-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, c1EBa0MobKjH5ambV6QoJgtusVYx3n3dzgwZaoMOA2qY/kBMznEXt43xnaH3UIgq PTOG46/6O7m35YHe1juhiQ== 0000898430-95-001064.txt : 19950613 0000898430-95-001064.hdr.sgml : 19950613 ACCESSION NUMBER: 0000898430-95-001064 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950612 SROS: NASD SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCKESSON CORP CENTRAL INDEX KEY: 0000927653 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 943207296 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 033-86536 FILM NUMBER: 95546365 BUSINESS ADDRESS: STREET 1: ONE POST ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4159838300 FORMER COMPANY: FORMER CONFORMED NAME: SP VENTURES INC DATE OF NAME CHANGE: 19940728 10-K405 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-13252 McKESSON CORPORATION A Delaware Corporation I.R.S. Employer Number 94-3207296 McKesson Plaza, One Post Street, San Francisco, CA 94104 Telephone - Area Code (415) 983-8300 Securities registered pursuant to Section 12(b) of the Act: (Name Of Each Exchange (Title Of Each Class) On Which Registered) Common Stock, $.01 par value New York Stock Exchange Pacific Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: None. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of voting stock held by nonaffiliates of the Registrant at June 1, 1995: $1,734,940,620 Number of shares of common stock outstanding at June 1, 1995: 44,626,319 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Appendix to the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on July 26, 1995 are incorporated by reference into Parts I and II of this report. Portions of the Registrant's Proxy Statement for said meeting are incorporated by reference into Part III of this report. TABLE OF CONTENTS Item Page - ---- ---- PART I
1. Business......................................................... 1 2. Properties....................................................... 6 3. Legal Proceedings................................................ 6 4. Submission of Matters to a Vote of Security Holders.............. 8 Executive Officers of the Registrant............................. 9 PART II 5. Market for the Registrant's Common Stock and Related Stockholder Matters......................................................... 11 6. Selected Financial Data.......................................... 11 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 11 8. Financial Statements and Supplementary Data...................... 11 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................ 11 PART III 10. Directors and Executive Officers of the Registrant............... 12 11. Executive Compensation........................................... 12 12. Security Ownership of Certain Beneficial Owners and Management... 12 13. Certain Relationships and Related Transactions................... 12 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 13 Signatures....................................................... 14
PART I ITEM 1. BUSINESS (a) General Development of Business New McKesson (the "Company") was organized in the state of Delaware on July 7, 1994 as a wholly-owned subsidiary of McKesson Corporation, a Delaware corporation ("McKesson"), for the purpose of owning and operating the businesses of McKesson following the acquisition of McKesson's pharmaceutical benefits management business ("PCS") by ECO Acquisition Corporation ("ECO"), a subsidiary of Eli Lilly and Company ("Lilly"), for approximately $4 billion (the "PCS Transaction"). PCS had been operated primarily by PCS Health Systems, Inc. and Clinical Pharmaceuticals, Inc., both of which were wholly-owned subsidiaries of McKesson. As part of the PCS Transaction, on November 21, 1994 the Company acquired all of the assets and liabilities of McKesson, other than those related to PCS, and McKesson distributed to its stockholders one share of the Company's common stock for each share of McKesson common stock held of record as of November 19, 1994 (the "Spin-Off"). Simultaneously with the Spin-Off, ECO consummated a tender offer for all outstanding shares of McKesson common stock at a price of $76 per share (the "Offer"). Following the completion of the Offer, McKesson merged with and into ECO. As a result of the PCS Transaction (i) Lilly became the indirect sole owner of PCS, and (ii) each existing McKesson stockholder received (a) a cash payment of $76 per share of McKesson common stock (representing the proceeds from the sale of PCS) and (b) one share of common stock of the Company, representing their continuing interest in the retained businesses. For financial statement purposes, the Company is the continuing entity and has retained the name McKesson Corporation. PCS is reflected as a discontinued operation in the Company's consolidated