/16%)) for deposits in Dollars for a
period of one (1) month as reported on Dow Jones Markets screen 3750 as of 11:00
a.m. (London time) on the date of which such rate would be in effect, or if such
day is not a Business Day, then the immediately preceding Business Day (or if
not so reported, then as determined by the Administrative Agent from another
recognized source or interbank quotation). Each calculation by the
Administrative Agent of the LIBOR Market Rate shall be conclusive and binding
for all purposes, absent manifest error.
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"LIBOR Market Rate Loan" means any Loan bearing interest at a rate
based upon the LIBOR Market Rate as provided in Section 4.1(a).
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary,
to the next higher 1/100th of 1%) determined by the Administrative Agent
pursuant to the following formula:
LIBOR
LIBOR Rate = ----------------------------------
1.00-Eurodollar Reserve Percentage
"LIBOR Rate Loan" means any Loan bearing interest at a rate based
upon the LIBOR Rate as provided in Section 4.1(a).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Loans" means any revolving loan denominated in Dollars or any
Alternative Currency, and all such revolving loans collectively as the context
requires.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Applications, any Hedging Agreement with any Lender (which such Hedging
Agreement is permitted or required hereunder) and the Guaranty Agreement, all as
may be amended, restated or otherwise modified.
"Material Adverse Effect" means, with respect to the Borrower or any
of its Subsidiaries, a material adverse effect on the properties, business,
operations or condition (financial or otherwise) of any such Person or the
ability of any such Person to perform its obligations under the Loan Documents
or Material Contracts, in each case to which it is a party.
"Material Contract" means (a) any contract or other agreement,
written or oral, of the Borrower or any of its Subsidiaries involving monetary
liability of or to any such Person in an amount in excess of $10,000,000 per
annum, or (b) any other contract or agreement, written or oral, of the Borrower
or any of its Subsidiaries from which the Borrower and its Subsidiaries derive
five percent (5%) or more of the total annual revenues of the Borrower and its
Subsidiaries, taken as a whole.
"Material Customer" means any customer of the Borrower or any of its
Subsidiaries from which the Borrower and its Subsidiaries, taken as a whole,
derive ten percent (10%) or more of their total annual revenues.
"Related Material Services Contracts" means the collective reference
to any master services contract (and any subcontracts or work orders related
thereto) or any contracts or other agreements
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or series of related contracts or agreements, written or oral, between the
Borrower or any of its Subsidiaries and any one of the Borrower's Material
Customers.
"Material Subsidiaries" means, at any time, the collective reference
to the domestic Subsidiaries of the Borrower that comprise at least seventy-five
percent (75%) of the aggregate EBIT (which, for purposes of this definition,
shall include management fees) attributable to all domestic Subsidiaries of the
Borrower.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is
making, or is accruing an obligation to make, contributions within the preceding
six (6) years.
"Notes" means the collective reference to the revolving credit notes
made by the Borrower payable to the order of each Lender, substantially in the
form of Exhibit A hereto, evidencing the Revolving Credit Facility, and any
amendments and modifications thereto, any substitutes therefor, and any
replacements, restatements, renewals or extension thereof, in whole or in part;
"Note" means any of such Notes.
"Notice of Account Designation" shall have the meaning assigned
thereto in Section 2.2(b).
"Notice of Borrowing" shall have the meaning assigned thereto in
Section 2.2(a).
"Notice of Conversion/Continuation" shall have the meaning assigned
thereto in Section 4.2.
"Notice of Prepayment" shall have the meaning assigned thereto in
Section 2.3(c).
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loans, (b)
the L/C Obligations, (c) all payment and other obligations owing by the Borrower
to any Lender or the Administrative Agent under any Hedging Agreement with any
Lender (which such Hedging Agreement is permitted or required hereunder), and
(d) all other fees and commissions (including attorneys' fees), charges,
indebtedness, loans, liabilities, financial accommodations, obligations,
covenants and duties owing by the Borrower to the Lenders or the Administrative
Agent, of every kind, nature and description, direct or indirect, absolute or
contingent, due or to become due, contractual or tortious, liquidated or
unliquidated, and whether or not evidenced by any note, in each case under or in
respect of this Agreement, any Note, any Letter of Credit or any of the other
Loan Documents.
"Officer's Compliance Certificate" shall have the meaning assigned
thereto in Section 7.2.
"Other Taxes" shall have the meaning assigned thereto in Section
4.13(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency.
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<PAGE> 18
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for employees of the
Borrower or any ERISA Affiliates or (b) has at any time within the preceding six
years been maintained for the employees of the Borrower or any of their current
or former ERISA Affiliates.
"Permitted Currency" means Dollars or any Alternative Currency, or
each such currency, as the context requires.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by First Union as its prime rate. Each
change in the Prime Rate shall be effective as of the opening of business on the
day such change in the Prime Rate occurs. The parties hereto acknowledge that
the rate announced publicly by First Union as its Prime Rate is an index or base
rate and shall not necessarily be its lowest or best rate charged to its
customers or other banks.
"Register" shall have the meaning assigned thereto in Section
13.10(d).
"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit.
"Rental Expense" means, for any period all rental expense of the
Borrower and its Subsidiaries during such period under all leases of real
property.
"Required Lenders" means, at any date, any combination of holders of
at least fifty-one percent (51%) of the aggregate unpaid principal amount of the
Notes, or if no amounts are outstanding under the Notes, any combination of
Lenders whose Commitment Percentages aggregate at least fifty-one percent (51%).
"Responsible Officer" means any executive officer or financial
officer of the Borrower, and any other officer or similar official of the
Borrower responsible for the administration of the obligations of the Borrower
in respect of this Agreement, in each case, reasonably acceptable to the
Administrative Agent.
"Revolving Credit Facility" means the revolving credit facility
established pursuant to Article II hereof.
"Revolving Credit Termination Date" means the earliest of the dates
referred to in Section 2.6.
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"Solvent" means, with respect to a Person on a particular date, that
such Person (a) has capital sufficient to carry on its business and transactions
and all business and transactions in which it is about to engage and is able to
pay its debts as they mature, (b) owns property having a fair value greater than
the amount required to pay its probable liabilities (including contingencies),
and (c) does not believe that it will incur debts or liabilities beyond its
ability to pay such debts or liabilities as they mature.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc.
"Subordinated Debt" means the collective reference to Debt on
Schedule 6.1(t) hereof designated as Subordinated Debt and any other Debt of the
Borrower or any Subsidiary subordinated in right and time of payment to the
Obligations on terms satisfactory to the Required Lenders.
"Subsidiary" means as to any Person, any corporation, partnership,
limited liability company or other entity of which more than fifty percent (50%)
of the outstanding capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other managers of
such corporation, partnership, limited liability company or other entity is at
the time, directly or indirectly, owned by or the management is otherwise
controlled by such Person (irrespective of whether, at the time, capital stock
or other ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have
voting power by reason of the happening of any contingency). Unless otherwise
qualified references to "Subsidiary" or "Subsidiaries" herein shall refer to
those of the Borrower.
"Tangible Net Worth" shall mean the amount of assets shown on the
Consolidated balance sheet of the Borrower and its Subsidiaries (but excluding
from such assets any items which would be treated as intangibles under GAAP,
including, but not limited to capitalized interest, debt discount and expense,
goodwill, patents, trademarks, copyrights, licenses, and franchises), less all
liabilities of the Borrower and its Subsidiaries, all computed in accordance
with GAAP applied on a consistent basis.
"Taxes" shall have the meaning assigned thereto in Section 4.13(a).
"Termination Event" means: (a) a "Reportable Event" described in
Section 4043 of ERISA, or (b) the withdrawal of the Borrower or any ERISA
Affiliate from a Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (c) the termination of a
Pension Plan, the filing of a notice of intent to terminate a Pension Plan or
the treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate, or the appointment of
a trustee with respect to, any Pension Plan by the PBGC, or (e) any other event
or condition which would constitute grounds under Section 4042(a) of ERISA for
the termination of, or the appointment of a trustee to administer, any Pension
Plan, or (f) the partial or complete withdrawal of the Borrower or any ERISA
Affiliate from
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a Multiemployer Plan, or (g) the imposition of a Lien pursuant to Section 412 of
the Code or Section 302 of ERISA, or (h) any event or condition which results in
the reorganization or insolvency of a Multiemployer Plan under Sections 4241 or
4245 of ERISA, or (i) any event or condition which results in the termination of
a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of
proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.
"Total Capitalization" means, at any date of determination, the sum
of (a) Total Debt plus (b) stockholders' equity as calculated in accordance with
GAAP.
"Total Debt" means all Debt of the Borrower and its Subsidiaries at
any date.
"Uniform Customs" the Uniform Customs and Practice for Documentary
Credits (1994 Revision), International Chamber of Commerce Publication No. 500,
as amended from time to time.
"United States" means the United States of America.
"Wholly-Owned" means, with respect to a Subsidiary, that all of the
shares of capital stock or other ownership interests of such Subsidiary are,
directly or indirectly, owned or controlled by the Borrower and/or one or more
of its Wholly-Owned Subsidiaries.
SECTION 1.2 General. Unless otherwise specified, a reference in this
Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the masculine, the
feminine and the neuter. Any reference herein to "Charlotte time" shall refer to
the applicable time of day in Charlotte, North Carolina.
SECTION 1.3 Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings when
used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
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ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.1 Revolving Credit Loans. Subject to the terms and
conditions of this Agreement, each Lender severally agrees to make Loans in a
Permitted Currency to the Borrower from time to time from the Closing Date
through the Revolving Credit Termination Date as requested by the Borrower in
accordance with the terms of Section 2.2; provided, that (a) the Dollar Amount
of the aggregate principal amount of all outstanding Loans (after giving effect
to any amount requested) shall not exceed the Aggregate Commitment less the
Dollar Amount of all outstanding L/C Obligations, (b) the Dollar Amount of the
aggregate principal amount of all Loans made in an Alternative Currency shall
not exceed the Alternative Currency Commitment and (c) the Dollar Amount of the
aggregate principal amount of outstanding Loans from any Lender to the Borrower
shall not at any time exceed such Lender's Commitment less such Lender's
Available Commitment. Each Loan by a Lender shall be in a principal amount equal
to such Lender's Commitment Percentage of the aggregate principal amount of
Loans requested on such occasion. Loans to be made in an Alternative Currency
shall be funded in an amount equal to the Alternative Currency Amount of such
Loan. Subject to the terms and conditions hereof, the Borrower may borrow, repay
and reborrow Loans hereunder until the Revolving Credit Termination Date.
SECTION 2.2 Procedure for Advances of Revolving Credit Loans.
(a) Requests for Borrowing. The Borrower shall give the
Administrative Agent irrevocable prior written notice in the form attached
hereto as Exhibit B (a "Notice of Borrowing") not later than 11:00 a.m.
(Charlotte time) (i) on the same Business Day as each Base Rate Loan, LIBOR
Market Rate or LIBOR Rate Loan denominated in Dollars, (ii) two (2) Business
Days before each Base Rate Loans or LIBOR Market Rate Loan denominated in an
Alternative Currency and (iii) at least four (4) Business Days before each LIBOR
Rate Loan denominated in an Alternative Currency, of its intention to borrow,
specifying (A) the date of such borrowing, which shall be a Business Day, (B)
whether the Loan shall be denominated in Dollars or an Alternative Currency, (C)
whether the Loans are to be LIBOR Market Rate Loans, LIBOR Rate Loans or Base
Rate Loans; provided that the Borrower shall only be permitted to request Base
Rate Loans and LIBOR Market Rate Loans to be denominated in an Alternative
Currency if such Alternative Currency is available to the Lenders at such rate,
(D) the amount of such borrowing, which shall be in an amount equal to the
amount of the Aggregate Commitment or Alternative Currency Commitment, as
applicable, then available to the Borrower, or if less, (x) with respect to Base
Rate Loans or LIBOR Market Rate Loans in an aggregate principal amount of
$100,000 or a whole multiple of $50,000 in excess thereof and (y) with respect
to LIBOR Rate Loans denominated in Dollars, in an aggregate principal amount of
$3,000,000 or a whole multiple of $1,000,000 in excess thereof, and (E) in the
case of a LIBOR Rate Loan, the duration of the Interest Period applicable
thereto. Notices received after 11:00 a.m. (Charlotte time) shall be deemed
received on the next Business Day. The Administrative Agent shall promptly
notify the Lenders of each Notice of Borrowing.
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(b) Disbursement of Revolving Credit Loans Denominated in Dollars.
Not later than 2:00 p.m. (Charlotte time) on the proposed borrowing date for any
Loan denominated in Dollars, each Lender will make available to the
Administrative Agent, for the account of the Borrower, at the office of the
Administrative Agent in Dollars in funds immediately available to the
Administrative Agent, such Lender's Commitment Percentage of the requested Loan
to be made on such borrowing date. The Borrower hereby irrevocably authorizes
the Administrative Agent to disburse the proceeds of each borrowing requested
pursuant to this Section 2.2 in immediately available funds by crediting or
wiring such proceeds to the deposit account of the Borrower identified in the
most recent notice substantially in the form of Exhibit C hereto (a "Notice of
Account Designation") delivered by the Borrower to the Administrative Agent or
may be otherwise agreed upon by the Borrower and the Administrative Agent from
time to time. Subject to Section 4.7, the Administrative Agent shall not be
obligated to disburse the portion of the proceeds of any Loan requested pursuant
to this Section 2.2 to the extent that any Lender has not made available to the
Administrative Agent its Commitment Percentage of such Loan.
(c) Disbursement of Alternative Currency Loans. Not later than 11:00
a.m. (the time of the Administrative Agent's Correspondent) on or before the
proposed borrowing date for any Alternative Currency Loan, each Lender will make
available to the Administrative Agent for the account of the Borrower at the
office of the Administrative Agent's Correspondent, in the requested Alternative
Currency in funds immediately available to the Administrative Agent, such
Lender's Commitment Percentage of the Alternative Currency Amount of such
requested borrowing. The Borrower hereby irrevocably authorizes the
Administrative Agent to disburse the proceeds of each borrowing requested
pursuant to this Section 2.2 in immediately available funds by crediting or
wiring such proceeds to the deposit account of the Borrower identified in the
most recent Notice of Account Designation delivered by the Borrower to the
Administrative Agent or may be otherwise agreed upon by the Borrower and the
Administrative Agent from time to time. Subject to Section 4.7, the
Administrative Agent shall not be obligated to disburse the portion of the
proceeds of any Loan requested pursuant to this Section 2.2 to the extent that
any Lender has not made available to the Administrative Agent its Commitment
Percentage of such Loan.
SECTION 2.3 Repayment of Loans.
(a) Repayment on Termination Date. The Borrower shall repay the
outstanding principal amount of all Loans in full on the Revolving Credit
Termination Date.
(b) Mandatory Repayment of Excess Loans.
(i) Aggregate Commitment. If at any time (as determined by
the Administrative Agent under Section 2.3(b)(iv), and for any reason, the
aggregate principal Dollar Amount of all outstanding Loans exceeds one hundred
and five percent (105%) of the Aggregate Commitment less all outstanding L/C
Obligations, the Borrower shall (A) first, if (and to the extent) necessary to
eliminate such excess, immediately repay outstanding Base Rate Loans by the
Dollar Amount of such excess (and/or reduce any pending request for a Base Rate
Loan on such day by the Dollar Amount of such excess), (B) second, if (and to
the extent) necessary to eliminate such
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excess, immediately repay LIBOR Market Rate Loans (and/or reduce any pending
requests for a borrowing) and (C) third, if (and to the extent) necessary to
eliminate such excess, immediately repay LIBOR Rate Loans (and/or reduce any
pending requests for a borrowing or continuation or conversion of such Loans
submitted in respect of such Loans on such day) by the Dollar Amount of any
remaining excess.
(ii) Excess Alternative Currency Loans. If at any time and
for any reason the outstanding principal amount of all outstanding Alternative
Currency Loans exceeds the lesser of (A) the Aggregate Commitment less the sum
of the outstanding principal amount of all Loans denominated in Dollars less the
sum of the outstanding principal Dollar Amount of all L/C Obligations and (B)
the Alternative Currency Commitment, such excess shall be immediately repaid, in
the currency in which such Alternative Currency Loan or Alternative Currency
Loans were initially funded, by the Borrower to the Administrative Agent for the
account of the Lenders.
(iii) Excess L/C Obligations. If at any time and for any
reason the aggregate outstanding principal amount of the L/C Obligations exceeds
the lesser of (1) the Aggregate Commitment less the sum of the Dollar Amount of
the aggregate principal amount of all outstanding Loans and (2) the L/C
Commitment, then the Borrower shall deposit an amount equal to such excess with
the Administrative Agent to be held as cash collateral in accordance with
Section 11.2(b); provided that any such cash collateral shall be released
promptly to the Borrower at any time that the aggregate outstanding principal
amount of the L/C Obligations no longer exceeds the thresholds described in
clauses (1) and (2) of this subsection (iii).
(iv) Compliance and Payments. The Borrower's compliance
with this Section 2.3(b) shall be tested from time to time by the Administrative
Agent at its sole discretion, but in any event on each day an interest payment
is due under Section 4.1(f). Each such repayment pursuant to this Section 2.3(b)
shall be accompanied by any amount required to be paid pursuant to Section 4.11
hereof.
(c) Optional Repayments. The Borrower may at any time and from time
to time repay the Loans, in whole or in part, upon at least four (4) Business
Days' irrevocable notice to the Administrative Agent with respect to LIBOR Rate
Loans denominated in an Alternative Currency, upon at least two (2) Business
Days' irrevocable notice to the Administrative Agent with respect to Base Rate
Loans and LIBOR Market Rate Loans denominated in an Alternative Currency and
same Business Day irrevocable notice with respect to Base Rate Loans, LIBOR
Market Rate Loans and LIBOR Rate Loans denominated in Dollars, in the form
attached hereto as Exhibit D (a "Notice of Prepayment") specifying the date and
amount of repayment and whether the repayment is of Base Rate Loans, LIBOR
Market Rate Loans or LIBOR Rate Loans denominated in an Alternative Currency or
denominated in Dollars, or a combination thereof, and, if of a combination
thereof, the amount allocable to each. Upon receipt of such notice, the
Administrative Agent shall promptly notify each Lender. If any such notice is
given, the amount specified in such notice shall be due and payable on the date
set forth in such notice. Partial repayments shall be in an aggregate amount of
$100,000 or a whole multiple of $50,000 in excess thereof with respect to Base
Rate Loans and LIBOR Market Rate Loans and $3,000,000 or a whole multiple of
$1,000,000 in excess thereof
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with respect to LIBOR Rate Loans. Each such repayment shall be accompanied by
any amount required to be paid pursuant to Section 4.11 hereof.
(d) Limitation on Repayment of LIBOR Rate Loans. The Borrower may not
repay any LIBOR Rate Loan on any day other than on the last day of the Interest
Period applicable thereto unless such repayment is accompanied by any amount
required to be paid pursuant to Section 4.11 hereof.
SECTION 2.4 Revolving Credit Loans. Each Lender's Loans and the
obligation of the Borrower to repay such Loans shall be evidenced by a separate
Note executed by the Borrower payable to the order of such Lender representing
the Borrower's obligation to pay such Lender's Commitment or, if less, the
aggregate unpaid principal amount of all Loans made and to be made by such
Lender to the Borrower hereunder, plus interest and all other fees, charges and
other amounts due thereon. Each Note shall be dated the date hereof and shall
bear interest on the unpaid principal amount thereof at the applicable interest
rate per annum specified in Section 4.1.
SECTION 2.5 Permanent Reduction of the Aggregate Commitment.
(a) Voluntary Reduction. The Borrower shall have the right at any
time and from time to time, upon at least five (5) Business Days prior written
notice to the Administrative Agent, to permanently reduce, without premium or
penalty, (i) the entire Aggregate Commitment at any time or (ii) portions of the
Aggregate Commitment, from time to time, in an aggregate principal amount not
less than $3,000,000 or any whole multiple of $1,000,000 in excess thereof. To
the extent that the Aggregate Commitment is reduced to an amount below the
Alternative Currency Commitment, there shall be a corresponding permanent
reduction of the Alternative Currency Commitment, to the amount of the Aggregate
Commitment as so reduced. The amount of each partial permanent reduction shall
be applied pro rata to reduce the remaining mandatory reduction amounts required
under Section 2.5(b).
(b) Each permanent reduction permitted or required pursuant to this
Section 2.5 shall be accompanied by a payment of principal sufficient to reduce
the aggregate outstanding Extensions of Credit of the Lenders after such
reduction to the Aggregate Commitment as so reduced and if the Aggregate
Commitment as so reduced is less than the aggregate amount of all outstanding
Letters of Credit, the Borrower shall be required to deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit (which
cash collateral the Administrative Agent shall promptly release to the Borrower
of such times as the Aggregate Commitment no longer exceeds the aggregate amount
of all outstanding Letters of Credit). Any reduction of the Aggregate Commitment
to zero shall be accompanied by payment of all outstanding Obligations (and
furnishing of cash collateral satisfactory to the Administrative Agent for all
L/C Obligations) and shall result in the termination of the Commitments and
Credit Facility. Such cash collateral shall be applied, subject to the foregoing
provisions of this Section 2.5(b), in accordance with Section 11.2(b). If the
reduction of
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the Aggregate Commitment requires the repayment of any LIBOR Rate Loan, such
repayment shall be accompanied by any amount required to be paid pursuant to
Section 4.11 hereof.
SECTION 2.6 Termination of Credit Facility. The Credit Facility shall
terminate on the earliest of (a) August 6, 2001, (b) the date of termination by
the Borrower pursuant to Section 2.5(b), and (c) the date of termination by the
Administrative Agent on behalf of the Lenders pursuant to Section 11.2(a).
SECTION 2.7 Use of Proceeds. The Borrower shall use the proceeds of
the Extensions of Credit to fund working capital and for general corporate
purposes including acquisitions and other permitted investments and to refinance
certain existing indebtedness and the payment of certain fees and expenses
incurred in connection with the transactions contemplated by this Agreement.
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C Commitment. Subject to the terms and conditions
hereof, the Issuing Lender agrees to issue standby letters of credit ("Letters
of Credit") for the account of the Borrower on any Business Day from the Closing
Date through but not including the Revolving Credit Termination Date in such
form as may be approved from time to time by the Issuing Lender; provided, that
the Issuing Lender shall have no obligation to issue any Letter of Credit if,
after giving effect to such issuance, (a) the L/C Obligations would exceed the
lesser of (i) the L/C Commitment or (ii) the Aggregate Commitment less the sum
of the Dollar Amount of the aggregate principal amount of all loans or (b) the
Available Commitment of any Lender would be less than zero. Each Letter of
Credit shall (i) be denominated in Dollars in a minimum amount of $50,000, (ii)
be a standby letter of credit issued to support obligations of the Borrower or
any of its Subsidiaries, contingent or otherwise, incurred in the ordinary
course of business or otherwise for a purpose consistent with the permitted use
of proceeds described in Section 2.7, (iii) expire no later than the earlier of
(x) the date which is 365 days after the issuance thereof and (y) the Revolving
Credit Termination Date, and (iv) be subject to the Uniform Customs and, to the
extent not inconsistent therewith, the laws of the State of North Carolina. The
Issuing Lender shall not at any time be obligated to issue any Letter of Credit
hereunder if such issuance would conflict with, or cause the Issuing Lender or
any L/C Participant to exceed any limits imposed by, any Applicable Law.
References herein to "issue" and derivations thereof with respect to Letters of
Credit shall also include extensions or modifications of any existing Letters of
Credit, unless the context otherwise requires.
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SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower
may from time to time request that the Issuing Lender issue a Letter of Credit
by delivering to the Issuing Lender at the Administrative Agent's Office an
Application therefor, completed to the satisfaction of the Issuing Lender, and
such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing Lender
shall process such Application and the certificates, documents and other papers
and information delivered to it in connection therewith in accordance with its
customary procedures and shall, subject to Section 3.1 and Article V hereof,
promptly issue the Letter of Credit requested thereby (but in no event shall the
Issuing Lender be required to issue any Letter of Credit earlier than two (2)
Business Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing
Lender shall furnish to the Borrower a copy of such Letter of Credit and furnish
to each Lender a copy of such Letter of Credit and the amount of each Lender's
L/C Participation therein, all promptly following the issuance of such Letter of
Credit.
SECTION 3.3 Commissions and Other Charges.
(a) The Borrower shall pay to the Administrative Agent, for the
account of the Issuing Lender and the L/C Participants, a letter of credit
commission with respect to each Letter of Credit in an amount equal to the
Applicable Margin with respect to LIBOR Rate Loans per annum on the face amount
of such Letter of Credit. Such commission shall be payable quarterly in arrears
on the last Business Day of each calendar quarter and on the Revolving Credit
Termination Date.
(b) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Lender and the L/C Participants all
commissions received by the Administrative Agent in accordance with their
respective Commitment Percentages.
SECTION 3.4 [Intentionally Omitted].
SECTION 3.5 Reimbursement Obligation of the Borrower. The Borrower
agrees to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrower of the date and amount of a draft paid under any Letter of
Credit for the amount of (a) such draft so paid and (b) any taxes, fees, charges
or other costs or expenses incurred by the Issuing Lender in connection with
such payment. Each such payment shall be made to the Issuing Lender at its
address for notices specified herein in Dollars and in immediately available
funds. Interest shall be payable on any and all amounts remaining unpaid by the
Borrower under this Article III from the date such amounts become payable
(whether at stated maturity, by acceleration or otherwise) until payment in full
at the rate which would be payable on any outstanding Base Rate Loans which were
then overdue. If the Borrower fails to timely reimburse the Issuing Lender on
the date the Borrower receives the notice referred to in this Section 3.5, the
Borrower shall be deemed to have timely given a Notice of Borrowing hereunder to
the Administrative Agent requesting the Lenders to make a Base Rate Loan on such
date in an amount equal to the amount of such drawing and, regardless of whether
or not the conditions precedent specified in Article V have been satisfied, the
Lenders shall
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<PAGE> 27
make Base Rate Loans in such amount, the proceeds of which shall be applied to
reimburse the Issuing Lender for the amount of the related drawing and costs and
expenses.