financial statements. In May 1995, the Company announced its intention to repurchase from time to time up to 3.5 million shares of its common stock in open market or private transactions. Developments which could be considered significant to individual segments of the business are described under (c)(1) "Narrative Description of Business" on pages 1 through 6 of this report. (b) Financial Information About Industry Segments Financial information for the three years ended March 31, 1995 appears in Financial Note 15, "Segments of Business", on pages 39 and 40 of the Appendix to the Company's 1995 Proxy Statement, which note is incorporated herein by reference. (c) Narrative Description of Business (1) Description of Segments of Business The principal segments of the Company's business are: Health Care Services Water Products Armor All 1 Health Care Services PRODUCTS & MARKETS Wholesale Distribution of Pharmaceutical & Health Care Products -- Within the United States and Canada, the Company is the largest wholesale distributor of ethical and proprietary drugs and health and beauty care products. Its products are distributed to chain and independent drug stores, hospitals, food stores and mass merchandisers. This business requires large inventories, significant amounts of which are financed by related payables. In addition, the Company owns a 22.7% equity interest in Nadro, S.A. de C.V. the leading pharmaceutical wholesaler in Mexico. Using the name "Economost" and "Econolink" and a number of related service marks, the Company has promoted electronic order entry systems and a wide range of computerized merchandising and asset management services for drug retailers and hospitals. The Company is also a supplier of computer systems and software for pharmacy management. In the United States, the Company does business under the McKesson Drug Company tradename. In Canada, the Company does business under the name Medis Health and Pharmaceutical Services Inc.. Voluntary Marketing Program -- Under the Valu-Rite pharmacy program, the Company provides its independent U.S. retail drug store customers with a common marketing identity, group advertising, purchasing programs, promotional merchandise and access to a pharmacy provider network. At March 31, 1995, approximately 5,000 stores were participating in the Valu-Rite program. Similar programs are available to independent drug stores through other drug wholesalers. The Company provides similar services to retail drug stores in Canada. Millbrook Distribution Services Co. -- Millbrook Distribution Services Co. distributes health and beauty care products, general merchandise and specialty foods to supermarkets, drug stores and discount department stores. The distribution services provided include product recommendations, procurement, warehousing, distribution, retail shelf management and temporary field labor. Healthcare Delivery Systems, Inc. ("HDS") -- HDS provides services designed to meet the needs of pharmaceutical and other healthcare manufacturers in commercializing a product and enhancing its market position. The core activity of HDS currently is the development of integrated systems for specialized delivery of pharmaceutical products. These systems manage manufacturer cost and information requirements through a variety of services including financial assistance programs for patients, reimbursement support and patient advocacy programs, clinical trial support services, and product hot-line and physician and patient information programs. Other -- Through its Sunmark operations, the Company supplies durable medical equipment to the home health care industry. Through its Central American operation, the Company manufactures a full line of branded generic pharmaceuticals that is distributed directly and indirectly to retailers in Central America. Through Zee Medical, Inc., the Company distributes first-aid products and supplies to industrial and commercial customers. COMPETITION In every area of operations, the distribution businesses (not including HDS) face strong competition both in price and service from national, regional and local full-line, short-line and specialty wholesalers, service merchandisers, and from manufacturers engaged in direct distribution. The particular area in which HDS provides services is in a rapid state of development and therefore there are no clearly defined markets in which HDS competes. It nonetheless faces competition from various other service providers and from pharmaceutical and other healthcare manufacturers (as well as other potential customers of HDS) which may from time to time decide to develop, for their own internal needs, 2 those services which are provided by HDS and other competing service providers. Price, quality of service, and, in some cases, convenience to the customer are