SECTION 3.6 Obligations Absolute. The Borrower's obligations under
this Article III (including without limitation the Reimbursement Obligation)
shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Lender or any beneficiary of a
Letter of Credit. The Borrower also agrees with the Issuing Lender that the
Issuing Lender shall not be responsible for, and the Borrower's Reimbursement
Obligation under Section 3.5 shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid, fraudulent or forged, or any
dispute between or among the Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
any claims whatsoever of a Borrower against any beneficiary of such Letter of
Credit or any such transferee. The Issuing Lender shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions caused by the Issuing Lender's gross
negligence or willful misconduct. The Borrower agrees that any action taken or
omitted by the Issuing Lender under or in connection with any Letter of Credit
or the related drafts or documents, if done in the absence of gross negligence
or willful misconduct and in accordance with the standards of care specified in
the Uniform Customs and, to the extent not inconsistent therewith, the UCC shall
be binding on the Borrower and shall not result in any liability of the Issuing
Lender to the Borrower. The responsibility of the Issuing Lender to the Borrower
in connection with any draft presented for payment under any Letter of Credit
shall, in addition to any payment obligation expressly provided for in such
Letter of Credit, be limited to determining that the documents (including each
draft) delivered under such Letter of Credit in connection with such presentment
are in conformity with such Letter of Credit.
SECTION 3.7 Effect of Application. To the extent that any provision
of any Application related to any Letter of Credit is inconsistent with the
provisions of this Article III, the provisions of this Article III shall apply.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1 Interest.
(a) Interest Rate Options. Subject to the provisions of this Section
4.1, at the election of the Borrower, (i) the Loans or any portion thereof shall
bear interest at (A) the Base Rate plus the Applicable Margin as set forth in
Section 4.1(c) or (B) the LIBOR Rate plus the Applicable Margin as set forth in
Section 4.1(c) or (C) the LIBOR Market Rate plus the Applicable Margin as set
forth in Section 4.1(c); provided that the LIBOR Rate shall not be available
until three (3) Business Days after the Closing Date and provided further that
the Borrower shall only be permitted to request Base Rate Loans and LIBOR Market
Rate Loans to be denominated in an Alternative Currency if
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<PAGE> 28
such Alternative Currency is available to the Lenders at such rate. The Borrower
shall select the rate of interest and Interest Period, if any, applicable to any
Loan at the time a Notice of Borrowing is given pursuant to Section 2.2 or at
the time a Notice of Conversion/Continuation is given pursuant to Section 4.2.
Each Loan or portion thereof bearing interest based on the Base Rate shall be a
"Base Rate Loan", each Loan or portion thereof bearing interest based on the
LIBOR Rate shall be a "LIBOR Rate Loan" and each Loan or portion thereof bearing
interest based on the LIBOR Market Rate shall be a "LIBOR Market Rate Loan." Any
Loan or any portion thereof as to which the Borrower has not duly specified an
interest rate as provided herein shall be deemed a Base Rate Loan denominated in
Dollars.
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 4.1(a), shall elect
an interest period (each, an "Interest Period") to be applicable to such Loan,
which Interest Period shall be a period of one (1), two (2), three (3), or six
(6) months with respect to each LIBOR Rate Loan; provided that:
(i) the Interest Period shall commence on the date of
advance of or conversion to any LIBOR Rate Loan and, in the case of immediately
successive Interest Periods, each successive Interest Period shall commence on
the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a
day that is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, that if any Interest Period with respect to a
LIBOR Rate Loan would otherwise expire on a day that is not a Business Day but
is a day of the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(iii) any Interest Period with respect to a LIBOR Rate
Loan that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of the relevant
calendar month at the end of such Interest Period;
(iv) no Interest Period shall extend beyond the Revolving
Credit Termination Date; and
(v) there shall be no more than eight (8) Interest Periods
outstanding at any time.
(c) Applicable Margin. The Applicable Margin provided for in Section
4.1(a) with respect to the Loans (the "Applicable Margin") shall (i) on the
Closing Date equal the percentages set forth in the certificate delivered
pursuant to Section 5.2(d)(ii) and (ii) for each fiscal quarter thereafter be
determined by reference to the Debt to Capitalization Ratio or if the Borrower
has made a Rating Election (as defined below) pursuant to Section 4.1(d), the
senior unsecured Debt rating of the Borrower as determined by Standard & Poor's
(the "Senior Unsecured Debt Rating")
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as of the end of the fiscal quarter immediately preceding the delivery of the
applicable Officer's Compliance Certificate as follows:
<TABLE>
<CAPTION>
Debt to Capitalization Senior Unsecured Debt Applicable LIBOR Applicable Base Rate
Ratio Rating Margin Margin
- ---------------------- --------------------- ---------------- --------------------
<S> <C> <C> <C>
> 0.40 to 1.00 < BBB- 0.425% 0.000%
- -
> 0.35 to 1.00 > BBB- 0.300% 0.000%
- - -
> 0.30 to 1.00 > BBB 0.250% 0.000%
- - -
> 0.25 to 1.00 > BBB+ 0.200% 0.000%
- - -
<0.25 to 1.00 > A- 0.170% 0.000%
-
</TABLE>
"Debt to Capitalization Ratio" means, at any date of determination,
the ratio of Total Debt to Total Capitalization of the Borrower and its
Subsidiaries. Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent on the tenth (10th) Business Day after receipt by the
Administrative Agent of quarterly financial statements for the Borrower and its
Subsidiaries and the accompanying Officer's Compliance Certificate setting forth
the Debt to Capitalization Ratio or Senior Unsecured Debt Rating, as applicable,
of the Borrower and its Subsidiaries as of the most recent fiscal quarter end.
Subject to Section 4.1(d), in the event the Borrower fails to deliver such
financial statements and certificate within the time required by Section 7.1(a)
hereof, the Applicable Margin shall be the highest Applicable Margin set forth
above until the delivery of such financial statements and certificate.
(d) Rating Election. So long as no Default or Event of Default has
occurred and is continuing, at any date after the Borrower has obtained an
investment-grade debt rating, the Borrower may make a one-time election while
such investment-grade rating remains in effect (such election, the "Rating
Election") as to whether the Debt to Capitalization Ratio or the Senior
Unsecured Debt Rating shall be the basis for determining the Applicable Margin
pursuant to Section 4.1(c).
(e) Default Rate. Subject to Section 11.3, at the discretion of the
Administrative Agent and Required Lenders, upon the occurrence and during the
continuance of an Event of Default, (i) the Borrower shall no longer have the
option to request LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans shall
bear interest at a rate per annum two percent (2%) in excess of the rate then
applicable to LIBOR Rate Loans, until the end of the applicable Interest Period
and thereafter at a rate equal to two percent (2%) in excess of the rate then
applicable to Base Rate Loans, (iii) all outstanding LIBOR Market Rate Loans
shall bear interest at a rate per annum equal to two percent (2%) in excess of
the rate then applicable to Base Rate Loans and (iv) all outstanding Base Rate
Loans shall bear interest at a rate per annum equal to two percent (2%) in
excess of the rate then applicable to Base Rate Loans. Interest shall continue
to accrue on the Notes after the filing by or against the Borrower of any
petition seeking any relief in bankruptcy or under any act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign.
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(f) Payment and Computation of Interest and Fees. All fees hereunder
and interest on each Base Rate Loan and each LIBOR Market Rate Loan shall be
payable in arrears on the last Business Day of each calendar quarter commencing
September 30, 1998; and interest on each LIBOR Rate Loan shall be payable on the
last day of each Interest Period applicable thereto, and if such Interest Period
extends over three (3) months, at the end of each three (3) month interval
during such Interest Period. Interest on LIBOR Rate Loans (except for
Alternative Currency Loans denominated in Pounds Sterling which shall be
computed on the basis of a 365/66-day year) and LIBOR Market Rate Loans and all
fees payable hereunder shall be computed on the basis of a 360-day year and
assessed for the actual number of days elapsed and interest on Base Rate Loans
shall be computed on the basis of a 365/66-day year and assessed for the actual
number of days elapsed.
(g) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Notes
charged or collected pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible under any Applicable Law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate permitted by Applicable Law and the Lenders shall at the Administrative
Agent's option (i) promptly refund to the Borrower any interest received by
Lenders in excess of the maximum lawful rate or (ii) shall apply such excess to
the principal balance of the Obligations. It is the intent hereof that the
Borrower not pay or contract to pay, and that neither the Administrative Agent
nor any Lender receive or contract to receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may be paid by the Borrower
under Applicable Law.
SECTION 4.2 Notice and Manner of Conversion or Continuation of Loans.
Provided that no Event of Default has occurred and is then continuing, the
Borrower shall have the option to (a) convert at any time following the third
Business Day after the Closing Date all or any portion of its outstanding Base
Rate Loans or LIBOR Market Rate Loans in a principal amount equal to $3,000,000
or any whole multiple of $1,000,000 in excess thereof into one or more LIBOR
Rate Loans denominated in Dollars, (b) upon the expiration of any Interest
Period, convert all or any part of its outstanding LIBOR Rate Loans denominated
in Dollars in a principal amount equal to $100,000 or a whole multiple of
$50,000 in excess thereof into Base Rate Loans or LIBOR Market Rate Loans or (c)
upon the expiration of any Interest Period, continue any LIBOR Rate Loan
denominated in any Permitted Currency in a principal amount of $3,000,000 or any
whole multiple of $1,000,000 in excess thereof (or with respect to LIBOR Rate
Loans denominated in an Alternative Currency, the Alternative Currency Amount in
each case thereof) as a LIBOR Rate Loan in the same Permitted Currency. Whenever
the Borrower desires to convert or continue Loans as provided above, the
Borrower shall give the Administrative Agent irrevocable prior written notice in
the form attached as Exhibit E (a "Notice of Conversion/ Continuation") not
later than 11:00 a.m. (Charlotte time) four (4) Business Days before (with
respect to any LIBOR Rate Loan denominated in an Alternative Currency), two (2)
Business Days before (with respect to any LIBOR Market Rate Loan or Base Rate
Loan denominated in an Alternative Currency) and the same Business Day of (with
respect to any Loan denominated in Dollars) the day on which a
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<PAGE> 31
proposed conversion or continuation of such Loan is to be effective specifying
(A) the Loans to be converted or continued, the Permitted Currency in which such
Loan is denominated and, in the case of any LIBOR Rate Loan to be converted or
continued, the last day of the Interest Period therefor, (B) the effective date
of such conversion or continuation (which shall be a Business Day), (C) the
principal amount of such Loans to be converted or continued, and (D) the
Interest Period to be applicable to such converted or continued LIBOR Rate Loan.
The Administrative Agent shall promptly notify the Lenders of such Notice of
Conversion/Continuation.
SECTION 4.3 Fees.
(a) Facility Fees. The Borrower shall pay to the Administrative
Agent, for the account of the Lenders, a non-refundable facility fee on the
entire amount of the Aggregate Commitment, regardless of usage at a rate per
annum determined by reference to the Debt to Capitalization Ratio or Senior
Unsecured Debt Rating, as applicable, as of the end of the fiscal quarter
immediately preceding the delivery of the applicable Officer's Compliance
Certificate as follows:
Debt to Capitalization Senior Unsecured Debt Facility Fee
Ratio Rating
---------------------- --------------------- ------------
> 0.40 to 1.00 < BBB- 0.200%
- -
> 0.35 to 1.00 > BBB- 0.150%
- - -
> 0.30 to 1.00 > BBB 0125%
- - -
> 0.25 to 1.00 > BBB+ 0.100%
- - -
<0.25 to 1.00 > A- 0.080%
-
(b) Administrative Agent's and Other Fees. In order to compensate the
Administrative Agent for structuring and syndicating the Loans and for its
obligations hereunder, the Borrower agrees to pay to the Administrative Agent,
for its account, the fees set forth in the separate fee letter agreement
executed by the Borrower and the Administrative Agent dated June 9, 1998.
SECTION 4.4 Manner of Payment.
(a) Loans Denominated in Dollars. Each payment (including repayments
described in Article II) by the Borrower on account of the principal of or
interest on the Loans denominated in Dollars or of any fee, commission or other
amounts (including the Reimbursement Obligation) payable to the Lenders under
this Agreement or any Note (except as set forth in Section 4.4(b)) shall be made
in Dollars not later than 1:00 p.m. (Charlotte time) on the date specified for
payment under this Agreement to the Administrative Agent at the Administrative
Agent's Office for the account of the Lenders (other than as set forth below)
pro rata in accordance with their respective Commitment Percentages (other than
as set forth below) in immediately available funds and shall be made without any
set-off, counterclaim or deduction whatsoever. Any payment received after such
time but before 2:00 p.m. (Charlotte time) on such day shall be deemed a payment
on such date for the purposes of Section 11.1, but for all other purposes shall
be deemed to have been made on the next
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<PAGE> 32
succeeding Business Day. Any payment received after 2:00 p.m. (Charlotte time)
shall be deemed to have been made on the next succeeding Business Day for all
purposes.
(b) Alternative Currency Loans. Each payment (including repayments
described in Article II) by the Borrower on account of the principal of or
interest on the Loans denominated in any Alternative Currency shall be made in
such Alternative Currency not later than 11:00 a.m. (the time of the
Administrative Agent's Correspondent) on the date specified for payment under
this Agreement to the Administrative Agent's account with the Administrative
Agent's Correspondent for the account of the Lenders (other than as set forth
below) pro rata in accordance with their respective Commitment Percentages
(other than as set forth below) in immediately available funds, and shall be
made without any set-off, counterclaim or deduction whatsoever. Any payment
received after such time but before 12:00 noon (the time of the Administrative
Agent's Correspondent) on such day shall be deemed a payment on such date for
the purposes of Section 11.1, but for all other purposes shall be deemed to have
been made on the next succeeding Business Day. Any payment received after 12:00
noon (the time of the Administrative Agent's Correspondent) shall be deemed to
have been made on the next succeeding Business Day for all purposes.
(c) Pro Rata Treatment. Upon receipt by the Administrative Agent of
each such payment, the Administrative Agent shall distribute to each Lender at
its address for notices set forth herein its pro rata share of such payment in
accordance with such Lender's Commitment Percentage (except as specified below)
and shall wire advice of the amount of such credit to each Lender. Each payment
to the Administrative Agent of the Issuing Lender's fees or L/C Participants'
commissions shall be made in like manner, but for the account of the Issuing
Lender or the L/C Participants, as the case may be. Each payment to the
Administrative Agent of Administrative Agent's fees or expenses shall be made
for the account of the Administrative Agent and any amount payable to any Lender
under Sections 4.10, 4.11, 4.12, 4.13, 13.2 or 13.10(i) shall be paid to the
Administrative Agent for the account of the applicable Lender. Subject to
Section 4.1(b)(ii) if any payment under this Agreement or any Note shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day and such extension of time shall
in such case be included in computing any interest if payable along with such
payment.
SECTION 4.5 Crediting of Payments and Proceeds. In the event that the
Borrower shall fail to pay any of the Obligations when due and the Obligations
have been accelerated pursuant to Section 11.2, all payments received by the
Lenders upon the Notes and the other Obligations and all net proceeds from the
enforcement of the Obligations shall be applied first to all expenses then due
and payable by the Borrower hereunder, then to all indemnity obligations then
due and payable by the Borrower hereunder, then to all Administrative Agent's
and Issuing Lender's fees then due and payable, then to all commitment and other
fees and commissions then due and payable, then to accrued and unpaid interest
on the Notes, the Reimbursement Obligation and any termination payments due in
respect of a Hedging Agreement with any Lender (which such Hedging Agreement is
permitted or required hereunder) (pro rata in accordance with all such amounts
due), then to the principal amount of the Notes and Reimbursement Obligation and
then to
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<PAGE> 33
the cash collateral account described in Section 11.2(b) hereof to the extent of
any L/C Obligations then outstanding, in that order.
SECTION 4.6 Adjustments. If any Lender (a "Benefited Lender") shall
at any time receive any payment of all or part of the Obligations owing to it,
or interest thereon, or if any Lender shall at any time receive any collateral
in respect to the Obligations owing to it (whether voluntarily or involuntarily,
by set-off or otherwise) in a greater proportion than any such payment to and
collateral received by any other Lender, if any, in respect of the Obligations
owing to such other Lender, or interest thereon, such Benefited Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Extensions of Credit, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such Benefited Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, that if all
or any portion of such excess payment or benefits is thereafter recovered from
such Benefited Lender, such purchase shall be rescinded, and the purchase price
and benefits returned to the extent of such recovery, but without interest. The
Borrower agrees that each Lender so purchasing a portion of another Lender's
Extensions of Credit may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of
Credit; Assumption by the Administrative Agent. The obligations of the Lenders
under this Agreement to make the Loans and issue or participate in Letters of
Credit are several and are not joint or joint and several. Unless the
Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the proposed borrowing date in
accordance with Section 2.2(b) and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If such amount is made available to the Administrative
Agent on a date after such borrowing date, such Lender shall pay to the
Administrative Agent on demand an amount, until paid, equal to (a) with respect
to a Loan denominated in Dollars, the product of (i) the amount not made
available by such Lender in accordance with the terms hereof, times (ii) the
daily average Federal Funds Rate during such period as determined by the
Administrative Agent, times (iii) a fraction the numerator of which is the
number of days that elapse from and including such borrowing date to the date on
which such amount not made available by such Lender in accordance with the terms
hereof shall have become immediately available to the Administrative Agent and
the denominator of which is 360 and (b) with respect to a loan denominated in an
Alternative Currency the amount not made available by such Lender in accordance
with the terms hereof and interest thereon at a rate per annum equal to the
Administrative Agent's aggregate marginal cost (including the cost of
maintaining any required reserves or deposit insurance and of any fees,
penalties, overdraft charges or other costs or expenses incurred by the
Administrative Agent as a result of the failure to deliver funds hereunder) of
carrying such amount. A certificate of the Administrative Agent with respect to
any amounts owing under this Section shall be conclusive, absent manifest error.
If such Lender's Commitment
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<PAGE> 34
Percentage of such borrowing is not made available to the Administrative Agent
by such Lender within three (3) Business Days of such borrowing date, the
Administrative Agent shall be entitled to recover such amount made available by
the Administrative Agent with interest thereon at the rate per annum applicable
to LIBOR Market Rate Loans hereunder, on demand, from the Borrower. The failure
of any Lender to make available its Commitment Percentage of any Loan requested
by the Borrower shall not relieve it or any other Lender of its obligation, if
any, hereunder to make its Commitment Percentage of such Loan available on the
borrowing date, but no Lender shall be responsible for the failure of any other
Lender to make its Commitment Percentage of such Loan available on the borrowing
date.
SECTION 4.8 Mandatory Redenomination of Alternative Currency Loans.
(a) If any LIBOR Rate Loan or LIBOR Market Rate Loan is required to
be converted to a Base Rate Loan pursuant to Section 4.1(e), Section 4.10 or any
other applicable provision hereof, such Loan shall be funded in Dollars in an
amount equal to the Dollar Amount of such Loan, all subject to the provisions of
Section 2.3(b). The Borrower shall reimburse the Lenders upon any such
conversion for any amounts required to be paid under Section 4.11 hereof.
(b) If, as a result of the implementation of the European economic
and monetary union ("EMU"), (i) any Alternative Currency ceases to be lawful
currency of the nation issuing the same and is replaced by a European common
currency (the "Euro") or (ii) any Alternative Currency and the Euro are at the
same time recognized by any governmental authority of the nation issuing such
Alternative Currency as lawful currency of such nation, then any amount payable
hereunder by the Borrower in such Alternative Currency shall instead by payable
in the Euro and the amount so payable shall be determined by translating the
amount so payable in such other Alternative Currency to the Euro at the exchange
rate recognized by the european central bank (or such other governmental or
regulatory authority designated by the EMU for establishing such exchange rate)
for the purpose of implementing the EMU. Prior to the occurrence of the event or
events described in clause (i) or (ii) of the preceding sentence, each amount
payable hereunder in any Alternative Currency will, except as otherwise provided
herein, continue to be payable only in that Alternative Currency.
(c) The terms and provisions of this Agreement will be subject to
such reasonable changes of construction as determined by the Administrative
Agent (acting reasonably and in consultation with the Borrower) to reflect such
implementation of the Euro and to put the Lenders and the Borrower in the same
position, so far as possible, that they would have been if such implementation
had not occurred. Except as provided in the foregoing provisions of this Section
4.8, no such implementation nor any economic consequences resulting therefrom
shall give rise to any right to terminate, contest, cancel, modify or
renegotiate the provisions of this Agreement.
SECTION 4.9 Regulatory Limitation. In the event, as a result of
increases in the value of Alternative Currencies against the Dollar or for any
other reason, the obligation of any of the Lenders to make Loans (taking into
account the Dollar Amount of the Obligations and all other
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indebtedness required to be aggregated under 12 U.S.C.A. ss.84, as amended, the
regulations promulgated thereunder and any other Applicable Law) is determined
by such Lender to exceed its then applicable legal lending limit under 12
U.S.C.A. ss.84, as amended, and the regulations promulgated thereunder, or any
other Applicable Law, the amount of additional Extensions of Credit such Lender
shall be obligated to make or issue or participate in hereunder shall
immediately be reduced to the maximum amount which such Lender may legally
advance (as determined by such Lender), the obligation of each of the remaining
Lenders hereunder shall be proportionately reduced, based on their applicable
Commitment Percentages and, to the extent necessary under such laws and
regulations (as determined by each of the Lenders, with respect to the
applicability of such laws and regulations to itself), and the Borrower shall
reduce, or cause to be reduced, complying to the extent practicable with the
remaining provisions hereof, the Obligations outstanding hereunder by an amount
sufficient to comply with such maximum amounts.
SECTION 4.10 Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate, LIBOR Market Rate Loans and
Alternative Currency Availability. If with respect to any Interest Period the
Administrative Agent or any Lender (after consultation with the Administrative
Agent) shall determine that (i) by reason of circumstances affecting the foreign
exchange and interbank markets generally, deposits in eurodollars or an
Alternative Currency in the applicable amounts are not being quoted via Dow
Jones Markets screen 3750 or offered to the Administrative Agent or such Lender
for such Interest Period, (ii) a fundamental change has occurred in the foreign
exchange or interbank markets with respect to any Alternative Currency
(including, without limitation, fundamental changes in national or international
financial, political or economic conditions or currency exchange rates or
exchange controls) or (iii) it has become otherwise materially impractical for
the Administrative Agent or the Lenders to make such Loan in an Alternative
Currency, then the Administrative Agent shall forthwith give notice thereof to
the Borrower. Thereafter, until the Administrative Agent notifies the Borrower
that such circumstances no longer exist (which notification the Administrative
Agent shall give to the Borrower promptly upon learning that such circumstances
no longer exist), the obligation of the Lenders to make LIBOR Rate Loans, LIBOR
Market Rate Loans or Alternative Currency Loans, as applicable, and the right of
the Borrower to convert any Loan to or continue any Loan as a LIBOR Rate Loan,
LIBOR Market Rate Loan or a Alternative Currency Loan, as applicable, shall be
suspended, and the Borrower shall repay in full (or cause to be repaid in full)
the then outstanding principal amount of each such LIBOR Rate Loans, LIBOR
Market Rate Loans or Alternative Currency Loan, as applicable, together with
accrued interest thereon, on the last day of the then current Interest Period
applicable to such LIBOR Rate Loan, LIBOR Market Rate Loan or Alternative
Currency Loan, as applicable, or convert the then outstanding principal amount
of each such LIBOR Rate Loan, LIBOR Market Rate Loan or Alternative Currency
Loan, as applicable, to a Base Rate Loan as of the last day of such Interest
Period.
(b) Laws Affecting LIBOR Rate, LIBOR Market Rate and Alternative
Currency Availability. If, after the date hereof, the introduction of, or any
change in, any Applicable Law or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
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by any Lender (or any of their respective Lending Offices) with any request or
directive (whether or not having the force of law) of any such Governmental
Authority, central bank or comparable agency, shall make it unlawful or
impossible for any of the Lenders (or any of their respective Lending Offices)
to honor its obligations hereunder to make or maintain any LIBOR Rate Loan,
LIBOR Market Rate Loan or any Alternative Currency Loan, such Lender shall
promptly give notice thereof to the Administrative Agent and the Administrative
Agent shall promptly give notice to the Borrower and the other Lenders.
Thereafter, until the Administrative Agent notifies the Borrower that such
circumstances no longer exist (which notification the Administrative Agent shall
give to the Borrower promptly upon learning that such circumstances no longer
exist), (i) the obligations of the Lenders to make LIBOR Rate Loans, LIBOR
Market Rate Loans or Alternative Currency Loans, as applicable, and the right of
the Borrower to convert any Loan or continue any Loan as a LIBOR Rate Loan,
LIBOR Market Rate Loan or Alternative Currency Loan, as applicable, shall be
suspended and thereafter the Borrower may select only Base Rate Loans hereunder,
and (ii) if any of the Lenders may not lawfully continue to maintain a LIBOR
Rate Loan, LIBOR Market Rate Loan or Alternative Currency Loan, as applicable,
to the end of the then current Interest Period applicable thereto as a LIBOR
Rate Loan, LIBOR Market Rate Loan or Alternative Currency Loan, as applicable,
the applicable LIBOR Rate Loan, LIBOR Market Rate Loan or Alternative Currency
Loan, as applicable, shall immediately be converted to a Base Rate Loan for the
remainder of such Interest Period.
(c) Increased Costs. If, after the date hereof, the introduction of,
or any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the
Lenders (or any of their respective Lending Offices) with any request or
directive (whether or not having the force of law) of such Governmental
Authority, central bank or comparable agency:
(i) shall subject any of the Lenders (or any of their
respective Lending Offices) to any tax, duty or other charge with respect to any
Note, Letter of Credit or Application or shall change the basis of taxation of
payments to any of the Lenders (or any of their respective Lending Offices) of
the principal of or interest on any Note, Letter of Credit or Application or any
other amounts due under this Agreement in respect thereof (except for changes in
the rate of tax on the overall net income of any of the Lenders or any of their
respective Lending Offices imposed by the jurisdiction in which such Lender is
organized or is or should be qualified to do business or such Lending Office is
located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit, insurance or capital or similar
requirement against assets of, deposits with or for the account of, or credit
extended by any of the Lenders (or any of their respective Lending Offices) or
shall impose on any of the Lenders (or any of their respective Lending Offices)
or the foreign exchange and interbank markets any other condition affecting any
Note;
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and the result of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan, LIBOR Market Rate Loan or
Alternative Currency Loan, as applicable, or issuing or participating in Letters
of Credit or to reduce the yield or amount of any sum received or receivable by
any of the Lenders under this Agreement or under the Notes in respect of a LIBOR
Rate Loan, LIBOR Market Rate Loan or Alternative Currency Loan, as applicable,
or Letter of Credit or Application, then such Lender may notify the
Administrative Agent, upon the receipt of which the Administrative Agent shall
promptly notify the Borrower of such fact and, if requested to do so by the
Lender, shall demand compensation therefor and, within thirty (30) days after
such notice by the Administrative Agent, the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender or Lenders for
such increased cost or reduction. The Administrative Agent will promptly notify
the Borrower of any event of which it has knowledge which will entitle such
Lender to compensation pursuant to this Section 4.10(c); provided, that the
Administrative Agent shall incur no liability whatsoever to the Lenders or the
Borrower in the event it fails to do so. The amount of such compensation shall
be determined, in the applicable Lender's reasonable discretion, based upon the
assumption that such Lender funded its Commitment Percentage of the LIBOR Rate
Loans, LIBOR Market Rate Loans or Alternative Currency Loans as applicable, in
the London interbank market and using any reasonable attribution or averaging
methods which such Lender deems appropriate and practical. A certificate of such
Lender setting forth the basis for determining such amount or amounts necessary
to compensate such Lender shall be forwarded to the Borrower through the
Administrative Agent and shall be conclusively presumed to be correct save for
manifest error.