generally the principal competitive elements in the industry. INTELLECTUAL PROPERTY The principal trademarks and service marks of the Health Care Services segment are: ECONOMOST(R), ECONOLINK(R) and VALU-RITE(R). The Health Care Services segment also owns other registered and unregistered trademarks and service marks and similar rights. All of the principal marks are registered in the United States and registration has been obtained or applied for in Canada with respect to such marks. The United States federal registrations of these trademarks and service marks have ten or twenty year terms, depending on date of registration; the Canadian registrations have fifteen year terms. All are subject to unlimited renewals. The Company believes this business has taken all necessary steps to preserve the registration and duration of its trademarks and service marks, although no assurance can be given that it will be able to successfully enforce or protect its rights thereunder in the event that they are subject to third-party infringement. The Company does not consider any particular patents, licenses, franchises or concessions to be material to the business of the Health Care Services segment. Water Products PRODUCTS & MARKETS McKesson Water Products Company is primarily engaged in the processing and sale of bottled drinking water delivered to homes and businesses under its Sparkletts, Alhambra, and Crystal brands in California, Arizona, Nevada and Texas. It also sells and leases bottled water dispensers and coolers in the foregoing states, and sells packaged water through retail stores in approximately 40 states. In addition, under the Aqua-Vend trademark, it sells processed water through vending machines in California, Arizona, Nevada, Texas, Louisiana and Florida. Due to the nature of this business, it does not generally (a) require significant amounts of inventory to meet the needs of its customers or to meet its own internal supply requirements, (b) provide significant extended payment terms to its customers or (c) otherwise have significant working capital requirements. COMPETITION Although this business faces competition from several larger competitors, the competition is generally widely dispersed between many different entities. Principal among the large local competitors of the Water Products segment are: Arrowhead (California and Arizona) and Ozarka/Oasis (Texas) (both owned by Nestle); Hinckley & Schmitt (Arizona, Las Vegas, and Southern California) and Sierra Springs (Northern California and Texas) (both owned by Anjou Bottled Water Group, a subsidiary of a large French water utility); Crystal Geyser (nationally distributed); Evian (nationally distributed) (owned by Groupe Donone, S.A.) and Glacier Water Services, Inc.. This operation faces significant competition in both price and service in all aspects of its business. INTELLECTUAL PROPERTY The principal trademarks and service marks of the Water Products segment are: SPARKLETTS(R), ALHAMBRA(R), CRYSTAL(TM), CRYSTAL-FRESH(R) and AQUA- VEND(R). The McKesson Water Products Company also owns other registered and unregistered trademarks and service marks used by the Water Products segment. All of the principal trademarks and service marks are registered in the United States, in addition to certain other jurisdictions. The United States federal registrations of these trademarks have terms of ten or twenty years, depending on date of registration, and are subject to 3 unlimited renewals. The Company believes this business has taken all necessary steps to preserve the registration and duration of its trademarks and service marks, although no assurance can be given that it will be able to successfully enforce or protect its rights thereunder in the event that they are subject to third-party infringement. The Company does not consider any particular patents, licenses, franchises or concessions to be material to the business of the Water Products segment. Armor All PRODUCTS & MARKETS The Company is engaged through its majority-owned Armor All Products Corporation subsidiary ("Armor All") in developing and marketing a line of branded appearance enhancement and protection products primarily for the do-it- yourself automotive and home care markets. Its principal brand, Armor All(R), has the leading position in the domestic automotive protectant market. A second major brand, Rain Dance(R), is a strong competitor in the market for automotive waxes, polishes and washes. Armor All's principal product, Armor All(R) Protectant, is designed to protect and beautify natural and synthetic polymer materials and is used primarily on certain automobile surfaces. Armor All's products are marketed in the U.S. and Canada by its direct sales force and through independent manufacturers' representatives and distributors. International