SECTION 4.11 Indemnity. The Borrower hereby indemnifies each of the
Lenders against any loss or expense (including, without limitation, any foreign
exchange costs) which may arise or be attributable to each Lender's obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain any Loan (a) as a consequence of any failure by the Borrower to make
any payment when due of any amount due hereunder in connection with a LIBOR Rate
Loan or LIBOR Market Rate Loan, (b) due to any failure of the Borrower to borrow
on a date specified therefor in a Notice of Borrowing or Notice of
Continuation/Conversion or (c) due to any payment, prepayment or conversion of
any LIBOR Rate Loan or LIBOR Market Rate Loan on a date other than the last day
of the Interest Period therefor. The amount of such loss or expense shall be
determined, in the applicable Lender's reasonable discretion, based upon the
assumption that such Lender funded its Commitment Percentage of the LIBOR Rate
Loans or LIBOR Market Rate Loans in the London interbank market and using any
reasonable attribution or averaging methods which such Lender deems appropriate
and practical. A certificate of such Lender setting forth the basis for
determining such amount or amounts necessary to compensate such Lender shall be
forwarded to the Borrower through the Administrative Agent and shall be
conclusively presumed to be correct save for manifest error.
SECTION 4.12 Capital Requirements. If either (a) the introduction of,
or any change in, or in the interpretation of, any Applicable Law or (b)
compliance with any guideline or request from any central bank or comparable
agency or other Governmental Authority (whether or not having the force of law),
has or would have the effect of reducing the rate of return on the capital of,
or has affected or would affect the amount of capital required to be maintained
by, any
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Lender or any corporation controlling such Lender as a consequence of, or with
reference to the Commitments and other commitments of this type, below the rate
which the Lender or such other corporation could have achieved but for such
introduction, change or compliance, then within fifteen (15) Business Days after
written demand by any such Lender, the Borrower shall pay to such Lender from
time to time as specified by such Lender additional amounts sufficient to
compensate such Lender or other corporation for such reduction. A certificate as
to such amounts submitted to the Borrower and the Administrative Agent by such
Lender, shall, in the absence of manifest error, be presumed to be correct and
binding for all purposes.
SECTION 4.13 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder or under the Notes or the Letters of Credit shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholding, and all liabilities with respect
thereto excluding, (i) in the case of each Lender and the Administrative Agent,
income and franchise taxes imposed by the jurisdiction under the laws of which
such Lender or the Administrative Agent (as the case may be) is organized or is
or should be qualified to do business or any political subdivision thereof and
(ii) in the case of each Lender, income and franchise taxes imposed by the
jurisdiction of such Lender's Lending Office or any political subdivision
thereof (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note or Letter of Credit to any Lender or the
Administrative Agent, (A) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.13) such Lender or the
Administrative Agent (as the case may be) receives an amount equal to the amount
such party would have received had no such deductions been made, (B) the
Borrower shall make such deductions, (C) the Borrower shall pay the full amount
deducted to the relevant taxing authority or other authority in accordance with
applicable law, and (D) the Borrower shall deliver to the Administrative Agent
evidence of such payment to the relevant taxing authority or other authority in
the manner provided in Section 4.13(d).
(b) Stamp and Other Taxes. In addition, the Borrower shall pay any
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes, levies of the United
States or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Loans, the Letters of Credit, the other Loan Documents, or the perfection of any
rights or security interest in respect thereto (hereinafter referred to as
"Other Taxes").
(c) Indemnity. The Borrower shall indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 4.13) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other
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Taxes were correctly or legally asserted. Such indemnification shall be made
within thirty (30) days from the date such Lender or the Administrative Agent
(as the case may be) makes written demand therefor.
(d) Evidence of Payment. Within thirty (30) days after the date of
any payment of Taxes or Other Taxes, the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 13.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.
(e) Delivery of Tax Forms. Each Lender organized under the laws of a
jurisdiction other than the United States or any state thereof shall deliver to
the Borrower, with a copy to the Administrative Agent, on the Closing Date or
concurrently with the delivery of the relevant Assignment and Acceptance, as
applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms
1001, as applicable (or successor forms) properly completed and certifying in
each case that such Lender is entitled to a complete exemption from withholding
or deduction for or on account of any United States federal income taxes, and
(ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form,
as the case may be, to establish an exemption from United States backup
withholding taxes. Each such Lender further agrees to deliver to the Borrower,
with a copy to the Administrative Agent, a Form 1001 or 4224 and Form W-8 or
W-9, or successor applicable forms or manner of certification, as the case may
be, on or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower, certifying in the case of a Form
1001 or 4224 that such Lender is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes (unless in any such case an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders such forms inapplicable or
the exemption to which such forms relate unavailable and such Lender notifies
the Borrower and the Administrative Agent that it is not entitled to receive
payments without deduction or withholding of United States federal income taxes)
and, in the case of a Form W-8 or W-9, establishing an exemption from United
States backup withholding tax.
(f) Survival. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 4.13 shall survive the payment in full of the
Obligations and the termination of the Commitments.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 Closing. The closing shall take place at the offices of
Kennedy Covington Lobdell & Hickman, L.L.P. at 10:00 a.m. on August 7, 1998, or
on such other date and at such other place as the parties hereto shall mutually
agree.
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SECTION 5.2 Conditions to Closing and Initial Extensions of Credit.
The obligation of the Lenders to close this Agreement and to make the initial
Loan or issue the initial Letter of Credit is subject to the satisfaction of
each of the following conditions:
(a) Executed Loan Documents. This Agreement, the Notes and the
Guaranty Agreement shall have been duly authorized, executed and delivered to
the Administrative Agent by the parties thereto (which with regard to the
Guaranty Agreement shall consist of the Material Subsidiaries as of the Closing
Date), shall be in full force and effect and no default shall exist thereunder,
and the Borrower shall have delivered original counterparts thereof to the
Administrative Agent.
(b) Closing Certificates; Etc.
(i) Officers's Certificate of the Borrower. The
Administrative Agent shall have received a certificate from a Responsible
Officer, in form and substance satisfactory to the Administrative Agent, to the
effect that all representations and warranties of the Borrower contained in this
Agreement and the other Loan Documents are true, correct and complete; that the
Borrower is not in violation of any of the covenants contained in this Agreement
and the other Loan Documents; that, after giving effect to the transactions
contemplated by this Agreement, no Default or Event of Default has occurred and
is continuing; and that the Borrower has satisfied each of the closing
conditions.
(ii) Certificate of Secretary of the Borrower. The
Administrative Agent shall have received a certificate of the secretary or
assistant secretary of the Borrower certifying as to the incumbency and
genuineness of the signature of each officer of the Borrower executing Loan
Documents to which it is a party and certifying that attached thereto is a true,
correct and complete copy of (A) the articles of incorporation of the Borrower
and all amendments thereto, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of incorporation, (B) the bylaws of
the Borrower as in effect on the date of such certifications, (C) resolutions
duly adopted by the Board of Directors of the Borrower authorizing the
borrowings contemplated hereunder and the execution, delivery and performance of
this Agreement and the other Loan Documents to which it is a party, and (D) each
certificate required to be delivered pursuant to Section 5.2(b)(iii).
(iii) Certificates of Good Standing. To the extent
requested by the Administrative Agent, the Administrative Agent shall have
received long-form certificates as of a recent date of the good standing of the
Borrower under the laws of its jurisdiction of organization and each other
jurisdiction where the Borrower is qualified to do business and a certificate of
the relevant taxing authorities of such jurisdictions certifying that such
Person has filed required tax returns and owes no delinquent taxes.
(iv) Opinions of Counsel. The Administrative Agent shall
have received favorable opinions of counsel to the Borrower addressed to the
Administrative Agent and the Lenders with respect to the Borrower, the Loan
Documents and such other matters as the Lenders reasonably shall request.
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(v) Tax Forms. The Administrative Agent shall have
received copies of the United States Internal Revenue Service forms required by
Section 4.13(e) hereof.
(c) Consents; Defaults.
(i) Governmental and Third Party Approvals. The Borrower
shall have obtained all necessary approvals, authorizations and consents of any
Person and of all Governmental Authorities and courts having jurisdiction with
respect to the transactions contemplated by this Agreement and the other Loan
Documents.
(ii) No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any Governmental Authority to enjoin, restrain, or prohibit,
or to obtain substantial damages in respect of, or which is related to or arises
out of this Agreement or the other Loan Documents or the consummation of the
transactions contemplated hereby or thereby, or which, in the Administrative
Agent's reasonable discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement and such other Loan Documents.
(iii) No Event of Default. No Default or Event of Default
shall have occurred and be continuing.
(d) Financial Matters.
(i) Financial Statements. The Administrative Agent shall
have received the most recent audited Consolidated financial statements of the
Borrower and its Subsidiaries, all in form and substance satisfactory to the
Administrative Agent.
(ii) Financial Condition Certificate. The Borrower shall
have delivered to the Administrative Agent a certificate, in form and substance
satisfactory to the Administrative Agent, and certified as accurate by a
Responsible Officer, that (A) the Borrower and each of its Subsidiaries are each
Solvent, (B) the Borrower's payables are current and not past due, (C) attached
thereto is a pro forma balance sheet of the Borrower and its Subsidiaries
setting forth on a pro forma basis the financial condition of the Borrower and
its Subsidiaries on a Consolidated basis as of the date of the most recent
quarterly financial statements provided by the Borrower, reflecting a pro forma
basis the effect of the transactions contemplated herein, including all fees and
expenses in connection therewith, and evidencing compliance on a pro forma basis
with the covenants contained in Articles IX and X hereof, (D) attached thereto
are the financial projections previously delivered to the Administrative Agent
representing the good faith opinions of the Borrower and senior management
thereof as to the projected results contained therein and (E) attached thereto
is a calculation of the Applicable Margin pursuant to Section 4.1(c).
(iii) Payment at Closing; Fee Letters. The Borrower shall
have paid the fees set forth or referenced in Section 4.3 and any other accrued
and unpaid fees or commissions
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due hereunder (including, without limitation, legal fees and expenses) to the
Administrative Agent and Lenders, and to any other Person such amount as may be
due thereto in connection with the transactions contemplated hereby, including
all taxes, fees and other charges in connection with the execution, delivery,
recording, filing and registration of any of the Loan Documents. The
Administrative Agent shall have received duly authorized and executed copies of
the fee letter agreement referred to in Section 4.3(c).
(e) Miscellaneous.
(i) Notice of Borrowing. The Administrative Agent shall
have received a Notice of Borrowing from the Borrower in accordance with Section
2.2(a), and a Notice of Account Designation specifying the account or accounts
to which the proceeds of any Loans made after the Closing Date are to be
disbursed.
(ii) Proceedings and Documents. All opinions, certificates
and other instruments and all proceedings in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and substance to
the Lenders. The Lenders shall have received copies of all other instruments and
other evidence as the Lender may reasonably request, in form and substance
satisfactory to the Lenders, with respect to the transactions contemplated by
this Agreement and the taking of all actions in connection therewith.
(iii) Due Diligence and Other Documents. The Borrower
shall have delivered to the Administrative Agent such other documents,
certificates and opinions as the Administrative Agent may reasonably request.
SECTION 5.3 Conditions to All Extensions of Credit. The obligations
of the Lenders to make any Extensions of Credit are subject to the satisfaction
of the following conditions precedent on the relevant borrowing or issue date,
as applicable:
(a) Continuation of Representations and Warranties. The
representations and warranties contained in Article VI shall be true and correct
on and as of such borrowing or issuance date with the same effect as if made on
and as of such date; except for any representation and warranty made as of an
earlier date, which representation and warranty shall remain true and correct as
of such earlier date.
(b) No Existing Default. No Default or Event of Default shall have
occurred and be continuing hereunder (i) on the borrowing date with respect to
such Loan or after giving effect to the Loans to be made on such date or (ii) or
the issue date with respect to such Letter of Credit or after giving affect to
such Letters of Credit on such date.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
SECTION 6.1 Representations and Warranties. To induce the
Administrative Agent and Lenders to enter into this Agreement and to induce the
Lenders to make Extensions of Credit, the Borrower hereby represents and
warrants to the Administrative Agent and Lenders that:
(a) Organization; Power; Qualification. The Borrower and each of the
Guarantors is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, has the power and
authority to own its properties and to carry on its business as now being and
hereafter proposed to be conducted and is duly qualified and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization, except
where the failure to do so could not reasonably be expected to have a Material
Adverse Effect. The jurisdictions in which the Borrower and the Guarantors are
organized and qualified to do business as of the Closing Date are described on
Schedule 6.1(a).
(b) Ownership. Each Subsidiary of the Borrower as of the Closing Date
is listed on Schedule 6.1(b). As of the Closing Date, the capitalization of the
Borrower and the Guarantors consists of the number of shares, authorized, issued
and outstanding, of such classes and series, with or without par value,
described on Schedule 6.1(b). All outstanding shares have been duly authorized
and validly issued and are fully paid and nonassessable. The shareholders of the
Guarantors of the Borrower and the number of shares owned by each as of the
Closing Date are described on Schedule 6.1(b).
(c) Authorization of Agreement, Loan Documents and Borrowing. Each of
the Borrower and the Guarantors has the right, power and authority and has taken
all necessary corporate and other action to authorize the execution, delivery
and performance of this Agreement and each of the other Loan Documents to which
it is a party in accordance with their respective terms. This Agreement and each
of the other Loan Documents have been duly executed and delivered by the duly
authorized officers of the Borrower and each of the Guarantors party thereto,
and each such document constitutes the legal, valid and binding obligation of
the Borrower or its Guarantors party thereto, enforceable in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar state or federal debtor relief laws from
time to time in effect which affect the enforcement of creditors' rights in
general and the availability of equitable remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with Laws,
Etc. The execution, delivery and performance by the Borrower and the Guarantors
of the Loan Documents to which each such Person is a party, in accordance with
their respective terms, the borrowings hereunder and the transactions
contemplated hereby do not and will not, by the passage of time, the giving of
notice or otherwise, (i) require any Governmental Approval or violate any
Applicable Law
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relating to the Borrower or any of the Guarantors, (ii) conflict with, result in
a breach of or constitute a default under the articles of incorporation, bylaws
or other organizational documents of the Borrower or any of the Guarantors or
any indenture, agreement or other instrument to which such Person is a party or
by which any of its properties may be bound or any Governmental Approval
relating to such Person, or (iii) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by such Person other than Liens arising under the Loan
Documents.
(e) Compliance with Law; Governmental Approvals. Each of the Borrower
and the Guarantors (i) has all Governmental Approvals required by any Applicable
Law for it to conduct its business, each of which is in full force and effect,
is final and not subject to review on appeal and is not the subject of any
pending or, to the best of its knowledge, threatened attack by direct or
collateral proceeding, and (ii) is in material compliance with each Governmental
Approval applicable to it and in material compliance with all other Applicable
Laws relating to it or any of its respective properties.
(f) Tax Returns and Payments. Each of the Borrower and the Guarantors
has duly filed or caused to be filed all federal, state, local and other tax
returns required by Applicable Law to be filed, and has paid, or made adequate
provision for the payment of, all federal, state, local and other taxes,
assessments and governmental charges or levies upon it and its property, income,
profits and assets which are due and payable. No Governmental Authority has
asserted any Lien or other claim against the Borrower or any Guarantor with
respect to unpaid taxes which has not been discharged or resolved. The charges,
accruals and reserves on the books of the Borrower and any of its Subsidiaries
in respect of federal, state, local and other taxes for all Fiscal Years and
portions thereof since the organization of the Borrower and any of its
Subsidiaries are in the judgment of the Borrower adequate, and the Borrower does
not anticipate any additional taxes or assessments for any of such years.
(g) Intellectual Property Matters. Each of the Borrower and the
Guarantors owns or possesses rights to use all franchises, licenses, copyrights,
copyright applications, patents, patent rights or licenses, patent applications,
trademarks, trademark rights, trade names, trade name rights, copyrights and
rights with respect to the foregoing which are required to conduct its business.
No event has occurred which, to the knowledge of the Borrower or the Guarantors,
permits, or after notice or lapse of time or both would permit, the revocation
or termination of any such rights, and, to the knowledge of the Borrower or the
Guarantors, neither the Borrower nor any Subsidiary thereof is liable to any
Person for infringement under Applicable Law with respect to any such rights as
a result of its business operations.
(h) Environmental Matters.
(i) The properties of the Borrower and the Guarantors do
not contain, and to their knowledge have not previously contained, any Hazardous
Materials in amounts or concentrations which (A) constitute or constituted a
violation of applicable Environmental Laws or (B) could give rise to liability
under applicable Environmental Laws;
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(ii) Such properties and all operations conducted in
connection therewith are in material compliance, and have been in material
compliance, with all applicable Environmental Laws, and there is no
contamination at, under or about such properties or such operations which could
interfere with the continued operation of such properties or impair the fair
saleable value thereof;
(iii) Neither the Borrower nor any Guarantor thereof has
received any notice of violation, alleged violation, non-compliance, liability
or potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of their properties or the operations
conducted in connection therewith, nor does the Borrower or any Guarantor have
knowledge or reason to believe that any such notice will be received or is being
threatened;
(iv) To the knowledge of the Borrower and Guarantors,
Hazardous Materials have not been transported or disposed of from the properties
of the Borrower and the Guarantors in violation of, or in a manner or to a
location reasonably likely to give rise to liability under, Environmental Laws,
nor, to the knowledge of the Borrower and Guarantors, have any Hazardous
Materials been generated, treated, stored or disposed of at, on or under any of
such properties in violation of, or in a manner reasonably likely to give rise
to liability under, any applicable Environmental Laws;
(v) No judicial proceedings or governmental or
administrative action is pending, or, to the knowledge of the Borrower,
threatened, under any Environmental Law to which the Borrower or any Guarantor
is or will be named as a party with respect to such properties or operations
conducted in connection therewith, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to such properties or such operations; and
(vi) To the best of Borrower's knowledge, there has been
no release, or threat of release, of Hazardous Materials at or from such
properties, in violation of or in amounts or in a manner reasonably likely to
give rise to liability under Environmental Laws.
(i) ERISA.
(i) As of the Closing Date, neither the Borrower nor any
ERISA Affiliate maintains or contributes to, or has any obligation under, any
Employee Benefit Plans other than those identified on Schedule 6.1(i);
(ii) the Borrower and each ERISA Affiliate is in
compliance with all applicable provisions of ERISA and the regulations and
published interpretations thereunder with respect to all Employee Benefit Plans
except for any required amendments for which the remedial amendment period as
defined in Section 401(b) of the Code has not yet expired. Each Employee
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Benefit Plan that is intended to be qualified under Section 401(a) of the Code
has been determined by the Internal Revenue Service to be so qualified, and each
trust related to such plan has been determined to be exempt under Section 501(a)
of the Code. No liability has been incurred by the Borrower or any ERISA
Affiliate which remains unsatisfied for any taxes or penalties with respect to
any Employee Benefit Plan or any Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412 of the Code) been
incurred (without regard to any waiver granted under Section 412 of the Code),
nor has any funding waiver from the Internal Revenue Service been received or
requested with respect to any Pension Plan, nor has the Borrower or any ERISA
Affiliate failed to make any contributions or to pay any amounts due and owing
as required by Section 412 of the Code, Section 302 of ERISA or the terms of any
Pension Plan prior to the due dates of such contributions under Section 412 of
the Code or Section 302 of ERISA, nor has there been any event requiring any
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any
Pension Plan;
(iv) Neither the Borrower nor any ERISA Affiliate has: (A)
engaged in a nonexempt prohibited transaction described in Section 406 of the
ERISA or Section 4975 of the Code, (B) incurred any liability to the PBGC which
remains outstanding other than the payment of premiums and there are no premium
payments which are due and unpaid, (C) failed to make a required contribution or
payment to a Multiemployer Plan, or (D) failed to make a required installment or
other required payment under Section 412 of the Code;
(v) No Termination Event has occurred or is reasonably
expected to occur; and
(vi) No proceeding, claim, lawsuit and/or investigation is
existing or, to the best knowledge of the Borrower after due inquiry, threatened
concerning or involving any (A) employee welfare benefit plan (as defined in
Section 3(1) of ERISA) currently maintained or contributed to by the Borrower or
any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan.
(j) Margin Stock. Neither the Borrower nor any Subsidiary thereof is
engaged principally or as one of its activities in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each
such term is defined or used in Regulation U of the Board of Governors of the
Federal Reserve System). Not more than twenty-five percent (25%) of the proceeds
of any of the Loans or Letters of Credit will be used for purchasing or carrying
margin stock or for any purpose which violates, or which would be inconsistent
with, the provisions of Regulation T, U or X of such Board of Governors.
(k) Government Regulation. Neither the Borrower nor any Guarantor
thereof is an "investment company" or a company "controlled" by an "investment
company" (as each such term is defined or used in the Investment Company Act of
1940, as amended) and neither the Borrower nor any Subsidiary thereof is, or
after giving effect to any Extension of Credit will be, subject to
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regulation under the Public Utility Holding Company Act of 1935 or the
Interstate Commerce Act, each as amended, or any other Applicable Law which
limits its ability to incur or consummate the transactions contemplated hereby.
(l) Material Contracts. Schedule 6.1(l) sets forth a complete and
accurate list of all Material Contracts of the Borrower and its Subsidiaries in
effect as of the Closing Date not listed on any other Schedule hereto; other
than as set forth in Schedule 6.1(l), each such Material Contract is, and after
giving effect to the consummation of the transactions contemplated by the Loan
Documents will be, in full force and effect in accordance with the terms
thereof. The Borrower and its Subsidiaries have delivered to the Administrative
Agent a true and complete copy of each Material Contract required to be listed
on Schedule 6.1(l) or any other Schedule hereto.
(m) Employee Relations. Each of the Borrower and the Guarantors is
not, as of the Closing Date, party to any collective bargaining agreement nor
has any labor union been recognized as the representative of its employees. The
Borrower knows of no pending, threatened or contemplated strikes, work stoppage
or other collective labor disputes involving its employees or those of the
Guarantors.
(n) Burdensome Provisions. Neither the Borrower nor any Guarantor is
a party to any indenture, agreement, lease or other instrument, or subject to
any corporate or partnership restriction, Governmental Approval or Applicable
Law which is so unusual or burdensome as to be likely to have a Material Adverse
Effect. The Borrower and the Guarantors do not presently anticipate that future
expenditures needed to meet the provisions of any statutes, orders, rules or
regulations of a Governmental Authority will be so burdensome as to have a
Material Adverse Effect.
(o) Financial Statements. The (i) Consolidated balance sheets of the
Borrower and its Subsidiaries as of December 31, 1997 and the related statements
of income and retained earnings and cash flows for the Fiscal Years then ended
and (ii) unaudited Consolidated balance sheet of the Borrower and its
Subsidiaries as of June 30, 1998 and related unaudited interim statements of
revenue and retained earnings, copies of which have been furnished to the
Administrative Agent and each Lender, are complete and correct in all material
respects, and fairly present the Consolidated financial condition of the
Borrower and its Subsidiaries as at such dates, and the results of the
operations and changes of financial position for the periods then ended. All
such financial statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP. The Borrower and its Subsidiaries
have no material Debt, obligation or other unusual forward or long-term
commitment which is not fairly reflected in the foregoing financial statements
or in the notes thereto.
(p) No Material Adverse Change. Since December 31, 1997, there has
been no material adverse change in the properties, business, operations, or
condition (financial or otherwise) of the Borrower and its Subsidiaries and to
the knowledge of the Borrower no event has occurred or condition arisen that
could reasonably be expected to have a Material Adverse Effect.
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(q) Solvency. As of the Closing Date and after giving effect to each
Extension of Credit made hereunder, the Borrower and each of its Subsidiaries
will be Solvent.
(r) Titles to Properties. Each of the Borrower and the Guarantors has
such title to the real property owned by it as is necessary or desirable to the
conduct of its business and valid and legal title to all of its personal
property and assets, including, but not limited to, those reflected on the
balance sheets of the Borrower and its Subsidiaries delivered pursuant to
Section 6.1(o), except those which have been disposed of by the Borrower or its
Subsidiaries subsequent to such date which dispositions have been in the
ordinary course of business or as otherwise expressly permitted hereunder.
(s) Liens. None of the properties and assets of the Borrower or any
Guarantor thereof is subject to any Lien, except Liens permitted pursuant to
Section 10.3. No financing statement under the Uniform Commercial Code of any
state which names the Borrower or any Guarantor thereof or any of their
respective trade names or divisions as debtor and which has not been terminated,
has been filed in any state or other jurisdiction and neither the Borrower nor
any Subsidiary thereof has signed any such financing statement or any security
agreement authorizing any secured party thereunder to file any such financing
statement, except to perfect those Liens permitted by Section 10.3 hereof.
(t) Debt and Guaranty Obligations. Schedule 6.1(t) is a complete and
correct listing of all Debt and Guaranty Obligations of the Borrower and its
Subsidiaries as of the Closing Date in excess of $10,000,000. The Borrower and
its Subsidiaries have performed and are in compliance with all of the terms of
such Debt and Guaranty Obligations and all instruments and agreements relating
thereto, and no default or event of default, or event or condition which with
notice or lapse of time or both would constitute such a default or event of
default on the part of the Borrower or its Subsidiaries exists with respect to
any such Debt or Guaranty Obligation.