sales are effected through foreign sales offices, foreign distributors and a marketing and distribution alliance with S.C. Johnson. Primary customers include mass merchandise retailers, auto supply stores, warehouse clubs, hardware stores and other retail outlets. The Company in recent years has extended its product lines by introducing Armor All(R) Tire Foam(R) Protectant, Armor All(R) QuickSilver(TM) Wheel Cleaner, Armor All(R) Protectant Low-Gloss Natural Finish, Armor All(R) Spot & Wash(TM) Concentrate, Armor All(R) Leather Care Protectant, WAX PAX(TM) Instant Car Wax and three car polishes under the Rain Dance name. In January 1994, Armor All entered the home care market with the acquisition of the E-Z Deck Wash(R) and E-Z D(TM) brands. The E-Z Deck Wash product is designed to clean and restore wood surfaces such as patio decks, siding and fences. In February 1995, Armor All introduced three new home care products: Armor All Deck Protector, Armor All Water Proofing Sealer and Armor All Vinyl Siding Wash. Products which comprise a majority of Armor All's sales volume are manufactured under full service packaging agreements whereby contract packagers generally own the raw materials and finished goods in their possession and transfer title to Armor All just prior to shipment to Armor All's customers. Armor All's use of contract packagers permits it to avoid significant investments in inventory, machinery and other fixed assets. Armor All's relationships with its three most important packagers have lasted for 7, 10 and 22 years, respectively. Subject to contractual arrangements, Armor All periodically reevaluates its selection of packagers, and believes that other acceptable packagers are readily available. COMPETITION In the domestic protectant market, Armor All Protectant has two principal competitors, STP(R) Son-of-a-Gun(R) Protectant and Turtle Wax(R) Formula 2001(R), and several secondary competitors. Armor All Tire Foam Protectant has three principal competitors, No Touch(R), Turtle Wax(R) Formula 2001 and STP(R) Son-of-a-Gun(R) Tire Care, and several secondary competitors. Armor All QuickSilver Wheel Cleaner has four principal competitors, Eagle One(R), Turtle Wax(R) Formula 2001, Turtle Wax(R) Wheel Brite and Espree(R), and several secondary competitors. Armor All brand cleaner competes against many specialty automotive cleaner products. Armor All brand wash products and all of the Rain Dance and Rally brand products compete with numerous wash, wax and polish products in the automotive aftermarket. Competition in international markets varies by country. Armor All believes that brand recognition and loyalty, access to retail shelf space, product convenience and effectiveness, trade promotion and consumer advertising, support of customers' inventory management and marketing efforts, and pricing are important competitive factors in the appearance protection market. Armor All believes that it competes favorably with respect to these factors. 4 In the domestic home care products market, the E-Z Deck Wash brand product has two principal competitors, Thompson's(R) Deck Wash and Olympic(R) Deck Cleaner, and several secondary competitors. Armor All Deck Protector and Water Proofing Sealer each compete against products marketed under the Thompson's, Olympic and Behr brand names. There are no directly competitive products to Armor All Vinyl Siding Wash. INTELLECTUAL PROPERTY The principal trademarks and service marks of the Armor All segment are: ARMOR ALL(R), VIKING DESIGN(R) and related designs, RAIN DANCE(R), RALLY(R), NO. 7(R), TIRE FOAM(R), QUICKSILVER(TM), SPOT & WASH(R), WAX PAX(TM), E-Z DECK WASH(R) and E-Z D(TM). Armor All also owns other registered and unregistered trademarks and service marks. All of the principal trademarks and service marks are registered in the United States and Canada. Such marks are also registered in certain other foreign jurisdictions. The United States federal registrations of these trademarks and service marks have ten or twenty year terms, depending on date of registration; the Canadian registrations have fifteen year terms. All are subject to unlimited renewals. The Company believes it has taken all necessary steps to preserve the registration and duration of its trademarks and service marks, although no assurance can be given that it will be able to successfully enforce or protect its rights thereunder in the event that they are subject to third-party infringement. Armor All owns a process patent on ARMOR ALL Protectant and a patent on RAIN DANCE wax, and has applied for patents on ARMOR ALL QuickSilver Wheel Cleaner, ARMOR ALL Spot & Wash Concentrate, WAX PAX Instant Car Wax and ARMOR ALL Vinyl Siding Wash. In addition, Armor All owns a patent on an E-D DECK WASH product and has other domestic and foreign E-D DECK WASH patents pending. Armor All's process patent on ARMOR ALL Protectant will expire in 1996. Armor All's patent on RAIN DANCE wax will expire in the year 2000. The Company believes that Armor All's trademarks are more important assets than its patents, and that the termination or invalidity of its patents would not have a material adverse effect on Armor All. OWNERSHIP In fiscal 1994, the Company sold to the public 5,175,000 shares and donated to the McKesson Foundation 250,000 shares of common stock of Armor All. An additional 350,000 shares of Armor All common stock were donated to the McKesson Foundation in fiscal 1995. These transactions reduced the Company's equity interest in Armor All from 83% to 55%. In addition, in fiscal 1994, the Company sold $180 million of subordinated debentures that are exchangeable, at the option of the holders, into 6.9 million additional shares of Armor All common stock owned by the Company, subject to the Company's right to pay cash equal to the market price of the stock in lieu of making the exchange. If all of the debentures were exchanged, the Company's ownership interest in Armor All would be reduced to approximately 22%. As a result of the foregoing, the Company may not be able to exercise continued control over the business operations of Armor All and may not be able to obtain the financial benefits it would otherwise have received if it had maintained its controlling interest in Armor All. (2) Other Information About the Business Customers -- Sales to the Company's largest customer, Wal-Mart Stores, Inc., accounted for 10% of consolidated revenues in fiscal 1995 and 1994; however, no material part of the business is dependent upon a single or a very few customers, the loss of any one of which could have a material adverse effect on the Company or any of its business segments. Environmental Legislation -- The Company sold its chemical distribution operations in fiscal 1987. In connection with the disposition of those operations, the Company retained responsibility for certain environmental obligations and has entered into agreements with the EPA and certain states 5 pursuant to which it is or may be required to conduct environmental assessments and cleanups at several closed sites. These matters are described further in Item 3 "Legal Proceedings" below. Other than any capital expenditures which may be required in connection with those matters, the Company does not anticipate making substantial capital expenditures for environmental control facilities or to comply with environmental laws and regulations in the future. The amount of capital expenditures expended by the Company for environmental compliance was not material in fiscal 1995 and is not expected to be material in the next fiscal year. Employees -- At March 31, 1995, the Company employed approximately 12,200 persons. Backlog Orders -- Each of the Company's segments seeks to promptly fill or otherwise satisfy the orders of each such segment's customers. Accordingly, none of the Company's segments has a significant backlog of customer orders. (d) Financial Information About Foreign and Domestic Operations and Export Sales Information as to foreign operations is included in Financial Note 15, "Segments of Business" on pages 39 and 40 of the Appendix to the Company's 1995 Proxy Statement (the "Appendix"), which notes are incorporated herein by reference. ITEM 2. PROPERTIES Because of the nature of the Company's principal businesses, plant, warehousing, office and other facilities are operated in widely dispersed locations. The warehouses are typically owned or leased on a long-term basis. The Company considers its operating properties to be in satisfactory condition and adequate to meet its needs for the next several years. Information as to material lease commitments is included in Financial Note 10, "Lease Obligations" on page 31 of the Appendix, which note is incorporated herein by reference. Due to the numerous warehousing, office and other facilities utilized by the Company in its business operations, the Company does not believe that any one of its facilities is materially important to the Company. ITEM 3. LEGAL PROCEEDINGS In addition to commitments and obligations in the ordinary course of business, the Company is subject to various claims, other pending and possible legal actions for product liability and other damages, investigations relating to governmental laws and regulations, and other matters arising out of the normal conduct of the Company's business. The Company is a defendant in four civil actions filed between late 1993 and March of this year by independent pharmacies. The first proceeding, Feitelberg v. Abbott Laboratories, is pending in the Superior Court for the State of California (County of San Francisco) and is now referred to as Coordinated Proceeding