(u) Litigation. Except as set forth on Schedule 6.1(u), as of the
Closing Date there are no actions, suits or proceedings pending nor, to the
knowledge of the Borrower, threatened against the Borrower or any Guarantor or
any of their respective properties in any court or before any arbitrator of any
kind or before or by any Governmental Authority which, if adversely determined
could reasonably be expected to have a Material Adverse Effect.
(v) Absence of Defaults. To the knowledge of the Borrower, no event
has occurred or is continuing which constitutes a Default or an Event of
Default, or which constitutes, or which with the passage of time or giving of
notice or both would constitute, a default or event of default by the Borrower
or any Guarantor thereof under any Material Contract or judgment, decree or
order to which the Borrower or any Guarantor is a party or by which the Borrower
or any Guarantor or any of their respective properties may be bound or which
would require the Borrower or any Guarantor to make any payment thereunder prior
to the scheduled maturity date therefor.
(w) Accuracy and Completeness of Information. All written
information, reports and other papers and data produced by or on behalf of the
Borrower or any Subsidiary thereof and
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furnished to the Lenders were, at the time the same were so furnished, complete
and correct in all material respects to the extent necessary to give the
recipient a true and accurate knowledge of the subject matter. No document
furnished or written statement made to the Administrative Agent or the Lenders
by the Borrower or any Subsidiary thereof in connection with the negotiation,
preparation or execution of this Agreement or any of the Loan Documents contains
or will contain any untrue statement of a fact material to the creditworthiness
of the Borrower or its Subsidiaries or omits or will omit to state a fact
necessary in order to make the statements contained therein not misleading. The
Borrower is not aware of any facts which it has not disclosed in writing to the
Administrative Agent having a Material Adverse Effect, or insofar as the
Borrower can now foresee, could reasonably be expected to have a Material
Adverse Effect.
SECTION 6.2 Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this Agreement. All representations and warranties
made under this Agreement shall be made or deemed to be made at and as of the
Closing Date, shall survive the Closing Date until (unless otherwise set forth
herein) all principal, interest, fees and other amounts payable under this
Agreement or any other Loan Document shall have been paid in full and the
Commitments shall have terminated, and shall not be waived by the execution and
delivery of this Agreement, any investigation made by or on behalf of the
Lenders or any borrowing hereunder.
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner set
forth in Section 13.11 hereof, the Borrower will furnish or cause to be
furnished to the Administrative Agent and to the Lenders at their respective
addresses as set forth on Schedule 1, or such other office as may be designated
by the Administrative Agent and Lenders from time to time:
SECTION 7.1 Financial Statements and Projections.
(a) Quarterly Financial Statements. As soon as practicable and in any
event within sixty (60) days after the end of the first three (3) fiscal
quarters of each Fiscal Year, an unaudited Consolidated and consolidating
balance sheet of the Borrower and its Subsidiaries as of the close of such
fiscal quarter and unaudited Consolidated and consolidating statements of
income, retained earnings and cash flows for the fiscal quarter then ended and
that portion of the Fiscal Year then ended, including the notes thereto, all in
reasonable detail setting forth in comparative form the corresponding figures
for the preceding Fiscal Year and prepared by the Borrower in accordance with
GAAP and, if applicable, containing disclosure of the effect on the financial
position or results
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of operations of any change in the application of accounting principles and
practices during the period, and certified by the chief financial officer of the
Borrower to present fairly in all material respects the financial condition of
the Borrower and its Subsidiaries as of their respective dates and the results
of operations of the Borrower and its Subsidiaries for the respective periods
then ended, subject to normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and in any
event within one hundred twenty (120) days after the end of each Fiscal Year, an
audited Consolidated balance sheet of the Borrower and its Subsidiaries as of
the close of such Fiscal Year and audited Consolidated statements of income,
retained earnings and cash flows for the Fiscal Year then ended, including the
notes thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by an
independent certified public accounting firm acceptable to the Administrative
Agent in accordance with GAAP and, if applicable, containing disclosure of the
effect on the financial position or results of operation of any change in the
application of accounting principles and practices during the year, and
accompanied by a report thereon by such certified public accountants that is not
qualified with respect to scope limitations imposed by the Borrower or any of
its Subsidiaries or with respect to accounting principles followed by the
Borrower or any of its Subsidiaries not in accordance with GAAP.
SECTION 7.2 Officer's Compliance Certificate. At each time financial
statements are delivered pursuant to Sections 7.1 (a) or (b) a certificate of a
Responsible Officer in the form of Exhibit F attached hereto (an "Officer's
Compliance Certificate").
SECTION 7.3 Accountants' Certificate. At each time financial
statements are delivered pursuant to Section 7.1(b), a certificate of the
independent public accountants certifying such financial statements addressed to
the Administrative Agent for the benefit of the Lenders:
(a) stating that in making the examination necessary for the
certification of such financial statements, they obtained no knowledge of any
Default or Event of Default or, if such is not the case, specifying such Default
or Event of Default and its nature and period of existence; and
(b) including the calculations prepared by such accountants required
to establish whether or not the Borrower and its Subsidiaries are in compliance
with the financial covenants set forth in Article IX hereof as at the end of
each respective period.
SECTION 7.4 Other Reports.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or its Board of Directors by its independent public
accountants in connection with their auditing function, including, without
limitation, any management report and any management responses thereto;
(b) Promptly but in any event within ten (10) Business Days after the
filing thereof, a copy of (i) each report or other filing made by the Borrower
or any of its Subsidiaries with the
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Securities and Exchange Commission and required by the SEC to be delivered to
the shareholders of the Borrower or any of its Subsidiaries, (ii) each report
made by the Borrower or any of its Subsidiaries to the SEC on Form 8-K and (iii)
each final registration statement of the Borrower or any of its Subsidiaries
filed with the SEC;
(c) At any time after the Borrower has made Ratings Election,
promptly, but in any event within ten (10) Business Days of any change thereof,
written notice of any change in the Borrower's senior unsecured debt rating;
(d) As soon as practicable and in any event within sixty (60) days
after the end of any fiscal quarter, deliver a report, in form and substance
satisfactory to the Administrative Agent, identifying which Subsidiaries of the
Borrower comprise its Material Subsidiaries; and
(e) Such other information regarding the operations, business affairs
and financial condition of the Borrower or any of its Subsidiaries as the
Administrative Agent may reasonably request.
SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but in no
event later than ten (10) days after an officer of the Borrower obtains
knowledge thereof) telephonic and written notice of:
(a) the commencement of all proceedings and investigations by or
before any Governmental Authority and all actions and proceedings in any court
or before any arbitrator against or involving the Borrower or any Guarantor or
any of their respective properties, assets or businesses which if adversely
determined could reasonably be expected to have a Material Adverse Effect;
(b) any notice of any violation received by the Borrower or any
Guarantor from any Governmental Authority including, without limitation, any
notice of violation of Environmental Laws which in any such case could
reasonably be expected to have a Material Adverse Effect;
(c) any labor controversy that has resulted in, or threatens to
result in, a strike or other work action against the Borrower or any Guarantor;
(d) any attachment, judgment, lien, levy or order exceeding
$5,000,000 that may be assessed against or threatened against the Borrower or
any Guarantor;
(e) any Default or Event of Default, or any event which constitutes
or which with the passage of time or giving of notice or both would constitute a
default or event of default under any Material Contract to which the Borrower or
any of its Subsidiaries is a party or by which the Borrower or any Subsidiary
thereof or any of their respective properties may be bound;
(f) (i) any unfavorable determination letter from the Internal
Revenue Service regarding the qualification of an Employee Benefit Plan under
Section 401(a) of the Code (along with a copy
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thereof), (ii) all notices received by the Borrower or any ERISA Affiliate of
the PBGC's intent to terminate any Pension Plan or to have a trustee appointed
to administer any Pension Plan, (iii) all notices received by the Borrower or
any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition
or amount of withdrawal liability pursuant to Section 4202 of ERISA and (iv) the
Borrower obtaining knowledge or reason to know that the Borrower or any ERISA
Affiliate has filed or intends to file a notice of intent to terminate any
Pension Plan under a distress termination within the meaning of Section 4041(c)
of ERISA; and
(g) any event which makes any of the representations set forth in
Section 6.1 (except for any such representation that speaks as of a particular
date) inaccurate in any material respect.
SECTION 7.6 Accuracy of Information. All written information,
reports, statements and other papers and data furnished by or on behalf of the
Borrower to the Administrative Agent or any Lender (other than financial
forecasts) whether pursuant to this Article VII or any other provision of this
Agreement, shall be, at the time the same is so furnished, complete and correct
in all material respects to the extent necessary to give the Administrative
Agent or any Lender complete, true and accurate knowledge of the subject matter
based on the Borrower's knowledge thereof.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner
provided for in Section 13.11, the Borrower will and will cause each of the
Guarantors and with respect to Sections 8.6, 8.7, and 8.8, each of its
Subsidiaries to:
SECTION 8.1 Preservation of Corporate Existence and Related Matters.
Except as permitted by Section 10.5, preserve and maintain its separate
corporate existence and all rights, franchises, licenses and privileges
necessary to the conduct of its business, and qualify and remain qualified as a
foreign corporation and authorized to do business in each jurisdiction in which
the failure to so qualify would have a Material Adverse Effect.
SECTION 8.2 Maintenance of Property. Protect and preserve all
properties useful in and material to its business, including copyrights,
patents, trade names and trademarks; maintain in good working order and
condition all buildings, equipment and other tangible real and personal property
material to its business; and from time to time make or cause to be made all
renewals, replacements and additions to such property necessary for the conduct
of its business.
SECTION 8.3 Insurance. Maintain insurance with financially sound and
reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses of similar size and as may be
required by Applicable Law, and deliver to the
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Administrative Agent upon its reasonable request a detailed list of the
insurance then in effect, stating the names of the insurance companies, the
amounts of the insurance, the dates of the expiration thereof and the properties
and risks covered thereby.
SECTION 8.4 Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete in all material respects) as may be required or as may be
necessary to permit the preparation of financial statements in accordance with
GAAP and in compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.
SECTION 8.5 Payment and Performance of Obligations. Pay and perform
all Obligations under this Agreement and the other Loan Documents, and pay or
perform (a) all taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property, and (b) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices; provided, that the Borrower or such Guarantor may contest any item
described in clauses (a) or (b) of this Section 8.5 in good faith so long as
adequate reserves are maintained with respect thereto in accordance with GAAP.
SECTION 8.6 Compliance With Laws and Approvals. Observe and remain in
material compliance with all Applicable Laws and maintain in full force and
effect all Governmental Approvals material to its business, in each case
applicable to the conduct of its business except where the failure to observe or
comply could not reasonably be expected to have a Material Adverse Effect.
SECTION 8.7 Environmental Laws. In addition to and without limiting
the generality of Section 8.6, (a) comply in all material respects with all
applicable Environmental Laws and obtain and comply in all material respects
with and maintain any and all licenses, approvals, notifications, registrations
or permits required by applicable Environmental Laws, (b) conduct and complete
all investigations, studies, sampling and testing, and all remedial, removal and
other actions required under Environmental Laws, and promptly comply with all
lawful orders and directives of any Governmental Authority regarding
Environmental Laws, and (c) defend, indemnify and hold harmless the
Administrative Agent and the Lenders, and their respective parents,
Subsidiaries, Affiliates, employees, agents, officers and directors, from and
against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of the violation of, noncompliance with or
liability under any Environmental Laws applicable to the operations of the
Borrower or such Guarantor, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
reasonable attorney's and consultant's fees, except to the extent that any of
the foregoing directly result from the gross negligence or willful misconduct of
the party seeking indemnification therefor.
SECTION 8.8 Compliance with ERISA. In addition to and without
limiting the generality of Section 8.6, (a) comply with all applicable
provisions of ERISA and the regulations and published interpretations thereunder
with respect to all Employee Benefit Plans, (b) not take any
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action or fail to take action the result of which could be a liability to the
PBGC or to a Multiemployer Plan, (c) not participate in any prohibited
transaction that could result in any civil penalty under ERISA or tax under the
Code, (d) operate each Employee Benefit Plan in such a manner that will not
incur any tax liability under Section 4980B of the Code or any liability to any
qualified beneficiary as defined in Section 4980B of the Code and (e) furnish to
the Administrative Agent upon the Administrative Agent's request such additional
information about any Employee Benefit Plan as may be reasonably requested by
the Administrative Agent.
SECTION 8.9 Compliance With Agreements. Comply in all respects with
each term, condition and provision of all leases, agreements and other
instruments entered into in the conduct of its business including, without
limitation, any Material Contract; provided, that the Borrower or such
Subsidiary may contest any such lease, agreement or other instrument in good
faith through applicable proceedings so long as adequate reserves are maintained
in accordance with GAAP.
SECTION 8.10 Conduct of Business. Engage only in businesses in
substantially the same fields as the businesses conducted on the Closing Date
and lines of business reasonably related thereto or designated in the letter
agreement of even date herewith between Borrower and the Administrative Agent, a
copy of which has been furnished to the Administrative Agent (any of the
foregoing, a "Permitted Line of Business").
SECTION 8.11 Visits and Inspections. Permit representatives of the
Administrative Agent or any Lender, from time to time upon reasonable prior
notice (unless a Default or Event of Default has occurred and is continuing), to
visit and inspect its properties; inspect, audit and make extracts from its
books, records and files, including, but not limited to, management letters
prepared by independent accountants; and discuss with its principal officers,
and its independent accountants, its business, assets, liabilities, financial
condition, results of operations and business prospects.
SECTION 8.12 Additional Guarantors. Promptly upon discovery that the
current Guarantors do not consist of the Material Subsidiaries, cause to be
executed and delivered to the Administrative Agent (a) a duly executed joinder
in form and substance satisfactory to the Administrative Agent to the Guaranty
Agreement, such that the current Guarantors (after giving effect to such
joinder) consist of the Material Subsidiaries), and (b) favorable legal opinions
addressed to the Administrative Agent and Lenders in form and substance
satisfactory thereto with respect to such joinder and such other documents and
closing certificates as may be requested by the Administrative Agent.
SECTION 8.13 [Intentionally Omitted]
SECTION 8.14 Year 2000 Compatibility. Take all actions reasonably
necessary to assure that Borrower's computer based systems are able to operate
and effectively process data which includes dates on and after January 1, 2000.
At the request of the Administrative Agent, the Borrower shall provide
reasonable assurances satisfactory to the Administrative Agent of the Borrower's
Year 2000 compatibility.
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SECTION 8.15 Further Assurances. Make, execute and deliver all such
additional and further acts, things, deeds and instruments as the Administrative
Agent may reasonably require to document and consummate the transactions
contemplated hereby and to vest completely in and insure the Administrative
Agent and the Lenders their respective rights under this Agreement, the Notes,
the Letters of Credit and the other Loan Documents.
ARTICLE IX
FINANCIAL COVENANTS
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner set
forth in Section 13.11 hereof, the Borrower and its Subsidiaries on a
Consolidated basis will not:
SECTION 9.1 Maximum Ratio of Total Debt to Total Capitalization: The
Borrower shall not permit, as of any fiscal quarter end, the ratio of (a) Total
Debt as of such date to (b) Total Capitalization (the "Debt to Capitalization
Ratio") as of such date to exceed 0.45 to 1.00.
SECTION 9.2 Minimum Interest Coverage Ratio: The Borrower shall not
permit, as of any fiscal quarter end, the ratio of (a) Adjusted EBITR for the
four (4) consecutive fiscal quarter period ending on or immediately prior to
such date to (b) the sum of Interest Expense plus (ii) Rental Expense, in each
case for the four (4) consecutive fiscal quarter period ending on or immediately
prior to such date, to be less than 2.50 to 1.00.
ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner set
forth in Section 13.11 hereof, the Borrower has not and will not permit any of
its Subsidiaries to:
SECTION 10.1 Limitations on Debt and Guaranty Obligations. Create,
incur, assume or suffer to exist any Debt; unless:
(a) Such Debt is existing on the Closing Date, including, without
limitation, the Obligations;
(b) No Default or Event of Default has occurred and is continuing or
would result from the incurrence or assumption of any such Debt; and
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(c) If the outstanding principal amount of any such Debt exceeds
$10,000,000 on the date of incurrence or assumption, the Borrower shall deliver
a certificate, in form and substance satisfactory to the Administrative Agent,
demonstrating pro forma compliance, as of the date of such incurrence or
assumption, with the financial covenants contained in Article IX.
SECTION 10.2 [Reserved].
SECTION 10.3 Limitations on Liens. Create, incur, assume or suffer to
exist, any Lien on or with respect to any of its assets or properties (including
without limitation shares of capital stock or other ownership interests), real
or personal, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges or
levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) not yet due or as to which the period of grace (not to
exceed ninety (90) days), if any, related thereto has not expired or which are
being contested in good faith and by appropriate proceedings if adequate
reserves are maintained to the extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers, warehousemen,
processors or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, (i) which are not overdue for a period of more
than thirty (30) days or (ii) which are being contested in good faith and by
appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the ordinary
course of business in connection with, or to secure payment of, obligations
under workers' compensation, unemployment insurance or similar legislation or
obligations in the ordinary course of business under customer service contracts;
(d) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use of real
property, which in the aggregate are not substantial in amount and which do not,
in any case, detract from the value of such property or materially impair the
use thereof in the ordinary conduct of business;
(e) Liens of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders;
(f) Liens not otherwise permitted by this Section 10.3 and in
existence on the Closing Date and described on Schedule 10.3;
(g) Liens securing purchase money Debt permitted under Section 10.1
not to exceed $15,000,000 outstanding at any one time; provided that (i) such
Liens shall be created substantially simultaneously with the acquisition of the
related asset, (ii) such Liens do not at any time encumber any property other
than the property financed by such Debt, (iii) the amount of Debt secured
thereby is not increased and (iv) the principal amount of Debt secured by any
such Lien shall at no time
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exceed one-hundred percent (100%) of the original purchase price of such
property at the time it was acquired;
(h) Liens securing obligations as lessee under Capital Leases;
provided that (i) any such Lien shall attach only to the property subject to the
respective Capital Lease and (ii) that the Debt secured by such Liens, in the
aggregate, shall not exceed $15,000,000 at any one time outstanding, excluding
any Liens securing obligations with regard to fleet automobiles or other
vehicles leased for the Borrower or its Subsidiaries;
(i) Other Liens not referred to in (a) through (h), above; provided
that the Debt secured by such Liens, in the aggregate, shall not exceed
$10,000,000 at any one time outstanding; and
(j) Liens created solely for the purpose of extending, renewing or
replacing in whole or in part Debt secured by any Lien referred to in the
foregoing clauses (a) through (h), above; provided such Debt is extended,
renewed, or replaced on terms no less favorable to the Borrower or Guarantors,
as applicable.
SECTION 10.4 Limitations on Loans, Advances, Investments and
Acquisitions. Purchase, own, invest in or otherwise acquire, directly or
indirectly, any capital stock, interests in any partnership or joint venture
(including without limitation the creation or capitalization of any Subsidiary),
evidence of Debt or other obligation or security, substantially all or a portion
of the business or assets of any other Person or any other investment or
interest whatsoever in any other Person, or make or permit to exist, directly or
indirectly, any loans, advances or extensions of credit to, or any investment in
cash or by delivery of property in, any Person except:
(a) investments not otherwise permitted by this Section 10.4 in
Subsidiaries existing on the Closing Date and the other existing loans, advances
and investments not otherwise permitted by this Section 10.4 described on
Schedule 10.4(a);
(b) investments permitted under the Investment Policy in effect as of
the Closing Date, a copy of which is attached hereto as Schedule 10.4(b);
provided, that any exceptions or modifications to the Investment Policy after
the Closing Date approved in advance by the Required Lenders shall also be
permitted hereby;
(c) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within 120 days from the date of acquisition thereof, (ii) commercial
paper maturing no more than 120 days from the date of creation thereof and
currently having the highest rating obtainable from either Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. or Moody's
Investors Service, Inc., (iii) certificates of deposit maturing no more than 120
days from the date of creation thereof issued by commercial banks incorporated
under the laws of the United States of America, each having combined capital,
surplus and undivided profits of not less than $500,000,000 and having a rating
of "A" or better by a nationally recognized rating agency; provided, that the
aggregate amount invested in such certificates of deposit shall not at any time
exceed $5,000,000 for any one such certificate of
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deposit and $10,000,000 for any one such bank, or (iv) time deposits maturing no
more than 30 days from the date of creation thereof with commercial banks or
savings banks or savings and loan associations each having membership either in
the FDIC or the deposits of which are insured by the FDIC and in amounts not
exceeding the maximum amounts of insurance thereunder;
(d) investments in the form of acquisitions that meet all of the
following requirements: (i) in the case of an acquisition of capital stock,
equity interests or other ownership interests, the Person whose equity interest
is to be acquired shall be, or as a result of such acquisition shall become, a
Wholly-Owned Subsidiary of the Borrower and no Change in Control shall have been
effected thereby, (ii) the Person whose capital stock, equity interests or other
ownership interests are to be acquired shall be engaged in a business or the
assets being acquired are to be used in a Permitted Line of Business, (iii) the
Borrower shall deliver to the Administrative Agent all documents instruments and
joinders as are required to be delivered pursuant to Section 8.12, (iv) the
Borrower shall be in compliance with each financial covenant set forth in
Article IX and each negative covenant set forth in Article X prior to
consummating the acquisition, (v) no Default or Event of Default shall have
occurred and be continuing both before and immediately after giving effect to
the acquisition as well as for a period of the four (4) consecutive fiscal
quarters ending immediately thereafter, (vi) a copy of the final governing
documentation shall be delivered promptly after receipt by the Borrower after
the consummation of the acquisition, and (vii) with regard to acquisitions
funded in whole or in part with the proceeds of an Extension of Credit, then the
following requirements also apply (A) such acquisition shall be consummated on a
non-hostile basis and (B) if Extensions of Credit outstanding under the Credit
Agreement exceed $25,000,000 (including all Extensions of Credit to be made to
finance such proposed acquisition), then (aa) a description of the acquisition
and the governing documentation shall have been delivered to the Administrative
Agent and the Lenders at least fifteen (15) Business Days prior to the
consummation of the acquisition (or if such fifteen (15) Business Days prior
notice is not reasonably possible or is deemed unadvisable, then such prior
notice as is appropriate and feasible under the circumstances (in each case, as
determined by the Borrower in consultation with the Administrative Agent)), (bb)
the Borrower shall have demonstrated compliance with each financial covenant set
forth in Article IX and each negative covenant set forth in Article X prior to
consummating the acquisition and (cc) such documents as may be reasonably
requested by the Administrative Agent shall have been delivered to the
Administrative Agent;
(e) loans and advances to employees for reasonable business expenses
in the ordinary course of business in an aggregate amount not to exceed
$5,000,000 at any one time;
(f) investments (including loans) in addition to mergers or
acquisitions otherwise permitted under this Agreement, in Permitted Lines of
Business, provided that the aggregate amount of consideration paid (including
the principal balance of and any accrued interest on any loans) for all such
investments during the term hereof, adjusted for any recovery during the term
hereof by the Borrower of any such consideration (with any profit or premiums
thereon) upon the sale or other disposition of the related investment, shall not
exceed fifteen percent (15%) of Tangible Net Worth as of any date of
determination; and
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(g) loans, advances and investments required or made in connection
with the ESOP.
SECTION 10.5 Limitations on Mergers and Liquidation. Merge,
consolidate or enter into any similar combination with any other Person or
liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution)
except:
(a) any Wholly-Owned Subsidiary of the Borrower may merge with any
other Wholly-Owned Subsidiary of the Borrower; provided, that, if any such
Subsidiary is a Guarantor, such Guarantor shall be the surviving entity;
(b) any Wholly-Owned Subsidiary may merge into the Person such
Wholly-Owned Subsidiary was formed to acquire in connection with an acquisition
permitted by Section 10.4(d); and
(c) any Wholly-Owned Subsidiary of the Borrower may wind-up into the
Borrower or any other Wholly-Owned Subsidiary of the Borrower.
SECTION 10.6 Limitations on Sale of Assets. Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, the sale of any receivables and leasehold
interests and any sale-leaseback or similar transaction), whether now owned or
hereafter acquired except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale of obsolete assets no longer used or usable in the
business of the Borrower or any of its Subsidiaries;
(c) the transfer of assets to the Borrower or any Wholly-Owned
Subsidiary of the Borrower pursuant to Section 10.5(c);
(d) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the compromise or
collection thereof, including, without limitation, in connection with any asset
securitization;
(e) sale-leaseback transactions so long as no Default or Event of
Default has occurred and is continuing or is occasioned thereby; and
(f) the sale of any other assets of the Borrower or its Subsidiaries
not to exceed, in the aggregate, ten percent (10%) of Consolidated Tangible Net
Worth during any fiscal year.
SECTION 10.7 Limitations on Dividends and Distributions. Declare or
pay any dividends upon any of its capital stock; purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its capital stock, or
make any distribution of cash, property or assets among
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the holders of shares of its capital stock, or make any change in its capital
structure which such change in capital structure could reasonably be expected to
have a Material Adverse Effect; provided that:
(a) the Borrower or any Subsidiary may pay dividends in shares of its
own capital stock;
(b) any Subsidiary may pay cash dividends to the Borrower;
(c) if there is no Default or Event of Default existing at such time,
the Borrower or any Subsidiary may purchase, redeem, retire or otherwise
acquire, directly or indirectly, any shares of its capital stock pursuant to
duly executed and adopted resolutions by the Board of Directors; and
(d) the Borrower may declare and pay cash dividends; provided that no
Default or Event of Default has occurred and is continuing at the time of
declaration thereof and provided further that the payment thereof will not cause
the occurrence of a Default or Event of Default, all as demonstrated to the
reasonable satisfaction of the Administrative Agent.
SECTION 10.8 Limitations on Exchange and Issuance of Capital Stock.
Issue, sell or otherwise dispose of any class or series of capital stock that,
by its terms or by the terms of any security into which it is convertible or
exchangeable, is, or upon the happening of an event or passage of time would be,
(a) convertible or exchangeable into Debt or (b) required to be redeemed or
repurchased, including at the option of the holder, in whole or in part, or has,
or upon the happening of an event or passage of time would have, a redemption or
similar payment due.
SECTION 10.9 Transactions with Affiliates. Except for transactions
consistent with past business practices and in accordance with the requirements
of the Borrower's business or except as otherwise provided herein, directly or
indirectly (a) make any loan or advance to, or purchase or assume any note or
other obligation to or from, any of its officers, directors, shareholders or
other Affiliates, or to or from any member of the immediate family of any of its
officers, directors, shareholders or other Affiliates, or subcontract any
operations to any of its Affiliates or (b) enter into, or be a party to, any
other transaction with any of its Affiliates, except pursuant to the reasonable
requirements of its business and upon fair and reasonable terms prior to the
consummation thereof and are no less favorable to it than it would obtain in a
comparable arm's length transaction with a Person not its Affiliate.
SECTION 10.10 Certain Accounting Changes. Change its Fiscal Year end,
or make any change in its accounting treatment and reporting practices except as
required by GAAP.
SECTION 10.11 Amendments; Payments and Prepayments of Subordinated
Debt. Amend or modify (or permit the modification or amendment of) any of the
terms or provisions of any Subordinated Debt, or cancel or forgive, make any
voluntary or optional payment or prepayment on, or redeem or acquire for value
(including without limitation by way of depositing with any trustee with respect
thereto money or securities before due for the purpose of paying when due) any
Subordinated Debt.
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SECTION 10.12 Restrictive Agreements. Enter into any Debt which
contains any negative pledge on assets or any covenants more restrictive than
the provisions of Articles VIII, IX and X hereof, or which restricts, limits or
otherwise encumbers its ability to incur Liens on or with respect to any of its
assets or properties other than the assets or properties securing such Debt.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment or order of any court or any order, rule or regulation
of any Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans and Reimbursement
Obligations. The Borrower shall default in any payment of principal of any Loan,
Note or Reimbursement Obligation when and as due (whether at maturity, by reason
of acceleration or otherwise), and such default shall continue unremedied for
two (2) Business Days.
(b) Other Payment Default. The Borrower shall default in the payment
when and as due (whether at maturity, by reason of acceleration or otherwise) of
interest on any Loan, Note or Reimbursement Obligation or the payment of any
other Obligation, and such default shall continue unremedied for five (5)
Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed
to be made by the Borrower or any of its Subsidiaries under this Agreement, any
Loan Document or any amendment hereto or thereto, shall at any time prove to
have been incorrect or misleading in any material respect when made or deemed
made.
(d) Default in Performance of Certain Covenants. The Borrower shall
default in the performance or observance of any covenant or agreement contained
in Sections 7.1 or 7.2 or Articles IX or X of this Agreement.
(e) Default in Performance of Other Covenants and Conditions. The
Borrower or any Subsidiary thereof shall default in the performance or
observance of any term, covenant, condition or agreement contained in this
Agreement (other than as specifically provided for otherwise in this Section
11.1) or any other Loan Document and such default shall continue for a period of
thirty (30) days after written notice thereof has been given to the Borrower by
the Administrative Agent.
(f) Hedging Agreement. Any termination payment shall be due by the
Borrower under any Hedging Agreement and such amount is not paid within thirty
(30) Business Days of the due date thereof.
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(g) Debt Cross-Default. The Borrower or any of its Subsidiaries shall
(i) default in the payment of any Debt (other than the Notes or any
Reimbursement Obligation) the aggregate outstanding amount of which Debt is in
excess of $10,000,000 beyond the period of grace if any, provided in the
instrument or agreement under which such Debt was created, or (ii) default in
the observance or performance of any other agreement or condition relating to
any Debt (other than the Notes or any Reimbursement Obligation) the aggregate
outstanding amount of which Debt is in excess of $10,000,000 or contained in any
instrument or agreement evidencing, securing or relating thereto or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause, with the giving
of notice if required, any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).
(h) Other Cross-Defaults. The Borrower or any of its Subsidiaries
shall default in the payment when due, or in the performance or observance, of
any obligation or condition of any Material Contract (and all applicable cure
and grace periods have expired) unless, but only as long as, the existence of
any such default is being contested by the Borrower or such Subsidiary in good
faith by appropriate proceedings and adequate reserves in respect thereof have
been established on the books of the Borrower or such Subsidiary to the extent
required by GAAP.
(i) Loss of Material Services Contracts or Material Customers. (i)
All or substantially all of any group of Related Material Services Contracts
shall be terminated and not replaced with comparable Related Material Service
Contracts within a period of ninety (90) days after such termination or (ii) the
Borrower or any its Subsidiaries shall breach any material provision of any
Related Material Services Contracts which such breach (either individually or in
the aggregate with other breaches under the same Related Material Services
Contracts) could reasonably be expected to result in the loss of a Material
Customer; provided, that any event described in clause (i) or (ii) above shall
constitute an Event of Default only if, following the occurrence of such event,
the ability of the Borrower to satisfy its payment obligations under this
Agreement or to comply with the financial covenants set forth in Article IX
shall have been materially impaired, as reasonably determined by the
Administrative Agent and the Required Lenders.
(j) Change in Control. Any person or group of persons (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended)
shall obtain ownership or control in one or more series of transactions of more
than thirty percent (30%) of the common stock or thirty percent (30%) of the
voting power of the Borrower entitled to vote in the election of members of the
board of directors of the Borrower or there shall have occurred under any
indenture or other instrument evidencing any Debt in excess of $3,000,000 any
"change in control" (as defined in such indenture or other evidence of Debt)
obligating the Borrower to repurchase, redeem or repay all or any part of the
Debt or capital stock provided for therein (any such event, a "Change in
Control").
(k) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary
thereof shall (i) commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect), (ii) file a petition seeking to take advantage
of any other laws, domestic or foreign, relating to
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bankruptcy, insolvency, reorganization, winding up or composition for adjustment
of debts, (iii) consent to or fail to contest in a timely and appropriate manner
any petition filed against it in an involuntary case under such bankruptcy laws
or other laws, (iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of itself or of a substantial part
of its property, domestic or foreign, (v) admit in writing its inability to pay
its debts as they become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of authorizing any
of the foregoing.
(l) Involuntary Bankruptcy Proceeding. A case or other proceeding
shall be commenced against the Borrower or any Subsidiary thereof in any court
of competent jurisdiction seeking (i) relief under the federal bankruptcy laws
(as now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like for the Borrower or any Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and such case
or proceeding shall continue without dismissal or stay for a period of sixty
(60) consecutive days, or an order granting the relief requested in such case or
proceeding (including, but not limited to, an order for relief under such
federal bankruptcy laws) shall be entered.
(m) Failure of Agreements. Any material provision of this Agreement
or of any other Loan Document shall for any reason cease to be valid and binding
on the Borrower or Subsidiary party thereto or any such Person shall so state in
writing.
(n) Termination Event. The occurrence of any of the following events:
(i) the Borrower or any ERISA Affiliate fails to make full payment when due of
all amounts which, under the provisions of any Pension Plan or Section 412 of
the Code, the Borrower or any ERISA Affiliate is required to pay as
contributions thereto, (ii) an accumulated funding deficiency in excess of
$1,000,000 occurs or exists, whether or not waived, with respect to any Pension
Plan, (iii) a Termination Event or (iv) the Borrower or any ERISA Affiliate as
employers under one or more Multiemployer Plan makes a complete or partial
withdrawal from any such Multiemployer Plan and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding
$1,000,000.
(o) Judgment. A judgment or order for the payment of money which
causes the aggregate amount of all such judgments to exceed $15,000,000 in any
Fiscal Year shall be entered against the Borrower or any of its Subsidiaries by
any court and such judgment or order shall continue without discharge or stay
for a period of sixty (60) days.
SECTION 11.2 Remedies. Upon the occurrence of an Event of Default,
with the consent of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent shall, by notice
to the Borrower:
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(a) Acceleration; Termination of Facilities. Declare the principal of
and interest on the Loans, the Notes and the Reimbursement Obligations at the
time outstanding, and all other amounts owed to the Lenders and to the
Administrative Agent under this Agreement or any of the other Loan Documents
(other than any Hedging Agreement) and all other Obligations (other than
obligations owing under any Hedging Agreement), to be forthwith due and payable,
whereupon the same shall immediately become due and payable without presentment,
demand, protest or other notice of any kind, all of which are expressly waived,
anything in this Agreement or the other Loan Documents to the contrary
notwithstanding, and terminate the Credit Facility and any right of the Borrower
to request borrowings or Letters of Credit thereunder; provided, that upon the
occurrence of an Event of Default specified in Section 11.1(j) or (k), the
Credit Facility shall be automatically terminated and all Obligations (other
than obligations owing under any Hedging Agreement) shall automatically become
due and payable.
(b) Letters of Credit. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to the preceding paragraph, require the Borrower at such
time to deposit in a cash collateral account opened by the Administrative Agent
an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be applied
by the Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay the
other Obligations. After all such Letters of Credit shall have expired or been
fully drawn upon, the Reimbursement Obligation shall have been satisfied and all
other Obligations shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrower.
(c) Rights of Collection. Exercise on behalf of the Lenders all of
its other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Borrower's Obligations.
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrower, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default.
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SECTION 11.4 Judgment Currency. The obligation of the Borrower to
make payments of the principal of and interest on the Notes and the obligation
of any such Person to make payments of any other amounts payable hereunder or
pursuant to any other Loan Document in the currency specified for such payment
shall not be discharged or satisfied by any tender, or any recovery pursuant to
any judgment, which is expressed in or converted into any other currency, except
to the extent that such tender or recovery shall result in the actual receipt by
each of the Administrative Agent and Lenders of the full amount of the
particular Permitted Currency expressed to be payable pursuant to the applicable
Loan Document. The Administrative Agent shall, using all amounts obtained or
received from the Borrower pursuant to any such tender or recovery in payment of
principal of and interest on the Obligations, promptly purchase the applicable
Permitted Currency at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it. The obligation of the Borrower to
make payments in the applicable Permitted Currency shall be enforceable as an
alternative or additional cause of action solely for the purpose of recovering
in the applicable Permitted Currency the amount, if any, by which such actual
receipt shall fall short of the full amount of the Permitted Currency expressed
to be payable pursuant to the applicable Loan Document.
ARTICLE XII
THE ADMINISTRATIVE AGENT
SECTION 12.1 Appointment. Each of the Lenders hereby irrevocably
designates and appoints First Union as Administrative Agent of such Lender under
this Agreement and the other Loan Documents for the term hereof and each such
Lender irrevocably authorizes First Union as Administrative Agent for such
Lender, to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Administrative Agent by the terms of this
Agreement and such other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or such other Loan Documents, the Administrative
Agent shall not have any duties or responsibilities, except those expressly set
forth herein and therein, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or the other Loan Documents or
otherwise exist against the Administrative Agent. Any reference to the
Administrative Agent in this Article XII shall be deemed to refer to the
Administrative Agent solely in its capacity as Administrative Agent and not in
its capacity as a Lender.
SECTION 12.2 Delegation of Duties. The Administrative Agent may
execute any of its respective duties under this Agreement and the other Loan
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by the Administrative Agent with
reasonable care.
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SECTION 12.3 Exculpatory Provisions. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement or the other Loan Documents (except for actions occasioned solely by
its or such Person's own gross negligence or willful misconduct), or (b)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any of its Subsidiaries or
any officer thereof contained in this Agreement or the other Loan Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or the other Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
the other Loan Documents or for any failure of the Borrower or any of its
Subsidiaries to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower or any of its Subsidiaries.
SECTION 12.4 Reliance by the Administrative Agent. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless such Note shall have been
transferred in accordance with Section 13.10 hereof. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement and the other Loan Documents unless it shall first receive such advice
or concurrence of the Required Lenders (or, when expressly required hereby or by
the relevant other Loan Document, all the Lenders) as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action except for its own gross negligence or
willful misconduct. The Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
Notes in accordance with a request of the Required Lenders (or, when expressly
required hereby, all the Lenders), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Notes.
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SECTION 12.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless it has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the
Administrative Agent receives such a notice, it shall promptly give notice
thereof to the Lenders. The Administrative Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Lenders; provided that unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders, except to the extent that other provisions of
this Agreement expressly require that any such action be taken or not be taken
only with the consent and authorization or the request of the Lenders or
Required Lenders, as applicable.
SECTION 12.6 Non-Reliance on the Administrative Agent and Other
Lenders. Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its respective officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates has made any representations or
warranties to it and that no act by the Administrative Agent hereinafter taken,
including any review of the affairs of the Borrower or any of its Subsidiaries,
shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and its Subsidiaries and made its own decision
to make its Loans and issue or participate in Letter of Credit hereunder and
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement and the other Loan
Documents, and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition and
creditworthiness of the Borrower and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Administrative Agent hereunder or by the other Loan Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of the Borrower or
any of its Subsidiaries which may come into the possession of the Administrative
Agent or any of its respective officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates.
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SECTION 12.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such and (to the extent not reimbursed
by the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to the respective amounts of their Commitment Percentages,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Notes or any Reimbursement Obligation) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's bad faith, gross negligence or willful misconduct. The agreements in
this Section 12.7 shall survive the payment of the Notes, any Reimbursement
Obligation and all other amounts payable hereunder and the termination of this
Agreement.
SECTION 12.8 The Administrative Agent in Its Individual Capacity. The
Administrative Agent and its respective Subsidiaries and Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the Borrower as though the Administrative Agent were not an Administrative Agent
hereunder. With respect to any Loans made or renewed by it and any Note issued
to it and with respect to any Letter of Credit issued by it or participated in
by it, the Administrative Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may exercise the same
as though it were not an Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
SECTION 12.9 Resignation of the Administrative Agent; Successor
Administrative Agent. Subject to the appointment and acceptance of a successor
as provided below, the Administrative Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Administrative
Agent, which successor shall have minimum capital and surplus of at least
$500,000,000. If no successor Administrative Agent shall have been so appointed
by the Required Lenders and shall have accepted such appointment within thirty
(30) days after the Administrative Agent's giving of notice of resignation, then
the Administrative Agent may, on behalf of the Lenders and with the consent of
the Borrower, appoint a successor Administrative Agent, which successor shall
have minimum capital and surplus of at least $500,000,000; provided that so long
as any Default or Event of Default exists or is continuing, the Borrower shall
have no consent rights pursuant to this Section 12.9. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation hereunder as
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Administrative Agent, the provisions of this Section 12.9 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Administrative Agent.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to the
Administrative Agent as understood by the Administrative Agent will be deemed to
be the controlling and proper notice in the event of a discrepancy with or
failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it
at the following addresses, or any other address as to which all the other
parties are notified in writing.
If to the Borrower: Quintiles Transnational Corp.
4709 Creekstone Drive
Durham, North Carolina 27703-8411
Attention: Vincent T. Morgus
Telephone No.: (919) 941-2010
Telecopy No.: (919) 941-9113
With copies to: Smith, Anderson, Blount, Dorsett, Mitchell &
Jernigan, L.L.P.
2500 First Union Capitol Center
Raleigh, North Carolina 27601
Attention: Gerald F. Roach, Esq.
Telephone No.: (919) 821-6668
Telecopy No.: (919) 821-6800
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If to First Union as First Union National Bank
Administrative Agent: 150 Fayetteville Street Mall, 6th Floor
Raleigh, North Carolina 27601
Attention: G. Mendel Lay, Jr.
Telephone No.: (919) 881-7003
Telecopy No.: (919) 881-7016
If to any Lender: To the Address set forth on Schedule 1 hereto
(c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower and Lenders, as the Administrative Agent's Office referred to herein,
to which payments due are to be made and at which Loans will be disbursed and
Letters of Credit issued.
SECTION 13.2 Expenses; Indemnity. The Borrower will (a) pay all
out-of-pocket expenses of the Administrative Agent in connection with (i) the
preparation, execution and delivery of this Agreement and each other Loan
Document, whenever the same shall be executed and delivered, including without
limitation all reasonable out-of-pocket syndication and due diligence expenses
and reasonable fees and disbursements of counsel for the Administrative Agent
and (ii) the preparation, execution and delivery of any waiver, amendment or
consent by the Administrative Agent or the Lenders relating to this Agreement or
any other Loan Document, including without limitation reasonable fees and
disbursements of counsel for the Administrative Agent, (b) pay all reasonable
out-of-pocket expenses of the Administrative Agent and each Lender actually
incurred (with legal fees based on standard hourly rates and not the presumed
rates set forth in the N.C. Gen. Stat. Section 6-21.2) in connection with the
administration and enforcement of any rights and remedies of the Administrative
Agent and Lenders under the Credit Facility, including consulting with
appraisers, accountants, engineers, attorneys and other Persons concerning the
nature, scope or value of any right or remedy of the Administrative Agent or any
Lender hereunder or under any other Loan Document or any factual matters in
connection therewith, which expenses shall include without limitation the
reasonable fees and disbursements of such Persons, and (c) defend, indemnify and
hold harmless the Administrative Agent and the Lenders, and their respective
parents, Subsidiaries, Affiliates, employees, agents, Administrative Agents,
officers and directors, from and against any losses, penalties, fines,
liabilities, settlements, damages, costs and expenses, suffered by any such
Person in connection with any claim, investigation, litigation or other
proceeding (whether or not the Administrative Agent or any Lender is a party
thereto) and the prosecution and defense thereof, arising out of or in any way
connected with the Agreement, any other Loan Document or the Loans, including
without limitation reasonable attorney's and consultant's fees, except to the
extent that any of the foregoing result from the gross negligence or willful
misconduct of the party seeking indemnification therefor.
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SECTION 13.3 Set-off. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon and after the occurrence and during the continuation of any Event of
Default and upon the request of any Lender that the Administrative Agent declare
the Loans to be immediately due and payable or require cash collateral pursuant
to Section 11.2, the Lenders and any assignee or participant of a Lender in
accordance with Section 13.10 are hereby authorized by the Borrower at any time
or from time to time, without notice to the Borrower or to any other Person, any
such notice being hereby expressly waived, except as otherwise agreed in writing
by the Administrative Agent or the Lenders, to set off and to appropriate and to
apply any and all deposits (general or special, time or demand, including, but
not limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured) and any other indebtedness at any time held or owing by
the Lenders, or any such assignee or participant to or for the credit or the
account of the Borrower against and on account of the Obligations irrespective
of whether or not the Administrative Agent shall have declared any or all of the
Obligations to be due and payable as permitted by Section 11.2 and although such
Obligations shall be contingent or unmatured.
SECTION 13.4 Governing Law. This Agreement, the Notes and the other
Loan Documents, unless otherwise expressly set forth therein, shall be governed
by, construed and enforced in accordance with the laws of the State of North
Carolina, without reference to the conflicts or choice of law principles
thereof.
SECTION 13.5 Consent to Jurisdiction. The Borrower hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg County or Wake County, North Carolina, in any action, claim or other
proceeding arising out of any dispute in connection with this Agreement, the
Notes and the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations. The Borrower
hereby irrevocably consents to the service of a summons and complaint and other
process in any action, claim or proceeding brought by the Administrative Agent
or any Lender in connection with this Agreement, the Notes or the other Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations, on behalf of itself or its property, in the
manner specified in Section 13.1. Nothing in this Section 13.5 shall affect the
right of the Administrative Agent or any Lender to serve legal process in any
other manner permitted by Applicable Law or affect the right of the
Administrative Agent or any Lender to bring any action or proceeding against the
Borrower or its properties in the courts of any other jurisdictions.
SECTION 13.6 Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to the Notes or any other
Loan Documents ("Disputes"), between or among parties to the Notes or any other
Loan Document shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
Loan Documents executed in the future, or
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claims concerning any aspect of the past, present or future relationships
arising out of or connected with the Loan Documents. Arbitration shall be
conducted under and governed by the Commercial Financial Disputes Arbitration
Rules (the "Arbitration Rules") of the American Arbitration Association and
Title 9 of the U.S. Code. All arbitration hearings shall be conducted in either
Charlotte or Raleigh, North Carolina. The expedited procedures set forth in Rule
51, et seq. of the Arbitration Rules shall be applicable to claims of less than
$1,000,000. All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction.
Notwithstanding anything foregoing to the contrary, any arbitration proceeding
demanded hereunder shall begin within ninety (90) days after such demand thereof
and shall be concluded within one-hundred twenty (120) days after such demand.
These time limitations may not be extended unless a party hereto shows cause for
extension and then such extension shall not exceed a total of sixty (60) days.
The panel from which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall be a
retired judge from the highest court of general jurisdiction, state or federal,
of the state where the hearing will be conducted. The parties hereto do not
waive any applicable Federal or state substantive law except as provided herein.
Notwithstanding the foregoing, this paragraph shall not apply to any Hedging
Agreement that is a Loan Document.
(b) Jury Trial. THE ADMINISTRATIVE AGENT, EACH LENDER AND THE
BORROWER HEREBY ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE
IRREVOCABLY WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY
ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS
HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the preceding
binding arbitration provisions, the parties hereto and the other Loan Documents
preserve, without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute. Each
such Person shall have and hereby reserves the right to proceed in any court of
proper jurisdiction or by self help to exercise or prosecute the following
remedies: (i) all rights to foreclose against any real or personal property or
other security by exercising a power of sale granted in the Loan Documents or
under applicable law or by judicial foreclosure and sale, (ii) all rights of
self help including peaceful occupation of property and collection of rents, set
off, and peaceful possession of property, (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and in filing an involuntary bankruptcy
proceeding, and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
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SECTION 13.7 Reversal of Payments. To the extent the Borrower makes a
payment or payments to the Administrative Agent for the ratable benefit of the
Lenders or the Administrative Agent receives any payment or proceeds of the
collateral which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Administrative
Agent.
SECTION 13.8 Injunctive Relief; Punitive Damages.
(a) The Administrative Agent, Lenders and Borrower (on behalf of
itself and its Subsidiaries) hereby agree that no such Person shall have a
remedy of punitive or exemplary damages against any other party to a Loan
Document and each such Person hereby waives any right or claim to punitive or
exemplary damages that they may now have or may arise in the future in
connection with any Dispute, whether such Dispute is resolved through
arbitration or judicially.
(b) The parties agree that they shall not have a remedy of punitive
or exemplary damages against any other party in any Dispute and hereby waive any
right or claim to punitive or exemplary damages they have now or which may arise
in the future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
SECTION 13.9 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower or any Subsidiary thereof to determine compliance with any covenant
contained herein, shall, except as otherwise expressly contemplated hereby or
unless there is an express written direction by the Administrative Agent to the
contrary agreed to by the Borrower, be performed in accordance with GAAP as in
effect on the Closing Date. In the event that changes in GAAP shall be mandated
by the Financial Accounting Standards Board, or any similar accounting body of
comparable standing, or shall be recommended by the Borrower's certified public
accountants, to the extent that such changes would modify such accounting terms
or the interpretation or computation thereof, such changes shall be followed in
defining such accounting terms only from and after the date the Borrower and the
Lenders shall have amended this Agreement to the extent necessary to reflect any
such changes in the financial covenants and other terms and conditions of this
Agreement.
SECTION 13.10 Successors and Assigns; Participations.
(a) Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Administrative Agent and the Lenders,
all future holders of the Notes, and their respective successors and assigns,
except that the Borrower shall not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.
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(b) Primary Syndication; Assignment by Lenders. The parties agree
that the Lenders who become party hereto pursuant to the primary syndication of
this Facility shall be Lenders who are mutually agreed upon by the
Administrative Agent and the Borrower. After the completion of the primary
syndication, each Lender may, with the consent of the Borrower (so long as no
Default or Event of Default has occurred and is continuing) and the consent of
the Administrative Agent, which consents shall not be unreasonably withheld,
assign to one or more Eligible Assignees all or a portion of its interests,
rights and obligations under this Agreement (including, without limitation, all
or a portion of the Extensions of Credit at the time owing to it and the Notes
held by it); provided that:
(i) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and obligations under
this Agreement;
(ii) if less than all of the assigning Lender's Commitment
is to be assigned, the Commitment so assigned shall not be less than
$10,000,000;
(iii) the parties to each such assignment shall execute
and deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance in the form of Exhibit G attached hereto
(an "Assignment and Acceptance"), together with any Note or Notes subject to
such assignment;
(iv) such assignment shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with the
Securities and Exchange Commission or apply to or qualify the Loans or the Notes
under the blue sky laws of any state; and
(v) the assigning Lender shall pay to the Administrative
Agent an assignment fee of $3,000 upon the execution by such Lender of the
Assignment and Acceptance; provided that no such fee shall be payable upon any
assignment by a Lender to an Affiliate thereof.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereby
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.
(c) Rights and Duties Upon Assignment. By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the amount of the Extensions of
Credit with respect to each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
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and the Borrower, the Administrative Agent and the Lenders may treat each person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
or Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Issuance of New Notes. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Eligible Assignee together
with any Note or Notes subject to such assignment and the written consent to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is substantially in the form of Exhibit G:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the
Register;
(iii) give prompt notice thereof to the Lenders and the
Borrower; and
(iv) promptly deliver a copy of such Assignment and
Acceptance to the Borrower.
Within five (5) Business Days after receipt of notice, the Borrower shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes, a new Note or Notes to the order of such Eligible Assignee in
amounts equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and a new Note or Notes to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of the assigned Notes delivered to the assigning Lender. Each surrendered Note
or Notes shall be canceled and returned to the Borrower.
(f) Participations. Each Lender may sell participations to one or
more banks or other entities in all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Extensions of Credit and the Notes held by it); provided that:
(i) each such participation shall be in an amount not less
than $10,000,000;
(ii) such Lender's obligations under this Agreement
(including, without limitation, its Commitment) shall remain unchanged;
(iii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations;
(iv) such Lender shall remain the holder of the Notes held
by it for all purposes of this Agreement;
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(v) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement;
(vi) such Lender shall not permit such participant the
right to approve any waivers, amendments or other modifications to this
Agreement or any other Loan Document other than waivers, amendments or
modifications which would reduce the principal of or the interest rate on any
Loan or Reimbursement Obligation, extend the term or increase the amount of the
Commitment, reduce the amount of any fees to which such participant is entitled,
extend any scheduled payment date for principal of any Loan or, except as
expressly contemplated hereby or thereby, release substantially all of the
Collateral; and
(vii) any such disposition shall not, without the consent
of the Borrower, require the Borrower to file a registration statement with the
Securities and Exchange Commission to apply to qualify the Loans or the Notes
under the blue sky law of any state.