Special Title, Pharmaceutical Cases I, II and III. The second proceeding, HJB, Inc. v. Abbott Laboratories (now known as MDL 997), is pending in the United States District Court for the Northern District of Illinois. The third proceeding, K-S Pharmacies, Inc. v. Abbott Laboratories, is pending in the Circuit Court of Wisconsin for Dane County. A fourth action, Adams v. Abbott Laboratories, was filed in the U.S. District Court for the Eastern District of Arkansas. These actions were brought as purported class actions on behalf of all other similarly-situated retail pharmacies. A class has been certified in MDL 997. There are numerous other defendants in these actions including pharmaceutical manufacturers, a pharmaceutical mail order firm, and several other wholesale 6 distributors. These cases allege, in essence, that the defendants have unlawfully conspired together and agreed to fix the prices of brand name pharmaceuticals sold to plaintiffs at artificially high, discriminatory, and non-competitive levels, all in violation of various state and federal antitrust laws. Some of the plaintiffs specifically contend that the wholesaler and manufacturer defendants are engaged in a conspiracy to fix prices charged to plaintiffs and members of the purported classes (independent and chain retail drug stores) above the price levels charged to mail order pharmacies, HMOs and other institutional buyers. The California cases allege, among other things, violation of California antitrust law. In MDL 997 and Adams, plaintiffs allege that defendants' actions constitute price fixing in violation of the Sherman Act. In the K-S Pharmacies, Inc. complaint, plaintiffs allege violation of Wisconsin antitrust law. In each of the complaints, except Adams, plaintiffs seek certification as a class and remedies in the form of injunctive relief, unquantified monetary damages (trebled as provided by law), and attorneys fees and costs. In addition, the California cases seek restitution. The Company believes it has meritorious defenses to the allegations made against it and intends to vigorously defend itself in all of these cases. In addition, the Company has entered into a judgment sharing agreement with certain pharmaceutical manufacturer defendants, which provides generally that the Company (together with the other wholesale distributor defendants) will be held harmless by such pharmaceutical manufacturer defendants and will be indemnified against the costs of adverse judgments, if any, against the wholesaler and manufacturers in these or similar actions, in excess of $1 million in the aggregate per wholesale distributor defendant. Plaintiffs have attempted to have the court declare the judgment sharing agreement unlawful, but these efforts, to date, have been unsuccessful. Primarily as a result of the operation of its former chemical businesses, which were divested in fiscal 1987, the Company is involved in numerous matters pursuant to various environmental laws and regulations. The Company has received various claims and demands from governmental agencies relating to investigative and remedial actions purportedly required to address environmental conditions alleged to exist at six (6) sites where the Company formerly conducted operations; and the Company, by administrative order or otherwise, has agreed to take certain actions at those sites. These actions include the investigation and remediation of contamination from its (or its former subsidiaries') former operations at the sites located in Newark, New Jersey, Santa Fe Springs, California, Spartanburg, South Carolina, Syracuse, New York and Union City, California. The site in Newark, New Jersey, is being investigated pursuant to a New Jersey Department of Environmental Protection administrative consent order dated August 20, 1993. The site in Santa Fe Springs, California, is undergoing soil remediation, with an evaluation of the ground water remediation alternatives to follow, pursuant to a California Environmental Protection Agency Department of Toxic Substances Control consent order dated January 8, 1990. The current owner of the site in Spartanburg, South Carolina, has agreed to fully indemnify the Company. Pursuant to a New York State Department of Environmental Conservation consent order dated August 31, 1987, the unsaturated soils at the Syracuse, New York location were remediated; the saturated soils and groundwater are being addressed as part of a separate operable unit. The site in Union City, California is undergoing soil and ground water remediation pursuant to a California Regional Water Quality Control Board site cleanup requirements order dated June 15, 1988 . At the sixth site, which is undergoing a Resource Conservation and Recovery Act closure and is located in Des Moines, Iowa, the Company has requested the EPA to