(g) Disclosure of Information; Confidentiality. The Administrative
Agent and the Lenders shall hold all non-public information with respect to the
Borrower obtained pursuant to the Loan Documents confidential in accordance with
their customary procedures for handling confidential information; provided, that
the Administrative Agent may disclose information relating to this Agreement to
Gold Sheets and other similar bank trade publications, such information to
consist of deal terms and other information customarily found in such
publications and approved by Borrower in writing prior to submission and
provided further, that the Administrative Agent and Lenders may disclose any
such information to the extent such disclosure is required by law or requested
by any regulatory authority. Any Lender may, in connection with any assignment,
proposed assignment, participation or proposed participation pursuant to this
Section 13.10, disclose to the assignee, participant, proposed assignee or
proposed participant, any information relating to the Borrower furnished to such
Lender by or on behalf of the Borrower; provided, that prior to any such
disclosure, each such assignee, proposed assignee, participant or proposed
participant shall agree with the Borrower or such Lender to preserve the
confidentiality of any confidential information relating to the Borrower
received from such Lender.
(h) Certain Pledges or Assignments. Nothing herein shall prohibit any
Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
(i) Replacement of Lenders. If any Lender shall make any demand for
payment under Section 4.10, 4.12 or 4.13, or if any Lender shall be the subject
of any notification or assertion of a regulatory limitation under Section 4.9,
then within thirty (30) days after any such demand or notification or assertion,
the Borrower may, with the approval of the Administrative Agent (which approval
shall not be unreasonably withheld) and provided that no Event of Default or
Default shall then have occurred and be continuing, demand that such Lender
assign in accordance with this Section 13.10 to one or more assignees designated
by the Borrower and acceptable to the Required Lenders (provided that, solely
for purposes of this determination under this Section 13.10(i) by the
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Required Lenders, the Lender making a demand for payment or subject to a
notification or assertion of regulatory limitation shall not be included in the
Lender's holding Loans or having Commitments) all (but not less than all) of
such Lender's Commitment and the Loans owing and Reimbursement Obligations owing
to it within the period ending on the later to occur of such thirtieth (30th)
day and the last day of the longest of the then current Interest Periods for
such Loans. If any such assignee designated by the Borrower and approved by the
Required Lenders shall fail to consummate such assignment on terms acceptable to
such Lender, or if the Borrower shall fail to designate any such assignees
acceptable to the Required Lenders for all or part of such Lender's Commitment
or Extensions of Credit, then such demand by the Borrower shall become
ineffective; it being understood for purposes of this subsection (i) that such
assignment shall be conclusively deemed to be on terms acceptable to such
Lender, and such Lender shall be compelled to consummate such assignment to an
Eligible Assignee designated by the Borrower, if such Eligible Assignee (A)
shall agree to such assignment by entering into an Assignment and Acceptance
with such Lender and (B) shall offer compensation to such Lender in an amount
equal to all amounts then owing by the Borrower to such Lender hereunder and
under the Note made by the Borrower to such Lender, whether for principal,
interest, fees, costs or expenses (other than the demanded payment referred to
above and payable by the Borrower as a condition to the Borrower's right to
demand such assignment), or otherwise. In addition, in the event that the
Borrower shall be entitled to demand the replacement of any Lender pursuant to
this subsection (i), the Borrower may, in the case of any such Lender, with the
approval of the Administrative Agent (which approval shall not be unreasonably
withheld) and provided that no Event of Default or event that, with the giving
of notice or lapse of time or both, would constitute an Event of Default, shall
then have occurred and be continuing, terminate all (but not less than all) such
Lender's Commitment and prepay all (but not less than all) such Lender's
Extensions of Credit not so assigned, together with all interest accrued thereon
to the date of such prepayment and all fees, costs and expenses and other
amounts then owing by the Borrower to such Lender hereunder and under the Note
made by the Borrower to such Lender, at any time from and after such later
occurring day in accordance with Sections 2.3 and 2.5 hereof (but without any
requirement for ratable treatment of the other Lenders), if and only if, after
giving effect to such termination and prepayment, the sum of the aggregate
principal amount of the Extensions of Credit of all Lenders then outstanding
does not exceed the then remaining Aggregate Commitments of the Lenders.
SECTION 13.11 Amendments, Waivers and Consents. Except as set forth
below, any term, covenant, agreement or condition of this Agreement or any of
the other Loan Documents (other than any Hedging Agreement, the terms and
conditions of which may be amended, modified or waived by the parties thereto)
may be amended or waived by the Lenders, and any consent given by the Lenders,
if, but only if, such amendment, waiver or consent is in writing signed by the
Required Lenders (or by the Administrative Agent with the consent of the
Required Lenders) and delivered to the Administrative Agent and, in the case of
an amendment, signed by the Borrower; provided, that no amendment, waiver or
consent shall (a) increase the amount or extend the time of the obligation of
the Lenders to make Loans or issue or participate in Letters of Credit
(including without limitation pursuant to Section 2.6), (b) extend the
originally scheduled time or times of payment of the principal of any Loan or
Reimbursement Obligation or the time or times of payment of interest on any Loan
or Reimbursement Obligation, (c) reduce the rate of interest or fees payable
71
<PAGE> 78
on any Loan or Reimbursement Obligation, (d) reduce the principal amount of any
Loan or Reimbursement Obligation, (e) permit any subordination of the principal
or interest on any Loan or Reimbursement Obligation, (f) amend the definition of
Alternative Currency, or (g) amend the provisions of this Section 13.11 or the
definition of Required Lenders, without the prior written consent of each
Lender. In addition, no amendment, waiver or consent to the provisions of (a)
Article XII shall be made without the written consent of the Administrative
Agent and (b) Article III without the written consent of the Issuing Lender.
SECTION 13.12 Performance of Duties. The Borrower's obligations under
this Agreement and each of the Loan Documents shall be performed by the Borrower
at its sole cost and expense.
SECTION 13.13 All Powers Coupled with Interest. All powers of
attorney and other authorizations granted to the Lenders, the Administrative
Agent and any Persons designated by the Administrative Agent or any Lender
pursuant to any provisions of this Agreement or any of the other Loan Documents
shall be deemed coupled with an interest and shall be irrevocable so long as any
of the Obligations remain unpaid or unsatisfied or the Credit Facility has not
been terminated.
SECTION 13.14 Survival of Indemnities. Notwithstanding any
termination of this Agreement, the indemnities to which the Administrative Agent
and the Lenders are entitled under the provisions of this Article XIII and any
other provision of this Agreement and the Loan Documents shall continue in full
force and effect and shall protect the Administrative Agent and the Lenders
against events arising after such termination as well as before.
SECTION 13.15 Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 13.16 Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 13.17 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
SECTION 13.18 Term of Agreement. This Agreement shall remain in
effect from the Closing Date through and including the date upon which all
Obligations shall have been indefeasibly and irrevocably paid and satisfied in
full. No termination of this Agreement shall affect the rights and obligations
of the parties hereto arising prior to such termination.
72
<PAGE> 79
SECTION 13.19 Inconsistencies with Other Documents; Independent
Effect of Covenants. In the event there is a conflict or inconsistency between
this Agreement and any other Loan Document, the terms of this Agreement shall
control.
[Signature pages to follow]
73
<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal by their duly authorized officers, all as of the day and
year first written above.
[CORPORATE SEAL] QUINTILES TRANSNATIONAL CORP.,
as Borrower
By: \S\ Dennis Gillings
----------------------------------
Name: Dennis Gillings
----------------------------
Title: Chief Executive Officer
---------------------------
By: \S\ Rachel Selisker
----------------------------------
Name: Rachel Selisker
----------------------------
Title: Chief Financial Officer
---------------------------
FIRST UNION NATIONAL BANK,
as Administrative Agent and Lender
By: \S\ G. Mendel Lay, Jr.
----------------------------------
Name: G. Mendel Lay, Jr.
----------------------------
Title: Sr. Vice President
---------------------------
<PAGE> 81
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered under seal as of the date first above written.
[CORPORATE SEAL] [INSERT NAME OF NEW SUBSIDIARY]
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE> 82
Schedule 1
(Lenders and Commitments)
- --------------------------------------------------------------------------------
LENDER COMMITMENT COMMITMENT
PERCENTAGE
- --------------------------------------------------------------------------------
First Union National Bank
150 Fayetteville Street Mall, 6th Floor
Raleigh, North Carolina 27601 100% $150,000,000
Attention: G. Mendel Lay, Jr.
Telephone No.: (919) 881-7003
Telecopy No.: (919) 881-7016
- --------------------------------------------------------------------------------
<PAGE> 83
EXHIBIT A
to
Credit Agreement
dated as of August 7, 1998
by and among
Quintiles Transnational Corp.,
the Lenders party thereto, and
First Union National Bank, as
Administrative Agent
FORM OF REVOLVING CREDIT NOTE
<PAGE> 84
REVOLVING CREDIT NOTE
$__________ ___________ __, 1998
FOR VALUE RECEIVED, the undersigned, Quintiles Transnational Corp., a
corporation organized under the laws of North Carolina (the "Borrower"),
promises to pay to the order of _________________________________, (the
"Lender"), at the place and times provided in the Credit Agreement referred to
below, the principal sum of _________________ ($__________) or, if less, the
principal amount of all Revolving Credit Loans made by the Lender from time to
time pursuant to that certain Credit Agreement, dated as of even date herewith
(as amended, restated or otherwise modified, the "Credit Agreement") among the
Borrower, the Lenders who are or may become a party thereto (collectively, the
"Lenders") and First Union National Bank, as Administrative Agent. Capitalized
terms used herein and not defined herein shall have the meanings assigned
thereto in the Credit Agreement.
The unpaid principal amount of this Revolving Credit Note from time
to time outstanding is subject to mandatory repayment from time to time as
provided in the Credit Agreement and shall bear interest as provided in Section
4.1 of the Credit Agreement. Except as otherwise permitted under the Credit
Agreement, all payments of principal and interest on this Revolving Credit Note
shall be payable in lawful currency of the United States of America in
immediately available funds to the account designated in the Credit Agreement.
This Revolving Credit Note is entitled to the benefits of, and
evidences Obligations incurred under, the Credit Agreement, to which reference
is made for a statement of the terms and conditions on which the Borrower is
permitted and required to make prepayments and repayments of principal of the
Obligations evidenced by this Revolving Credit Note and on which such
Obligations may be declared to be immediately due and payable.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED, CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF NORTH CAROLINA, WITHOUT REFERENCE TO THE
CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.
The Debt evidenced by this Revolving Credit Note is senior in right
of payment to all Subordinated Debt referred to in the Credit Agreement.
The Company hereby waives all requirements as to diligence,
presentment, demand of payment, protest and (except as required by the Credit
Agreement) notice of any kind with respect to this Revolving Credit Note.
<PAGE> 85
IN WITNESS WHEREOF, the undersigned has executed this Revolving
Credit Note under seal as of the day and year first above written.
QUINTILES TRANSNATIONAL CORP.
[CORPORATE SEAL]
By:
--------------------------
Name:
---------------------
Title:
---------------------
By:
--------------------------
Name:
---------------------
Title:
---------------------
<PAGE> 86
EXHIBIT B
to
Credit Agreement
dated as of August 7, 1998
by and among
Quintiles Transnational Corp.,
the Lenders party thereto, and
First Union National Bank, as
Administrative Agent
FORM OF NOTICE OF BORROWING
<PAGE> 87
NOTICE OF BORROWING
Dated as of: ______________
First Union National Bank,
as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Revolving Credit Borrowing is delivered to
you under Section 2.2(a) of the Credit Agreement dated as of August 7, 1998 (as
amended, restated or otherwise modified, the "Credit Agreement"), by and among
Quintiles Transnational Corp., a North Carolina corporation (the "Borrower"),
the lenders party thereto (the "Lenders") and First Union National Bank, as
Administrative Agent.
1. The Borrower hereby requests that the Lenders make a Loan
denominated in [Dollars] [Applicable Alternative Currency] in the aggregate
principal amount of $___________. (Complete with a Permitted Currency and an
amount in accordance with Section 2.2(a) of the Credit Agreement.)
2. The Borrower hereby requests that such Loan be made on the
following Business Day: _____________________. (Complete with a Business Day in
accordance with Section 2.3(a) of the Credit Agreement).
3. The Borrower hereby requests that the Revolving Credit Loan bear
interest at the following interest rate, plus the Applicable Margin, as set
forth below:
Principal Interest Period Termination Date for
Component (LIBOR Interest Period
of Loan Interest Rate Rate only) (if applicable)
- ------- ------------- ---------- --------------
[Base Rate, LIBOR
Rate or LIBOR Market
Rate]1
- ----------------
1 Revolving Credit Loans denominated in Dollars may bear interest at the Base
Rate, the LIBOR Rate or the LIBOR Market Rate plus, in each case, the Applicable
Margin; Revolving Credit Loans denominated in an Alternative Currency shall bear
interest at the LIBOR Rate, the LIBOR Market Rate or the Base Rate plus, in each
case, the Applicable Margin; provided that the Borrower shall only be permitted
to request Base Rate Loans and LIBOR Market Rate Loans to be denominated in an
Alternative Currency if such Alternative Currency is available to the
...(continued)
<PAGE> 88
4. The principal amount of all Loans and L/C Obligations outstanding
as of the date hereof (including the requested Loan) does not exceed the maximum
amount permitted to be outstanding pursuant to the terms of the Credit
Agreement.
5. All of the conditions applicable to the Loan requested herein as
set forth in the Credit Agreement have been satisfied as of the date hereof and
will remain satisfied to the date of such Loan.
6. Capitalized terms used herein and not defined herein shall have
the meanings assigned thereto in the Credit Agreement.
[Signature Page Follows]
- ------------------
...(continued)
Lenders at such rate. In each case, the Applicable Margin shall be determined in
accordance with Section 4.1 of the Credit Agreement.
<PAGE> 89
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Borrowing on behalf of the Borrower this ____ day of ______, _______.
QUINTILES TRANSNATIONAL CORP.
By:
--------------------------
Name:
--------------------
Title:
-------------------
<PAGE> 90
EXHIBIT C
to
Credit Agreement
dated as of August 7, 1998
by and among
Quintiles Transnational Corp.,
the Lenders party thereto, and
First Union National Bank, as
Administrative Agent
FORM OF NOTICE OF ACCOUNT DESIGNATION
<PAGE> 91
NOTICE OF ACCOUNT DESIGNATION
Dated as of: _________
First Union National Bank,
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This Notice of Account Designation is delivered to you under Section
2.2(b) of the Credit Agreement dated as of August 7, 1998 (as amended, restated
or otherwise modified, the "Credit Agreement") by and among Quintiles
Transnational Corp., a corporation organized under the laws of North Carolina
(the "Borrower"), the lenders party thereto (the "Lenders") and First Union
National Bank, as Administrative Agent.
1. The Administrative Agent is hereby authorized to disburse all Loan
proceeds into the following account(s):
-----------------------------
ABA Routing Number: _________
Account Number: _____________
2. This authorization shall remain in effect until revoked or until a
subsequent Notice of Account Designation is provided to the Administrative
Agent.
3. Capitalized terms used herein and not defined herein shall have
the meanings assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Account Designation this _____ day of _______, ____.
QUINTILES TRANSNATIONAL CORP.
By:
--------------------------
Name:
--------------------
Title:
-------------------
<PAGE> 92
EXHIBIT D
to
Credit Agreement
dated as of August 7, 1998
by and among
Quintiles Transnational Corp.,
the Lenders party thereto, and
First Union National Bank, as
Administrative Agent
FORM OF NOTICE OF PREPAYMENT
<PAGE> 93
NOTICE OF PREPAYMENT
Dated as of: ________________
First Union National Bank,
as Administrative Agent
One First Union Center
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Prepayment is delivered to you under
Section 2.3(c) of the Credit Agreement dated as of August 7, 1998 (as amended,
restated or otherwise modified, the "Credit Agreement"), by and among Quintiles
Transnational Corp., a corporation organized under the laws of North Carolina
(the "Borrower"), the lenders party thereto (the "Lenders") and First Union
National Bank, as Administrative Agent.
1. The Borrower hereby provides notice to the Administrative Agent
that the it shall repay the following [Base Rate Loans] and/or [LIBOR Rate
Loans] and/or [LIBOR Market Rate Loans]_______________. (Complete with an amount
in accordance with Section 2.3 of the Credit Agreement.)
2. The Loan to be prepaid is denominated in: [Dollars/Applicable
Alternative Currency].
3. The Borrowers shall repay the above-referenced Loans on the
following Business Day: _______________. (Complete with a Business Day in
accordance with Section 2.3(c) of the Credit Agreement.)
4. Capitalized terms used herein and not defined herein shall have
the meanings assigned thereto in the Credit Agreement.
<PAGE> 94
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Prepayment this ____ day of _______, _____.
QUINTILES TRANSNATIONAL CORP.
By:
--------------------------
Name:
--------------------
Title:
-------------------
<PAGE> 95
EXHIBIT E
to
Credit Agreement
dated as of August 7, 1998
by and among
Quintiles Transnational Corp.,
the Lenders party thereto, and
First Union National Bank, as
Administrative Agent
FORM OF NOTICE OF CONVERSION/CONTINUATION
<PAGE> 96
NOTICE OF CONVERSION/CONTINUATION
Dated as of: ______________
First Union National Bank
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Conversion/Continuation (the "Notice") is
delivered to you under Section 4.2 of the Credit Agreement dated as of August 7,
1998 (as amended, restated or otherwise modified, the "Credit Agreement"), by
and among Quintiles Transnational Corp., a North Carolina corporation (the
"Borrower"), the lenders party thereto (the "Lenders") and First Union National
Bank, as Administrative Agent.
1. This Notice is submitted for the purpose of: (Check one and
complete applicable information in accordance with the Credit Agreement.)
[ ] Converting all or a portion of a Base Rate Loan into a LIBOR Rate
Loan
(a) The aggregate outstanding principal balance of such Loan
is $_______________.
(b) The principal amount of such Loan to be converted is
$_______________.
(c) The requested effective date of the conversion of such
Loan is _______________.
(d) The requested Interest Period applicable to the converted
Loan is _______________.
[ ] Converting all or a portion of a Base Rate Loan into a LIBOR
Market Rate Loan
(a) The aggregate outstanding principal balance of such Loan
is $_______________.
(b) The principal amount of such Loan to be converted is
$_______________.
(c) The requested effective date of the conversion of such
Loan is _______________.
<PAGE> 97
[ ] Converting a portion of a LIBOR Rate Loan into a Base Rate Loan
(a) The aggregate outstanding principal balance of such Loan
is $_______________.
(b) The last day of the current Interest Period for such Loan
is _______________.
(c) The principal amount of such Loan to be converted is
$_______________.
(d) The requested effective date of the conversion of such
Loan is _______________.
[ ] Converting all or a portion of a LIBOR Rate Loan into a LIBOR
Market Rate Loan
(a) The aggregate outstanding principal balance of such Loan
is $_______________.
(b) The last day of the current Interest Period for such Loan
is _______________.
(c) The principal amount of such Loan to be converted is
$_______________.
(d) The requested effective date of the conversion of such
Loan is _______________.
[ ] Continuing all or a portion of a LIBOR Rate Loan as a LIBOR Rate
Loan
(a) The aggregate outstanding principal balance of such Loan
is $_______________.
(b) The last day of the current Interest Period for such Loan
is ______________.
(c) The principal amount of such Loan to be continued is
$_______________.
(d) The requested effective date of the continuation of such
Loan is _______________.
(e) The requested Interest Period applicable to the continued
Loan is _______________.
<PAGE> 98
2. The principal amount of all Loans and L/C Obligations outstanding
as of the date hereof does not exceed the maximum amount permitted to be
outstanding pursuant to the terms of the Credit Agreement.
3. All of the conditions applicable to the conversion or continuation
of the Loan requested herein as set forth in the Credit Agreement have been
satisfied or waived as of the date hereof and will remain satisfied or waived to
the date of such Loan.
4. Capitalized terms used herein and not defined herein shall have
the meanings assigned thereto in the Credit Agreement.
[Signature Page Follows]
<PAGE> 99
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Conversion/Continuation this ____ day of __________, ____.
QUINTILES TRANSNATIONAL CORP.
By:
--------------------------
Name:
--------------------
Title:
-------------------
<PAGE> 100
EXHIBIT F
to
Credit Agreement
dated as of August 7, 1998
by and among
Quintiles Transnational Corp.,
the Lenders party thereto, and
First Union National Bank, as
Administrative Agent
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
<PAGE> 101
OFFICER'S COMPLIANCE CERTIFICATE
The undersigned, on behalf of Quintiles Transnational Corp. (the
"Borrower"), hereby certifies to the Administrative Agent and the Lenders, each
as defined in the Credit Agreement referred to below, as follows:
1. This Certificate is delivered to you pursuant to Section 7.2 of
the Credit Agreement dated as of August 7, 1998 (as amended, restated or
otherwise modified, the "Credit Agreement"), by and among the Borrower, the
lenders party thereto (the "Lenders") and First Union National Bank, as
Administrative Agent. Capitalized terms used herein and not defined herein shall
have the meanings assigned thereto in the Credit Agreement.
2. I have reviewed the financial statements of the Borrower and its
Subsidiaries dated as of _______________ and for the _______________ period[s]
then ended and such statements fairly present in all material respects the
financial condition of the Borrower and its Subsidiaries as of the dates
indicated and the results of their operations for the period[s] indicated.
3. I have reviewed the terms of the Credit Agreement and have made,
or caused to be made under my supervision, a review in reasonable detail of the
transactions and the condition of the Borrower and its Subsidiaries during the
accounting period covered by the financial statements referred to in Paragraph 2
above. Such review has not disclosed the existence during or at the end of such
accounting period of any condition or event that constitutes a Default or an
Event of Default, nor do I have any knowledge of the existence of any such
condition or event as at the date of this Certificate [except, if such condition
or event existed or exists, describe the nature and period of existence thereof
and what action the Borrower has taken, are taking and propose to take with
respect thereto].
4. The Applicable Margin and calculations determining such figure are
set forth on the attached Schedule 1 and the Borrower and its Subsidiaries are
in compliance with the financial covenants contained in Article IX of the Credit
Agreement as shown on such Schedule 1 and to my knowledge, the Borrower and its
Subsidiaries are in compliance with the other covenants and restrictions
contained in the Credit Agreement.
[Signature Page Follows]
<PAGE> 102
WITNESS the following signature as of the _____ day of _________,
____.
QUINTILES TRANSNATIONAL CORP.
By:
--------------------------
Name:
--------------------
Title:
-------------------
<PAGE> 103
Schedule 1
to
Officer's Compliance Certificate
A. Total Debt to Total Capitalization Ratio
1. Total Debt of the Borrower and
its Subsidiaries as of the
immediately preceding fiscal
quarter end 1 _________
2. Total Capitalization: The
sum of the following for the
Borrower and its Subsidiaries
as of the immediately preceding
fiscal quarter end
(a) Shareholder's Equity
as of such date 2(a) _______
(b) Total Debt (line 1) 2(b) _______
(c) Add lines 2(a) and 2(b) 2(c) _______
3. Total Debt to Total Capitalization Ratio:
Divide line 1 by line 2(c) 3 _________
4. Maximum Total Debt to Total Capitalization Ratio permitted
by Section 9.1 as of the date hereof 4 0.45 to 1.00
------------
B. Interest Coverage Ratio
1. Adjusted EBITR of the Borrower and its
Subsidiaries for the four (4) consecutive
fiscal quarters ending as of the immediately
preceding fiscal quarter end
(a) Consolidated Net Income 1(a) _______
(b) The sum of the following, 1(b) _______
to the extent deducted
from Net Income
<PAGE> 104
(i) Income and Franchise Taxes
(ii) Interest Expense
(iii) Extraordinary Losses
(iv) Rental Expense
(c) Interest Income 1(c) _______
(d) Extraordinary Gains 1(d) _______
(e) The sum of lines (c) and (d) 1(e) _______
(f) Line (a) plus line (b) 1(f) _______
-----
(g) Line (f) minus line (e):
Adjusted EBITR 1(g) _______
2. Interest Expense of the Borrower
and its Subsidiaries for the four (4)
consecutive fiscal quarters ending as
of the immediately preceding fiscal
quarter end 2 _________
3, Rental Expense of the Borrower and its
Subsidiaries for the four (4) consecutive
fiscal quarters ending as of the
immediately preceding fiscal
quarter end 3 _________
4. Line 2 plus line 3 4 _________
----
5. Line 1(g) divided by line 4: 5 _________
Interest Coverage Ratio
6. Minimum Interest Coverage Ratio
permitted by Section 9.2 as of the
date hereof 6 2.50 to 1.00
------------
C. Margin Stock
1. Total amount of purchases of margin
stock (as defined in Regulation U) with
loan proceeds to date 1 ________
<PAGE> 105
2. Amount of new purchases of margin
stock with loan proceeds 2 ________
3. Total amount of purchases of margin
stock. Line 1 plus line 2 3 ________
-----
4. From the Closing Date through the
date hereof, the percentage of loans
used to buy margin stock with loan
proceeds 4 ________
<PAGE> 106
EXHIBIT G
to
Credit Agreement
dated as of August 7, 1998
by and among
Quintiles Transnational Corp.,
the Lenders party thereto, and
First Union National Bank, as
Administrative Agent
FORM OF ASSIGNMENT AND ACCEPTANCE
<PAGE> 107
ASSIGNMENT AND ACCEPTANCE
Dated as of: _________
Reference is made to the Credit Agreement dated as of August 7, 1998,
as amended, restated or otherwise modified (the "Credit Agreement") by and among
Quintiles Transnational Corp., a North Carolina corporation (the "Borrower"),
the lenders party thereto (the "Lenders") and First Union National Bank, as
Administrative Agent. Capitalized terms used herein which are not defined herein
shall have the meanings assigned thereto in the Credit Agreement.
_____________ (the "Assignor") and __________ (the "Assignee") agree
as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, as of the Effective
Date (as defined below), a ____% interest in and to all of the Assignor's
interest, rights and obligations with respect to its Revolving Credit Commitment
and Revolving Credit Loans (including such percentage of the outstanding L/C
Obligations) and the Assignor thereby retains ____% of its interest therein.
This Assignment and Acceptance is entered pursuant to, and authorized by,
Section 13.10 of the Credit Agreement.