acknowledge that the site has achieved the requirements for clean closure. The current estimate (determined by the Company's environmental staff, in consultation with outside environmental specialists and counsel) of the upper limit of the Company's range of reasonably possible remediation costs for these six (6) sites is approximately $22 million, net of amounts which third parties have agreed to pay in settlement or which the Company expects, based either on pending settlement offers or nonrefundable contributions which are ongoing but are not the subject of an agreement, to be contributed by third parties. The $22 million is expected to be paid out between April 1995 and March 2027. Another such Superfund site is a closed wood treatment facility formerly operated by Mass Merchandisers, Inc. ("MMI") acquired by the Company in 1985. In fiscal 1993, a consent decree was entered whereby the Company will remediate the site at a cost estimated by the EPA to be approximately $11 million, with an additional estimated contingent cost of approximately $4 million. Through March 31, 1995, approximately $2 million had been paid out on the remediation of this site and approximately $9 million is expected to be paid out between April 1995 and March 1998. The $4 million additional estimated contingent cost will be paid, if at all, between April 2000 and March 7 2030. The anticipated costs of $22 million and $9 million are included in the Company's recorded environmental reserves at March 31, 1995. In addition to the foregoing remedial actions, the Company has been asked by current property owners to contribute to the investigation and environmental cleanup of eight (8) properties which the Company formerly owned or leased. At one of these properties, the government has ordered both the Company and an earlier former owner to investigate and remediate, and the Company is funding the work under a reservation of rights. One of the other properties is the subject of an order to investigate directed both to the current owner and the Company. No determination has been made of the Company's liability, if any, in proportion to other PRPs at any of these eight (8) former properties; however, $2.5 million has been included in the Company's recorded environmental reserves at March 31, 1995. The Company has also been designated as a potentially responsible party ("PRP") by the EPA under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (the "Superfund" law), for environmental assessment and cleanup costs as the result of the Company's alleged treatment or disposal of hazardous substances at twenty-six (26) Superfund sites, at none of which the Company is the sole PRP. With respect to each of these Superfund sites, numerous other PRPs have similarly been designated and, while the current state of the law potentially imposes joint and several liability upon PRPs, as a practical matter costs of these sites are typically shared with other PRPs. In some cases the Company has partial indemnity agreements with its insurers or an allocation or contribution agreement with other PRPs; at 18 of the 26 sites, while there is currently no indemnification from third parties or agreements from insurers to pay costs, the Company's alleged waste volumes were typically small. At three (3) of these Superfund sites another PRP has agreed to pay 45% of the allocated share of the Company's former subsidiary; three insurers have agreed to pay collectively 80% of the remainder. Such insurers have also agreed to pay 80% of the former subsidiary's allocation at one other Superfund site, and have agreed to indemnify 65% of the Company's allocation at seven (7) other Superfund sites. The estimated dollar amount of the Company's liability at the twenty-six (26) Superfund sites referenced in this paragraph is approximately $2.8 million, net of amounts which the third parties have agreed, or are expected, to contribute. Settlements and costs paid by the Company in Superfund matters to date have not been significant. The potential costs to the Company related to all of these environmental matters are highly uncertain due to such factors as: the unknown magnitude of possible pollution and cleanup costs; the complexity and evolving nature of governmental laws and regulations and their interpretations; the timing, varying costs and effectiveness of alternative cleanup technologies; the determination of the Company's liability in proportion to other PRPs; and the extent, if any, to which such costs are recoverable from insurance or other parties. The Company has established reserves, based on estimated total future cash flows, which it considers to be appropriate for these environmental matters, which reserves are net of approximately $15 million at March 31, 1995, relating to amounts third parties have agreed to pay in settlement or which the Company expects to be contributed by third parties, where the Company believes it is probable that the third parties will fulfill their agreements to pay. Management believes, based on current knowledge and the advice of the Company's counsel, that the outcome of the litigation and governmental proceedings discussed in this Item 3 will not have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the three months ended March 31, 1995. 