2. The Assignor (i) represents that, as of the date hereof, its Commitment
Percentage (without giving effect to assignments thereof which have not yet
become effective) under the Credit Agreement is ____%, the outstanding balances
of its Revolving Credit Loans (including its Revolving Credit Commitment
Percentage of the outstanding L/C Obligations) (unreduced by any assignments
thereof which have not yet become effective) under the Credit Agreement is
$__________; (ii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or any other instrument or document furnished
pursuant thereto, other than that the Assignor is the legal and beneficial owner
of the interest being assigned by it hereunder and that such interest is free
and clear of any adverse claim; (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or its Subsidiaries or the performance or observance by the Borrowers
or its Subsidiaries of any of their obligations under the Credit Agreement or
any other instrument or document furnished or executed pursuant thereto; and
(iv) attaches the Revolving Credit Note delivered to it under the Credit
Agreement and requests that the Borrowers exchange such Revolving Credit Note
for new Revolving Credit Notes payable to each of the Assignor and the Assignee
as follows:
<PAGE> 108
Revolving Credit Note
Payable to the Order of: Principal Amount of Note:
------------------------ -------------------------
__________ $_________
__________ $_________
3. The Assignee (i) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (ii) confirms that it has received
a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 7.1 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (iii) agrees
that it will, independently and without reliance upon the Assignor or any other
Lender or the Administrative Agent and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit Agreement; (iv)
confirms that it is an Eligible Assignee; (v) appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under the Credit Agreement and the other Loan Documents as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (vi) agrees that it will perform in
accordance with their terms all the obligations which by the terms of the Credit
Agreement and the other Loan Documents are required to be performed by it as a
Lender; (vii) agrees to hold all confidential information in a manner consistent
with the provisions of Section 13.10(g) of the Credit Agreement; and (viii)
includes herewith for the Administrative Agent the two forms required by Section
4.11(e) of the Credit Agreement (if not previously delivered).
4. The effective date for this Assignment and Acceptance shall be as set
forth in Section 1 of Schedule 1 hereto (the "Effective Date"). Following the
execution of this Assignment and Acceptance, it will be delivered to the
Administrative Agent for, to the extent required by the Credit Agreement,
consent by the Borrower and the Administrative Agent and acceptance and
recording in the Register.
5. Upon such consents, acceptance and recording, from and after the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and
the other Loan Documents to which Lenders are parties and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Lender under each such agreement, and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement and the other Loan
Documents.
6. Upon such consents, acceptance and recording, from and after the
Effective Date, the Administrative Agent shall make all payments in respect of
the interest assigned hereby (including payments of principal, interest, fees
and other amounts) to the Assignee. The Assignor and
<PAGE> 109
Assignee shall make all appropriate adjustments in payments for periods prior to
the Effective Date or with respect to the making of this assignment directly
between themselves.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO BE A CONTRACT UNDER
SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
ASSIGNOR:
---------------------------------
By:
------------------------------
Title:
---------------------------
ASSIGNEE:
---------------------------------
By:
------------------------------
Title:
---------------------------
Acknowledged and Consented to on behalf of the Borrower:2
QUINTILES TRANSNATIONAL CORP.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Consented to and Accepted:
FIRST UNION NATIONAL BANK,
as Administrative Agent
By:
--------------------------
Title:
-----------------------
- ---------------
2 If applicable pursuant to Section 13.10.
<PAGE> 110
Schedule I
to
Assignment and Acceptance
1. Effective Date ____________, ____
2. Assignor's Interest
Prior to Assignment
(a) Revolving Credit Commitment Percentage ____%
(b) Outstanding balance of Revolving Credit Loans $________
(c) Outstanding balance of (i) Assignor's Revolving
Credit Commitment Percentage of the
L/C Obligations $________
3. Assigned Interest (from Section 1) of Revolving Credit Loans ____%
4. Assignee's Extensions of Credit
After Effective Date
(a) Total Outstanding balance of
Assignee's Revolving Credit Loans
(line 2(b) times line 3) $________
-----
(b) Total Outstanding balance of
Assignee's Revolving Credit
Commitment Percentage
of the L/C Obligations
(line 2(c)(i) times line 3) $________
-----
5. Retained Interest of Assignor after
Effective Date
(a) Retained Interest (from Section 1) of Revolving
Credit Commitment Percentage ____%
(b) Outstanding balance of Assignor's Revolving
Credit Loans
(line 2(b) times line 5(a)) $________
-----
<PAGE> 111
(c) Outstanding balance of Assignor's
Revolving Credit Commitment
Percentage of L/C Obligations
(line 2(c)(i) times line 5(a)) $________
-----
6. Payment Instructions
(a) If payable to Assignor,
to the account of Assignor to:
____________________________________
____________________________________
ABA No.:____________________________
Account Name:_______________________
Acct. No.___________________________
Attn:_______________________________
Ref:________________________________
(b) If payable to Assignee, to the account of
Assignee to:
____________________________________
ABA No.:____________________________
Account Name:_______________________
Account No._________________________
Ref:________________________________
<PAGE> 112
EXHIBIT H
to
Credit Agreement dated as of August 7, 1998
by and among
Quintiles Transnational Corp.,
the Lenders party thereto, and
First Union National Bank, as
Administrative Agent
FORM OF GUARANTY AGREEMENT
<PAGE> 113
UNCONDITIONAL GUARANTY AGREEMENT
THIS UNCONDITIONAL GUARANTY AGREEMENT (this "Guaranty"), dated as of
the 7th day of August, 1998, made by each of the Guarantors listed on the
signature pages hereto or becoming a party hereto (the "Guarantors"), in favor
of FIRST UNION NATIONAL BANK, a national banking association, as Administrative
Agent (the "Administrative Agent"), for the ratable benefit of itself and the
financial institutions (the "Lenders") that are, or may from time to time
become, parties to the Credit Agreement (as hereinafter defined).
STATEMENT OF PURPOSE
Pursuant to the terms of the Credit Agreement dated as of August 7,
1998 by and among Quintiles Transnational Corp. (the "Borrower"), the Lenders
party thereto, and the Administrative Agent (as amended, restated, supplemented
or otherwise modified from time to time, the "Credit Agreement"), the Lenders
extended certain credit facilities to the Borrower as more particularly
described therein. The Borrower and the Guarantors comprise one integrated
financial enterprise and all Extensions of Credit to the Borrower pursuant to
the Credit Agreement will inure, directly or indirectly, to the benefit of each
of the Guarantors.
In connection with the transactions contemplated by the Credit
Agreement, the Lenders have requested, and each of the Guarantors has agreed to
execute and deliver, this Guaranty.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, and to induce the Lenders to make available
Extensions of Credit to the Borrower pursuant to the Credit Agreement, it is
agreed as follows:
SECTION 1. Definitions. Capitalized terms used herein (including the
preamble hereof) shall have the meanings assigned to them in the Credit
Agreement, unless the context otherwise requires or unless otherwise defined
herein. References in the Credit Agreement to a "Guaranty Agreement" or herein
to this "Guaranty" shall include and mean this Guaranty, including all
amendments and supplements hereto now or hereafter in effect.
SECTION 2. Guaranty of Obligations of the Borrower. Each Guarantor
hereby, jointly and severally with each other Guarantor, unconditionally,
absolutely and irrevocably guarantees to the Administrative Agent for the
ratable benefit of the Administrative Agent and the Lenders, and their
respective successors, endorsees, transferees and assigns, the prompt payment
(whether at stated maturity, by acceleration or otherwise) and performance of
all Obligations of the Borrower, whether primary or secondary (whether by way of
endorsement or otherwise), whether now existing or hereafter arising, whether or
not from time to time reduced or extinguished (except by payment thereof) or
hereafter increased or incurred, whether or not recovery may be or hereafter
become barred by the statute of limitations, whether enforceable or
unenforceable as against the Borrower, whether or not discharged, stayed or
otherwise affected by any bankruptcy, insolvency or other similar law or
proceeding, whether created directly with the Administrative Agent or any Lender
or acquired by the Administrative Agent or any Lender through assignment,
endorsement or otherwise, whether matured or unmatured, whether joint or
several, as and when the same become due and
<PAGE> 114
payable (whether at maturity or earlier, by reason of acceleration, mandatory
repayment or otherwise), in accordance with the terms of any such instruments
evidencing any such obligations, including all renewals, extensions or
modifications thereof (all Obligations of the Borrower to the Administrative
Agent or any Lender, including all of the foregoing, being hereinafter
collectively referred to as the "Guaranteed Obligations"); provided, that
notwithstanding anything to the contrary contained herein, it is the intention
of the Guarantors and the Lenders that, in any proceeding involving the
bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution or insolvency or any similar proceeding with respect to any
Guarantor or its assets, the amount of such Guarantor's obligations with respect
to the Obligations shall be in, but not in excess of, the maximum amount thereof
not subject to avoidance or recovery by operation of applicable law governing
bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution, insolvency, fraudulent transfers or conveyances or other similar
laws (including, without limitation, 11 U.S.C. ss.547, ss.548 and ss.550 and
other "avoidance" provisions of Title 11 of the United States Code), applicable
in any such proceeding to such Guarantor and this Guaranty (collectively,
"Applicable Insolvency Laws"). To that end, but only in the event and to the
extent that such Guarantor's obligations with respect to the Guaranteed
Obligations or any payment made pursuant to the Guaranteed Obligations would,
but for the operation of the foregoing proviso, be subject to avoidance or
recovery in any such proceeding under Applicable Insolvency Laws, the amount of
such Guarantor's obligations with respect to the Guaranteed Obligations shall be
limited to the largest amount which, after giving effect thereto, would not,
under Applicable Insolvency Laws, render such Guarantor's obligations with
respect to such Guaranteed Obligations unenforceable or avoidable or otherwise
subject to recovery under Applicable Insolvency Laws. To the extent any payment
actually made pursuant to the Guaranteed Obligations exceeds the limitation of
the foregoing proviso and is otherwise subject to avoidance and recovery in any
such proceeding under Applicable Insolvency Laws, the amount subject to
avoidance shall in all events be limited to the amount by which such actual
payment exceeds such limitation and the Guaranteed Obligations as limited by the
foregoing proviso shall in all events remain in full force and effect and be
fully enforceable against such Guarantor. The foregoing proviso is intended
solely to preserve the rights of the Administrative Agent hereunder against such
Guarantor in such proceeding to the maximum extent permitted by Applicable
Insolvency Laws and neither such Guarantor, the Borrower, any other Guarantor
nor any other Person shall have any right or claim under such proviso that would
not otherwise be available under Applicable Insolvency Laws in such proceeding.
SECTION 3. Nature of Guaranty. Each Guarantor agrees that this
Guaranty is a continuing, unconditional, absolute and irrevocable guaranty of
payment and performance and not of collection, and that its obligations under
this Guaranty shall be primary, absolute and unconditional, irrespective of, and
unaffected by:
(a) the genuineness, validity, regularity, enforceability
or any future amendment of, or change in, the Credit Agreement or any
other Loan Document or any other agreement, document or instrument to
which the Borrower or any Subsidiary thereof is or may become a
party;
(b) any structural change in, restructuring of or other
similar change of the Borrower or any of its Subsidiaries (including,
without limitation, each Guarantor);
2
<PAGE> 115
(c) the absence of any action to enforce this Guaranty, the
Credit Agreement or any other Loan Document or the waiver or consent
by the Administrative Agent or any Lender with respect to any of the
provisions of this Guaranty, the Credit Agreement or any other Loan
Document;
(d) the existence, value or condition of, or failure to
perfect its Lien against, any security for or other guaranty of the
Guaranteed Obligations or any action, or the absence of any action,
by the Administrative Agent or any Lender in respect of such security
or guaranty (including, without limitation, the release of any such
security or guaranty); or
(e) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor;
it being agreed by each Guarantor that, subject to the proviso in Section 2, its
obligations under this Guaranty shall not be discharged until the final and
indefeasible payment and performance, in full, of the Guaranteed Obligations and
the termination of the Commitments. Each Guarantor expressly waives all rights
it may now or in the future have under any statute (including without limitation
North Carolina General Statutes Section 26-7, et seq. or similar law) or at law
or in equity, or otherwise, to compel the Administrative Agent or any Lender to
proceed in respect of the Guaranteed Obligations against the Borrower or any
other party or against any security for or other guaranty of the payment and
performance of the Guaranteed Obligations before proceeding against, or as a
condition to proceeding against, such Guarantor; provided, however, that
regardless of any other provision of this Section 3, neither the Administrative
Agent nor any Lender shall proceed against any Guarantor hereunder until the
occurrence of an Event of Default. Each Guarantor further expressly waives and
agrees not to assert or take advantage of any defense based upon the failure of
the Administrative Agent or any Lender to commence an action in respect of the
Guaranteed Obligations against the Borrower, any Guarantor, any other guarantor
or any other party or any security for the payment and performance of the
Guaranteed Obligations. Each Guarantor agrees that any notice or directive given
at any time to the Administrative Agent or any Lender which is inconsistent with
the waivers in the preceding two sentences shall be null and void and may be
ignored by the Administrative Agent or such Lender, and, in addition, may not be
pleaded or introduced as evidence in any litigation relating to this Guaranty
for the reason that such pleading or introduction would be at variance with the
written terms of this Guaranty, unless the Administrative Agent and the Required
Lenders have specifically agreed otherwise in writing. The foregoing waivers are
of the essence of the transaction contemplated by the Loan Documents and, but
for this Guaranty and such waivers, the Administrative Agent and Lenders would
decline to enter into the Credit Agreement.
SECTION 4. Demand by the Administrative Agent. In addition to the
terms set forth in Section 3, and in no manner imposing any limitation on such
terms, if all or any portion of the then outstanding Guaranteed Obligations are
declared to be or become immediately due and payable, then the Guarantors shall,
upon demand in writing therefor by the Administrative Agent to the Guarantors,
pay all or such portion of the outstanding Guaranteed Obligations then due and
payable. Payment by the Guarantors shall be made to the Administrative Agent, to
be credited and applied upon the Guaranteed Obligations, in immediately
available federal funds to an account designated by the Administrative Agent or
at the address referenced herein for the giving of notice to the
3
<PAGE> 116
Administrative Agent or at any other address that may be specified in writing
from time to time by the Administrative Agent.
SECTION 5. Waivers. In addition to the waivers contained in Section
3, each Guarantor waives and agrees that it shall not at any time insist upon,
plead or in any manner whatever claim or take the benefit or advantage of any
appraisal, valuation, stay, extension, marshalling of assets or redemption laws,
or exemption, whether now or at any time hereafter in force, which may delay,
prevent or otherwise affect the performance by such Guarantor of its obligations
under, or the enforcement by the Administrative Agent or the Lenders of, this
Guaranty. Each Guarantor further hereby waives diligence, presentment, demand,
protest and notice of whatever kind or nature with respect to any of the
Guaranteed Obligations and waives the benefit of all provisions of law which are
or might be in conflict with the terms of this Guaranty. Each Guarantor
represents, warrants and agrees that its obligations under this Guaranty are not
and shall not be subject to any counterclaims, offsets or defenses of any kind
against the Administrative Agent, the Lenders or the Borrower whether now
existing or which may arise in the future.
SECTION 6. Benefits of Guaranty. The provisions of this Guaranty are
for the benefit of the Administrative Agent and the Lenders and their respective
successors, transferees, endorsees and assigns, and nothing herein contained
shall impair, as between the Borrower, the Administrative Agent and the Lenders,
the obligations of the Borrower under the Loan Documents. In the event all or
any part of the Guaranteed Obligations are transferred, endorsed or assigned by
the Administrative Agent or any Lender to any Person or Persons, any reference
to an "Administrative Agent", or "Lender" herein shall be deemed to refer
equally to such Person or Persons.
SECTION 7. Modification of Loan Documents etc. If the Administrative
Agent or the Lenders shall at any time or from time to time, with or without the
consent of, or notice to, any Guarantor:
(a) change or extend the manner, place or terms of payment
of, or renew or alter all or any portion of, the Guaranteed
Obligations;
(b) take any action under or in respect of the Loan
Documents in the exercise of any remedy, power or privilege contained
therein or available to it at law or in equity, or waive or refrain
from exercising any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the Loan
Documents;
(d) extend or waive the time for performance by any
Guarantor, any other guarantor, the Borrower or any other Person of,
or compliance with, any term, covenant or agreement on its part to be
performed or observed under a Loan Document (other than this
Guaranty), or waive such performance or compliance or consent to a
failure of, or departure from, such performance or compliance;
(e) take and hold security or collateral for the payment of
the Guaranteed Obligations or sell, exchange, release, dispose of, or
otherwise deal with, any property pledged, mortgaged or conveyed, or
in which the Administrative Agent or the Lenders have
4
<PAGE> 117
been granted a Lien, to secure any Debt of any Guarantor, any other
guarantor or the Borrower to the Administrative Agent or the Lenders;
(f) release anyone who may be liable in any manner for the
payment of any amounts owed by any Guarantor, any other guarantor or
the Borrower to the Administrative Agent or any Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors
of any Guarantor, any other guarantor or the Borrower are
subordinated to the claims of the Administrative Agent or any Lender;
or
(h) apply any sums by whomever paid or however realized to
any amounts owing by any Guarantor, any other guarantor or the
Borrower to the Administrative Agent or any Lender in such manner as
the Administrative Agent or any Lender shall determine in its
reasonable discretion;
then neither the Administrative Agent nor any Lender shall incur any liability
to any Guarantor as a result thereof, and no such action shall impair or release
the obligations of any Guarantor under this Guaranty.
SECTION 8. Reinstatement. Each Guarantor agrees that, if any payment
made by the Borrower or any other Person applied to the Obligations is at any
time annulled, set aside, rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be refunded or repaid or the proceeds of
any collateral are required to be refunded by the Administrative Agent or any
Lender to the Borrower, its estate, trustee, receiver or any other party,
including, without limitation, any Guarantor, under any Applicable Law or
equitable cause, then, to the extent of such payment or repayment, each
Guarantor's liability hereunder (and any Lien securing such liability) shall be
and remain in full force and effect, as fully as if such payment had never been
made, and, if prior thereto, this Guaranty shall have been canceled or
surrendered (and if any Lien or collateral securing such Guarantor's liability
hereunder shall have been released or terminated by virtue of such cancellation
or surrender), this Guaranty (and such Lien) shall be reinstated in full force
and effect, and such prior cancellation or surrender shall not diminish,
release, discharge, impair or otherwise affect the obligations of such Guarantor
in respect of the amount of such payment (or any Lien securing such obligation).
SECTION 9. Representations, Warranties and Covenants. To induce the
Lenders to execute the Credit Agreement and make any Extensions of Credit, each
Guarantor hereby represents, warrants, covenants and agrees on a joint and
several basis that:
(a) such Guarantor has the corporate right, power and
authority to execute, deliver and perform this Guaranty and has taken
all necessary corporate action to authorize its execution, delivery
and performance of this Guaranty;
(b) this Guaranty constitutes the legal, valid and binding
obligation of such Guarantor enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent
5
<PAGE> 118
conveyance or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies;
(c) the execution, delivery and performance of this
Guaranty will not violate any provision of any Applicable Law or
material contractual obligation of such Guarantor and will not result
in the creation or imposition of any Lien upon or with respect to any
property or revenues of such Guarantor;
(d) no consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority and
no consent of any other Person (including, without limitation, any
stockholder or creditor of such Guarantor), is required in connection
with the execution, delivery, performance, validity or enforceability
of this Guaranty;
(e) no actions, suits or proceedings before any arbitrator
or Governmental Authority are pending or, to the knowledge of such
Guarantor, threatened by or against such Guarantor or against any of
its properties with respect to this Guaranty or any of the
transactions contemplated hereby;
(f) such Guarantor has such title to the real property
owned by it and a valid leasehold interest in the real property
leased by it, and has good and marketable title to all of its
personal property sufficient to carry on its business free of any and
all Liens of any type whatsoever, except those permitted by Section
10.3 of the Credit Agreement;
(g) as of the Closing Date, such Guarantor (a) has capital
sufficient to carry on its business and transactions and all business
and transactions in which it engages and is able to pay its debts as
they mature, (b) owns property having a fair value greater than the
amount required to pay its probable liabilities (including
contingencies) and (c) does not believe that it will incur debts or
liabilities beyond its ability to pay such debts or liabilities as
they mature;
(h) all payments under this Guaranty shall be made in the
currency required by the Credit Agreement (the "Currency") in
immediately available funds (and no obligation or liability of the
Guarantors under this Guaranty shall be released or discharged by any
judgment in a currency other than the Currency) unless any judgment
or order of any court or other governmental department, commission,
board, bureau, instrumentality or agency is given or made for the
payment of any amount due under this Guaranty in a currency other
than the Currency, in which event the Guarantors shall indemnify and
hold harmless the Administrative Agent and the Lenders against any
loss incurred by the Administrative Agent and the Lenders as a result
of any such judgment or order and as a result of any variation having
occurred in rates of exchange between the date of any such amount
becoming due under this Guaranty and the date of actual payment
thereof. The foregoing indemnity shall constitute a separate and
independent obligation of the each Guarantor and shall continue in
full force and effect notwithstanding any such judgment or order. The
rate of exchange used
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<PAGE> 119
shall be that at which in accordance with normal banking procedures
the Administrative Agent could purchase the Currency with the
judgment currency on the Business Day succeeding that on which the
final judgment is given; .
(i) all payments under this Guaranty shall be paid in full
and made without set-off, counterclaim, condition or qualification,
and free and clear of and without deduction or withholding for, or on
account of, any present or future taxes, levies, imposts, duties,
fees, assessments or other charges of any nature whatsoever, and all
interest, penalties and similar liabilities with respect thereto
(except such taxes, levies, imposts, duties, fees, assessments and
other charges as are imposed on or measured by the Administrative
Agent's or any Lender's net income by the country or any subdivision
thereof in which the Administrative Agent's or any Lender's principal
office or lending office is located or otherwise are in the nature of
income taxes imposed on the Administrative Agent or any Lender),
imposed, levied, collected, withheld or assessed by any taxing or
other authority (all such non-excluded taxes, levies, imposts,
duties, fees, assessments, charges, deductions, withholdings and
liabilities, "Taxes"). If any Guarantor is compelled by law to deduct
or otherwise account for any Taxes, each Guarantor shall (x) pay to
the appropriate authority the amount of any and all such Taxes which
such Guarantor is so compelled to make, prior to the date upon which
any penalty may attach thereto, (y) pay in such manner, and at the
same time as the payment of the amounts payable in accordance with
clause (x), above, such additional amounts (if any) as may be
necessary to ensure that the Administrative Agent and the Lenders
receive a net amount equal to the full amount which the
Administrative Agent and the Lenders would have received had the
payment not been made subject to such Taxes, and (z) provide evidence
that all applicable Taxes shall have been paid to the appropriate
taxing authorities by delivery to the Administrative Agent, for the
benefit of the Lenders, of official tax receipts or notarized copies
within thirty (30) days after payment thereof, or if unobtainable due
to governmental policy or inability, other acceptable evidence. Any
Taxes which may become payable after payment in full of any amounts
owed hereunder shall be paid by the Guarantors or reimbursed by the
Guarantors if payment has been made by the Administrative Agent or
any Lender, together with additional taxes, duties, fees and charges
due as a consequence of such payment or reimbursement, and the
Guarantors shall, as provided in clause (z), above, deliver to the
Administrative Agent for the benefit of the Lenders appropriate
receipts or other evidence of such payment;
(j) such Guarantor shall pay, indemnify and hold harmless
the Administrative Agent and the Lenders from all present and future
claims or liabilities for any registration, stamp, documentary and
other similar taxes, fees or charges, and any penalties and interest
with respect thereto, which may be assessed, levied or collected by
any applicable Governmental Authority or by any department, agency,
state or political subdivision or taxing authority thereof or therein
or in connection with the execution, issuance, delivery, filing,
registration or enforcement of this Guaranty;
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(k) such Guarantor is generally subject to suit, and
neither it nor any of its properties or assets has any immunity from
the jurisdiction of any court or from legal process (whether through
service of process or notice of attachment prior to judgment,
attachment in aid of execution, execution or otherwise) under any
Applicable Law;
(l) there is no tax, duty, fee, assessment or other
governmental charge, or any deduction or withholding, imposed by any
applicable Governmental Authority (i) on or by virtue of the
execution, delivery, acquisition, registration or enforcement of this
Guaranty, or (ii) on any payment to be made by such Guarantor
pursuant to this Guaranty;
(m) to ensure the enforceability or admissibility in
evidence of this Guaranty, it is not necessary that this Guaranty be
filed or recorded with any applicable Governmental Authority or that
any stamp or similar tax be paid hereon or in respect hereof;
(n) such Guarantor hereby agrees that a final judgment in
any proceeding brought in any of the courts referred to in Section
12(i) shall be conclusive and binding upon each Guarantor and may be
enforced in the courts of the United States of America, the State of
North Carolina or any other courts to the jurisdiction of which such
Guarantor is subject, by a suit upon judgment, provided that service
of process is effected on such Guarantor in one of the manners
specified in Section 12(i) or as otherwise permitted by law; and
(o) to the extent that such Guarantor has or hereafter may
acquire any immunity from suit, jurisdiction of any court or any
legal process (whether through attachment prior to judgment,
attachment in aid of execution, execution of a judgment, or from any
other legal process or remedy) with respect to itself or its
property, such Guarantor hereby irrevocably waives such immunity in
respect of the Guaranteed Obligations and its obligations hereunder.
SECTION 10. Remedies.
(a) Upon the occurrence of any Event of Default, with the consent of
the Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, enforce against the Guarantors
their respective obligations and liabilities hereunder and exercise such other
rights and remedies as may be available to the Administrative Agent hereunder,
under the other Loan Documents or otherwise.
(b) No right or remedy herein conferred upon the Administrative Agent
is intended to be exclusive of any other right or remedy contained herein or in
any other Loan Document or otherwise, and every such right or remedy contained
herein and therein or now or hereafter existing at law, or in equity, or by
statute, or otherwise shall be cumulative. The Required Lenders may instruct the
Administrative Agent to pursue, or refrain from pursuing, any remedy available
to the Administrative Agent at such times and in such order as the Required
Lenders shall determine, and the Required Lenders' election as to such remedies
shall not impair any remedies against any
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Guarantor not then exercised. In addition, any election of remedies which
results in the denial or impairment of the right of the Administrative Agent to
seek a deficiency judgment against the Borrower shall not impair any Guarantor's
obligation to pay the full amount of the Guaranteed Obligations.
SECTION 11. No Subrogation. Notwithstanding any payment or payments
by any of the Guarantors hereunder, or any set-off or application of funds of
any of the Guarantors by the Administrative Agent or any Lender, or the receipt
of any amounts by the Administrative Agent or any Lender with respect to any of
the Guaranteed Obligations, none of the Guarantors shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against the Borrower or any of the other Guarantors or against any collateral
security held by the Administrative Agent or any Lender for the payment of the
Guaranteed Obligations nor shall any of the Guarantors seek any reimbursement
from the Borrower or any of the other Guarantors in respect of payments made by
such Guarantor in connection with the Guaranteed Obligations, until all amounts
owing to the Administrative Agent and the Lenders on account of the Guaranteed
Obligations are paid in full and the Commitments are terminated. If any amount
shall be paid to any Guarantor on account of such subrogation rights at any time
when all of the Guaranteed Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the Administrative Agent,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly endorsed by such Guarantor to the
Administrative Agent, if required) to be applied against the Guaranteed
Obligations, whether matured or unmatured, in such order as set forth in the
Credit Agreement.
SECTION 12. Miscellaneous.
(a) Entire Agreement; Amendments. This Guaranty, together with the
other Loan Documents, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements with
respect to the subject matter hereof and may not be amended or supplemented
except by a writing signed by each Guarantor and the Administrative Agent,
consented to by such Lenders as required by Section 13.11 of the Credit
Agreement.
(b) Headings. Titles and captions of sections and subsections in this
Guaranty are for convenience of reference only, and neither limit nor amplify
the provisions of this Guaranty.
(c) Severability. In the event that any one or more of the provisions
contained in this Guaranty shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Guaranty shall not be in any way impaired.
(d) Notices. All notices and communications hereunder shall be given
in accordance with Section 13.1 of the Credit Agreement and, in the case of the
Guarantors, shall be addressed to them at the address of the Borrower as set
forth in Section 13.1 of the Credit Agreement.
(e) Binding Effect. This Guaranty shall bind each Guarantor and shall
inure to the benefit of the Administrative Agent and the Lenders and their
respective successors and assigns. No Guarantor may assign this Guaranty or
delegate any of its duties hereunder, other than in
9
<PAGE> 122
connection with the merger of such Guarantor into such other Person as permitted
by Section 10.5 of the Credit Agreement, or with the prior consent of the
Administrative Agent and each of the Lenders.
(f) Non-Waiver. The failure of the Administrative Agent or any Lender
to enforce any right or remedy hereunder, or promptly to enforce any such right
or remedy, shall not constitute a waiver thereof, nor give rise to any estoppel
against the Administrative Agent or any Lender, nor excuse any Guarantor from
its obligations hereunder. Any waiver of any such right or remedy by the Lenders
must be in writing and signed by the Required Lenders.
(g) Termination. This Guaranty shall terminate and be of no further
force or effect on the earlier of (i) the date when the Guaranteed Obligations
have been indefeasibly paid in full and the Commitments terminated, and (ii)
with regard to any specific Guarantor, the date on which such Guarantor is
merged (or wound up or dissolved) into another Credit Party pursuant to Section
10.5 of the Credit Agreement or is otherwise permitted to assign or delegate its
duties hereunder pursuant to Section 12(e).
(h) Governing Law. This Guaranty shall be governed by and construed
and enforced in accordance with the laws of the State of North Carolina, without
reference to the conflicts or choice of law principles thereof.
(i) Consent to Jurisdiction. Each Guarantor hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg County or Wake County, North Carolina, in any action, claim or other
proceeding arising out of any dispute in connection with this Guaranty, any
rights or obligations hereunder, or the performance of such rights and
obligations. Each Guarantor hereby irrevocably consents to the service of a
summons and complaint and other process in any action, claim or proceeding
brought by the Administrative Agent or any Lender in connection with this
Guaranty, any rights or obligations hereunder, or the performance of such rights
and obligations, on behalf of itself or its property, in the manner referenced
in Section 12(d). Nothing in this Section 12(i) shall affect the right of the
Administrative Agent or any Lender to serve legal process in any other manner
permitted by Applicable Law or affect the right of the Administrative Agent or
any Lender to bring any action or proceeding against any Guarantor or its
properties in the courts of any other jurisdictions.
(j) Binding Arbitration; Waiver of Jury Trial.
(i) Binding Arbitration. Upon demand of any party, whether
made before or after institution of any judicial proceeding, any
dispute, claim or controversy arising out of, connected with or
relating to this Guaranty or any other Loan Documents ("Disputes"),
between or among parties to this Guaranty or any other Loan Document
shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the
right of that party to demand arbitration hereunder. Disputes may
include, without limitation, tort claims, counterclaims, claims
brought as class actions, claims arising from Loan Documents executed
in the future, or claims concerning any aspect of the past, present
or future relationships arising out or connected with the Loan
Documents. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration
Rules") of the American Arbitration Association and
10
<PAGE> 123
Title 9 of the U.S. Code. All arbitration hearings shall be conducted
in either Charlotte or Raleigh, North Carolina. The expedited
procedures set forth in Rule 51, et seq. of the Arbitration Rules
shall be applicable to claims of less than $1,000,000. All applicable
statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction.
Notwithstanding anything foregoing to the contrary, any arbitration
proceeding demanded hereunder shall begin within ninety (90) days
after such demand thereof and shall be concluded within one hundred
and twenty (120) days after such demand. These time limitations may
not be extended unless a party hereto shows cause for extension and
then such extension shall not exceed a total of sixty (60) days. The
panel from which all arbitrators are selected shall be comprised of
licensed attorneys. The single arbitrator selected for expedited
procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will
be conducted. The parties hereto do not waive any applicable federal
or state substantive law except as provided herein. Notwithstanding
the foregoing, this paragraph shall not apply to any Hedging
Agreement that is a Loan Document.
(ii) Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE ADMINISTRATIVE AGENT, EACH LENDER AND EACH GUARANTOR HEREBY
ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE
IRREVOCABLY WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH
RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS GUARANTY OR THE OTHER LOAN DOCUMENTS,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS.
(iii) Preservation of Certain Remedies. Notwithstanding the
preceding binding arbitration provisions, the parties hereto and to
the other Loan Documents preserve, without diminution, certain
remedies that such Persons may employ or exercise freely, either
alone, in conjunction with or during a Dispute. Each such Person
shall have and hereby reserves the right to proceed in any court of
proper jurisdiction or by self help to exercise or prosecute the
following remedies: (A) all rights to foreclose against any real or
personal property or other security by exercising a power of sale
granted in the Loan Documents or under applicable law or by judicial
foreclosure and sale, (B) all rights of self help including peaceful
occupation of property and collection of rents, set off, and peaceful
possession of property, (C) obtaining provisional or ancillary
remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and in filing an involuntary
bankruptcy proceeding, and (D) when applicable, a judgment by
confession of judgment. Preservation of these remedies does not limit
the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
(k) Limitation of Liability. Neither the Administrative Agent, the
Lenders nor any Affiliate thereof shall have any liability with respect to, and
each Guarantor hereby waives, releases and agrees not to sue upon, any claim for
any punitive or exemplary damages suffered by such Guarantor in connection with,
arising out of, or in any way related to this Guaranty and the other Loan
Documents, the transactions contemplated herein or therein, or any act, omission
or event occurring in connection herewith or therewith.
11
<PAGE> 124
(l) Expenses. Each Guarantor agrees that it will reimburse the
Administrative Agent and each Lender for all reasonable out-of-pocket expenses
(including reasonable attorneys' fees and expenses, which shall be based upon
standard hourly rates and not the presumed rates set forth in the N.C. Gen.
Stat. Section 6-21.2) incurred by the Administrative Agent or such Lender in
connection with the enforcement of the obligations of the Guarantors under this
Guaranty and any other Loan Documents and all reasonable out-of-pocket expenses
(including reasonable attorneys' fees and expenses) incurred by the
Administrative Agent in connection with the amendment or modification of this
Guaranty.
(m) Indemnities. Each Guarantor agrees to hold the Administrative
Agent and the Lenders harmless from and against all losses suffered by the
Administrative Agent and the Lenders in connection with (i) the exercise by the
Administrative Agent or the Lenders of any right or remedy granted to them under
this Guaranty, (ii) any claim, and the prosecution or defense thereof, arising
out of or in any way connected with this Guaranty, and (iii) the collection or
enforcement of the Obligations, the Guaranteed Obligations or any of them;
provided, that such Guarantor shall not be obligated to reimburse the
Administrative Agent or the Lenders for costs and expenses, or indemnify the
Administrative Agent or the Lenders for any loss, resulting from the gross
negligence or willful misconduct of the Administrative Agent or the Lenders.
Notwithstanding any termination of this Guaranty, the indemnities to which the
Administrative Agent and Lenders are entitled under this Guaranty shall continue
in full force and effect and shall protect the Administrative Agent and the
Lenders against events arising after such termination as well as before.
(n) Survival of Indemnities. Notwithstanding any termination of this
Guaranty or any other provisions of this Guaranty to the contrary, the
obligations of each Guarantor and the indemnities with respect thereto, to which
the Administrative Agent and the Lenders are entitled under Sections 12(l) and
(m) shall continue in full force and effect for the benefit of the
Administrative Agent and the Lenders notwithstanding the prior payment in full
of the Guaranteed Obligations and the termination of the Credit Agreement.
[Signature Page Follows]
12
<PAGE> 125
IN WITNESS WHEREOF, each of the Guarantors has executed and delivered
this Guaranty under seal as of the date first above written.
[CORPORATE SEAL] GUARANTORS:
INNOVEX (NORTH AMERICA) INC.
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
[CORPORATE SEAL] QUINTILES PACIFIC, INC.
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE> 126
UNCONDITIONAL GUARANTY AGREEMENT SUPPLEMENT
UNCONDITIONAL GUARANTY AGREEMENT SUPPLEMENT, dated as of __________,
______ (the "Supplement"), made by [INSERT NAME OF NEW SUBSIDIARY], a
____________________ (the "New Guarantor"), in favor of First Union National
Bank, as administrative agent (in such capacity, the "Administrative Agent")
under the Credit Agreement (as defined in the Guaranty Agreement referred to
below) for the ratable benefit of itself and the Lenders.
1. Reference is hereby made to the Unconditional Guaranty Agreement
dated as of August 7, 1998, made by certain Subsidiaries of Quintiles
Transnational Corp. party thereto (the "Guarantors"), as guarantors, in favor of
the Administrative Agent for the ratable benefit of itself and the Lenders
referred to therein (as amended, restated, supplemented or otherwise modified as
of the date hereof, the "Guaranty Agreement"). This Supplement supplements the
Guaranty Agreement, forms a part thereof and is subject to the terms thereof.
Capitalized terms used and not defined herein shall have the meanings given
thereto or referenced in the Guaranty Agreement.
2. The New Guarantor hereby agrees to unconditionally, absolutely and
irrevocably guarantee to the Administrative Agent for the ratable benefit of
itself, the Lenders and their respective successors, endorsees, transferees and
assigns, the prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance of all Obligations of the Borrower to the same extent
and upon the same terms and conditions as are contained in the Guaranty
Agreement.
3. The New Guarantor hereby agrees that it is a party to the Guaranty
Agreement as if a signatory thereto on the Closing Date of the Credit Agreement,
and the New Guarantor shall comply with all of the terms, covenants, conditions
and agreements and hereby makes each representation and warranty, in each case
set forth therein. The New Guarantor agrees that the "Guaranty Agreement" or
"Guaranty" as used therein or in any other Loan Documents shall mean the
Guaranty Agreement as supplemented hereby.
4. The New Guarantor hereby acknowledges it has received a copy of
the Guaranty Agreement and that it has read and understands the terms thereof.
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 88,499
<SECURITIES> 44,448
<RECEIVABLES> 295,425
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 466,041
<PP&E> 353,095
<DEPRECIATION> 113,939
<TOTAL-ASSETS> 937,952
<CURRENT-LIABILITIES> 268,374
<BONDS> 178,051
0
0
<COMMON> 768
<OTHER-SE> 464,179
<TOTAL-LIABILITY-AND-EQUITY> 937,952
<SALES> 0
<TOTAL-REVENUES> 848,379
<CGS> 0
<TOTAL-COSTS> 759,725
<OTHER-EXPENSES> 1,461
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 456
<INCOME-PRETAX> 86,737
<INCOME-TAX> 27,823
<INCOME-CONTINUING> 58,914
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,914
<EPS-PRIMARY> .77
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</TABLE>
<PAGE> 1
EXHIBIT 99.01
Risk Factors You Should Consider
Dependence on the Pharmaceutical and Biotechnology Industries
Our revenues depend on the research and development and sales and
marketing expenditures of the pharmaceutical and biotechnology industries.
To date, we have benefited from the tendency of companies in those
industries to hire outside organizations to conduct large clinical
research and sales and marketing projects. If these industries experience
a general market decline or begin to reduce their propensity to outsource
those projects, our operations and financial condition could be materially
and adversely affected.
Management of Growth
We have grown rapidly over the past 10 years. We believe that our
continued growth may place a strain on our existing operational, human and
financial resources. In order to manage our growth, we must continue to
(1) improve our operating and administrative systems, (2) attract and
retain qualified management, professional, scientific and technical
personnel and (3) assimilate differences in foreign business practices and
overcome language barriers.
Under our transnational organizational structure, a holding company
manages the operations of our service groups which perform complementary
functions. To date, this structure has successfully supported our growth.
We recently completed a number of acquisitions, and we cannot assure you
that our operational structure will continue to be effective. Failure to
effectively manage our growth could result in a material adverse effect on
our operations and financial condition.
<PAGE> 2
Risks Associated with Acquisitions
We have completed numerous acquisitions both within the United States and
internationally over the last several years and in 1998. In addition, we
are currently reviewing many acquisition candidates and continually
evaluating and competing for new acquisition opportunities. Acquisitions
involve numerous risks, including:
-- difficulties and expenses incurred during the acquisition;
-- integration of the acquired companies' operations and
services;
-- diversion of our management's attention from other business
concerns;
-- potential loss of the acquired companies' key employees;
-- the risk that acquired companies will not perform as expected;
-- Year 2000 risks of the acquired companies;
-- additional risks of assimilating differences in foreign
business practices and overcoming language barriers (for
acquisitions of foreign companies);
-- potential losses resulting from undiscovered liabilities of
acquired companies that are not covered by the indemnification
we may obtain from the sellers; and
-- expenses related to acquisition negotiations that are not
completed.
We cannot assure you that we can continue to successfully integrate into
our operations our past acquisitions or those we complete in the future.
Furthermore, we cannot assure you that we will either successfully
complete future acquisitions or that our completed acquisitions will
contribute favorably to our operations and future financial condition. The
realization of any of these risks associated with acquisitions could
result in a material adverse effect on our operations and financial
condition.
Risks Relating to Contract Sales Services
Outsourced contract sales services, or hiring outside organizations to
perform sales and marketing projects, is a relatively new industry in some
countries where we operate. We believe that this industry emerged because
of regulatory agencies' actions to place cost containment pressure on
pharmaceutical companies. As a result, large pharmaceutical companies
began to outsource their sales and marketing activities incident to
product launches (which typically require deployment of large numbers of
sales personnel for a relatively short amount of time). Many countries,
including the United States, have a low level of market penetration for
outsourced sales and marketing services. Thus, all companies in this
industry are subject to the risks inherent in a new or emerging industry,
including:
2
<PAGE> 3
-- an inability to attract and retain customers;
-- changes in the regulatory regime;
-- an absence of an established earnings history;
-- the availability of properly trained personnel; and
-- any unforeseen costs and expenses.
Competition
Since we offer an extensive range of services, we face a broad range of
competitors. Some of our competitors compete against us only with respect
to a single service or group of services, while others may compete across
a broader portion of our service lines. Our competitors generally fall
within the following categories:
Contract Research: traditional contract research organizations; the
in-house research and development departments of pharmaceutical
companies; universities; and teaching hospitals; consulting firms,
including boutique firms specializing in the healthcare industry and
the healthcare departments of large consulting firms.
Contract Sales: in-house sales and marketing departments of
pharmaceutical companies; contract sales organizations in countries
where we operate; and consulting firms offering medical
communications services.
Factors that affect our ability to compete include:
-- the highly competitive nature of the market for contract
research services;
-- our competitors' expansion into other areas in which we
operate;
-- increases in competition, which may lead to price and other
forms of competition that could have an effect on our profit
margins;
-- consolidation within the pharmaceutical industry, compounded
by a trend among pharmaceutical companies to limit outsourcing
to fewer full-service global organizations; and
-- the trend towards consolidation among the providers of
contract research and contract sales services, which could
result in greater competition among the larger contract
research and contract sales providers for customers and
acquisition candidates.
3
<PAGE> 4
Loss or Delay of Large Contracts
Most of our customers can terminate our contracts upon 15-90 days' notice.
In the event of termination, our contracts often provide for fees for
winding down the project. Still, the loss or delay of a large contract or
the loss or delay of multiple contracts could adversely affect our future
net revenue and profitability.
Variability of Backlog
We report backlog based on anticipated net revenue from uncompleted
projects that a customer has authorized. A number of factors may affect
our backlog, including:
-- the variable size and duration of projects (some are performed
over several years);
-- the loss or delay of projects; and
-- a change in the scope of work during the course of a project.
We cannot assure you that the backlog we have reported will be indicative
of our future results.
Risks of Cost Overruns on Fixed Price Contracts
Most of our service contracts have either a fixed price, a fixed price
with variable components or a fee-for-service subject to a cap. Under this
structure, we bear the risk of cost overruns. Underpricing of contracts or
significant cost overruns could have a material adverse effect on us.
Impact of the Year 2000 Issue
The Year 2000 issue results from computer processors and software failing
to process date values correctly, potentially causing system failures or
data corruption. The Year 2000 issue could cause disruptions of our
operations, including, among other things, a temporary inability to
process information; receive information, services or products from third
parties; interface with customers in the performance of contracts; or
operate or communicate in some or all of the regions in which we do
business.
4
<PAGE> 5
We face both internal and external risks from the Year 2000 issue. If
realized, these risks could have a material adverse effect on our
business, results of operations or financial condition. Our primary
internal risk is that our systems will not be Year 2000 compliant on time.
The magnitude of this risk depends on our ability to achieve compliance of
both internally and externally developed systems or to migrate to
alternate systems in a timely fashion. The decentralized nature of our
business may compound this risk if we are unable to coordinate efforts
across our global operations on a timely basis. We have established a Year
2000 Program that management believes will successfully address these
risks, however, we cannot guarantee that this program will be completed in
a timely manner. For a more complete discussion of our Year 2000 Program
and progress to date, you should refer to the explanation of it in
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in our most recent Form 10-Q
Notwithstanding our Year 2000 Program, we also face external risks that
may be beyond our control. Our international operations and our
relationships with foreign third parties create additional risks for us,
as many countries outside the United States have been less attuned to the
Year 2000 issue. These risks include the possibility that infrastructural
systems, such as electricity, water, natural gas or telephony, will fail
in some or all of the regions in which we operate, as well as the danger
that the internal systems of our foreign suppliers, service providers and
customers will fail. Our business also requires considerable travel, and
our ability to perform services under our customer contracts could be
negatively affected if air travel is disrupted by the Year 2000 issue.
In addition, our business depends heavily on the healthcare industry,
particularly on third party physician investigators. The healthcare
industry, and physicians' groups in particular, to date may not have
focused on the Year 2000 issue to the same degree as some other
industries, especially outside of major metropolitan centers. As a result,
we face increased risk that our physician investigators will be unable to
provide us with the data that we need to perform under our contracts on
time, if at all. Thus, the clinical study involved could be slowed or
brought to a halt. Also, the failure of our customers to address the Year
2000 issue could negatively impact their ability to utilize our services.
While we intend to develop contingency plans to address certain of these
risks, we cannot assure you that any developed plans will sufficiently
insulate us from the effects of these risks. Any disruptions resulting
from the realization of these risks would affect our ability to perform
our services. If we are unable to receive or process information, or if
third parties are unable to provide information or services to us, we may
not be able to meet milestones or obligations under our customer
contracts, which could have a material adverse effect on our business and
financial results.
Our estimates regarding the cost, timing and impact of addressing the Year
2000 issue are based on numerous assumptions of future events, including
the continued availability of certain resources, our ability to meet our
deadlines and the cooperation of third parties. We cannot guarantee that
our assumptions will be correct and that these estimates will be achieved.
Actual results could differ materially from our expectations as a result
of numerous factors, including the availability and cost of personnel
trained in this area, the ability to locate and correct all relevant
computer codes, unforeseen circumstances that would cause us to allocate
our resources elsewhere and similar uncertainties.
5
<PAGE> 6
Dependence on Key Executives and Personnel
We rely on a number of key executives, including Dennis B. Gillings,
Ph.D., our Chairman of the Board of Directors and Chief Executive Officer.
We maintain key man life insurance on Dr. Gillings in the amount of $3
million. The departure of any key executive could have a material adverse
effect on our operations or financial condition. In addition, our
performance depends on our ability to attract and retain qualified
management and professional, scientific and technical operating staff, as
well as our ability to recruit qualified representatives for our contract
sales services. We cannot assure you that we will be able to continue to
attract and retain qualified personnel.
Potential Liabilities
Potential Liabilities Arising From Contract Research Services
We contract with physicians to serve as investigators in conducting
clinical trials to test new drugs on human volunteers. Such testing
creates risk of liability for personal injury to or death of volunteers,
particularly to volunteers with life-threatening illnesses, resulting from
adverse reactions to the drugs administered during testing. It is possible
third parties could claim that we should be held liable for losses arising
from any professional malpractice of the investigators with whom we
contract or in the event of personal injury to or death of persons
participating in clinical trials. We do not believe we are legally
accountable for the medical care rendered by third party investigators,
and we would vigorously defend any such claims. Nonetheless, it is
possible we could be found liable for those types of losses.
Since we have Phase I clinical trial facilities, we also could be liable
for the general risks associated with a Phase I facility. These risks
include, but are not limited to, adverse events resulting from the
administration of drugs to clinical trial participants or the professional
malpractice of Phase I medical care providers.
Potential Liabilities Arising From Other Services
We also could be held liable for errors or omissions in connection with
the services each of our service groups perform.
Measures to Reduce Risk From Potential Liabilities.
We attempt to reduce risk from potential liabilities through:
-- contractual indemnification provisions with customers and
investigators;
-- insurance maintained by us, our customers and our
investigators;
-- various regulatory requirements, including the use of
institutional review boards; and
-- the procurement of each volunteer's informed consent to
participate in a study.
6
<PAGE> 7
You should note several aspects about our contractual indemnifications.
First, they generally do not fully protect us against some of our own
actions, such as negligence. Second, the terms and scope of each
indemnification vary from customer to customer and from trial to trial.
Finally, the financial performance of any of these indemnities is not
secured. As a result, we bear the risk that the indemnifying party may not
have the financial ability to fulfill its indemnification obligations.
Our professional liability insurance covers the worldwide territories in
which we operate and includes drug safety issues, as well as data
processing errors and omissions. We can offer you no assurance that we
will be able to maintain this insurance on terms acceptable to us or that
this insurance will cover all of our losses. We caution you that our
financial condition could be materially and adversely affected if we were
required to pay damages or bear the costs of defending any claim (1)
outside the scope of or in excess of a contractual indemnification
provision, (2) beyond the level of insurance coverage or (3) in the event
that an indemnifying party does not fulfill its indemnification
obligations.
Effect of Government Regulation
Our contract research business benefits from the extensive governmental
regulation of the drug development/approval process, particularly in the
United States. From time to time legislation is introduced in the U.S.
Congress to substantially modify regulations administered by the Food and
Drug Administration, the agency governing this process. We believe the
level of regulation is generally less burdensome outside the United
States. Still, European countries are attempting to establish common
standards for clinical testing of new drugs. This trend has caused changes
in the various requirements currently imposed by each country. Some of the
changes under consideration in the United States and elsewhere include
mandatory substitution of generic drugs for patented drugs, relaxation in
the scope of regulatory requirements or the introduction of simplified
drug approval procedures. These and other changes in regulation could
decrease the business opportunities available to us. In addition, any
failure on our part to comply with applicable regulations could result in
the termination of ongoing clinical research or sales and marketing
projects or the disqualification of data for submission to regulatory
authorities, either of which could have a material adverse effect on us.
Uncertainty in Healthcare Industry and Possible Healthcare Reform
Changing political, economic and regulatory influences in the healthcare
industry may affect the pharmaceutical, biotechnology and medical device
industries. Numerous governments have undertaken efforts to control
growing healthcare costs through legislation, regulation and voluntary
agreements with medical care providers and pharmaceutical companies.
Implementation of government healthcare reform may adversely affect
research and development expenditures by these companies, which could
decrease the business opportunities available to us. We cannot predict the
likelihood of healthcare reform legislation being enacted or the effects
such legislation would have on our operations.
7
<PAGE> 8
Exchange Rate Fluctuation Risks
We derive a large portion of our net revenue from our operations outside
the United States, as illustrated by the following table:
% of Net Revenue from
Year Foreign Operations
====================================================
1997 50.0%
----------------------------------------------------
1996 57.0%
----------------------------------------------------
1995 60.1%
====================================================
Factors associated with international operations, including changes in
foreign currency exchange rates and uncertainties relative to regional
economic circumstances, could significantly affect our operations and
financial results. Exchange rate fluctuations between local currencies and
the U.S. dollar create risk in several ways, including:
-- Foreign Currency Translation Risk. The revenue and expenses of
our foreign operations are generally denominated in local
currencies.
-- Foreign Currency Transaction Risk. Our service contracts may
be denominated in a currency other than the currency in which
we incur expenses related to such contracts.
We try to limit these risks through exchange rate fluctuation provisions
stated in our service contracts, or we may hedge our transaction risk with
foreign currency exchange contracts or options. Despite these efforts, we
may still experience fluctuations in financial results from our operations
outside the United States, and we cannot assure you that we will be able
to favorably reduce our currency transaction risk associated with our
service contracts.
Variation in Our Quarterly Results
The results of our operations have been, and can be expected to be,
subject to quarterly fluctuations. Quarterly results can fluctuate as a
result of a number of factors, including:
-- the timing of start-up expenses for new offices;
-- the completion of acquisitions;
-- the completion or commencement of significant contracts;
-- changes in the mix of services offered; and
-- foreign exchange fluctuations.
Because of these factors, we believe that you should not rely on quarterly
comparisons of our financial results as an indication of our future
performance.
8
<PAGE> 9
Volatility of Our Stock Price
The market price of our common stock has been and may continue to be
subject to wide fluctuations. Factors affecting our stock price may
include (1) variations in operating results from quarter to quarter, (2)
changes in earnings estimates by analysts, (3) market conditions in the
industry and (4) general economic conditions.
9