8 Executive Officers of the Registrant The following table sets forth information concerning the executive officers of the Registrant as of June 1, 1995. The number of years of service with the Company includes service with predecessor and acquired companies, including McKesson. There are no family relationships between any of the executive officers or directors of the Registrant. The executive officers are chosen annually to serve until the first meeting of the Board of Directors following the next annual meeting of stockholders and until their successors are elected and have qualified, or until death, resignation or removal, whichever is sooner.
Name Age Position with Registrant and Business Experience - ----------------- ----- --------------------------------------------------- Alan Seelenfreund 58 Chairman of the Board and Chief Executive Officer since July 1994 and a Director since November 1994. Formerly Chairman of the Board and Chief Executive Officer (November 1989-November 1994), a Director (July 1988-November 1994) and Chief Financial Officer (April 1984-April 1990) of McKesson. Service with the Company - 20 years. David E. McDowell 52 President and Chief Operating Officer since September 1994 and a Director since November 1994. Formerly President and Chief Operating Officer and a Director (January 1992-November 1994) of McKesson. Vice President and General Manager, Quality and Chief Information Officer, IBM Corporation (November 1990-January 1992); President of IBM's National Service Division (July 1987- August 1990) and Assistant General Manager (January-July 1987). Service with the Company - 3.5 years. William A. Armstrong 54 Vice President Human Resources and Administration since September 1994. Formerly Vice President Human Resources and Administration (April 1993-November 1994), Vice President Administration (July 1991- April 1993) and Executive Assistant to the Office of the Chief Executive (1990-April 1992) of McKesson. Service with the Company - 23 years. Michael T. Dalby 49 Vice President Strategic Planning since September 1994. Principal at McKinsey & Company, Inc., an international management consulting firm (1988- 1994). Service with the Company - 8 months. Jon W. d'Alessio 48 Treasurer since September 1994. Formerly Treasurer (January 1992-November 1994), Staff Vice President Corporate Treasury (November 1991-January 1992) and Staff Vice President and Chief Information Officer (1990-November 1991) of McKesson. Service with the Company - 17 years. Kevin B. Ferrell 47 Vice President and Chief Financial Officer since October 1994. Executive Vice President of Global Investment Management at Bank of America (1993- March 1994). Other positions in the last 18 years, all associated with Bank of America: President and Director of SeaFirst Bank, Senior Vice President and Head of Corporate Banking in San Francisco and Senior Vice President of Finance and Treasury. Service with the Company - 7 months.
9
Name Age Position with Registrant and Business Experience - ----------------- ----- --------------------------------------------------- Richard H. Hawkins 45 Vice President and Controller of the Company since September 1994. Formerly Vice President (April 1993- November 1994) and Controller (April 1990-November 1994) of McKesson, Chief Financial Officer (September 1993-November 1994) of McKesson's Drug Company division and Vice President Finance (February 1991-April 1993) of McKesson's Distribution Group. Service with the Company - 11 years. David L. Mahoney 40 Vice President and President of Healthcare Delivery Systems, Inc., a wholly-owned subsidiary of the Company, since September 1994. Formerly Vice President Strategic Planning (July 1990-September 1994) of McKesson. Principal at McKinsey & Company, Inc., an international management consulting firm (1987-July 1990). Service with the Company - 5 years. Ivan D. Meyerson 50 Vice President and General Counsel since July 1994. Formerly Vice President and General Counsel (January 1987-November 1994) of McKesson. Service with the Company - 17 years. Nancy A. Miller 51 Vice President and Corporate Secretary since July 1994. Formerly Vice President and Corporate Secretary (December 1989-November 1994) of McKesson. Service with the Company - 17 years. Charles A. Norris 50 Vice President and President of McKesson Water Products Company, a wholly-owned subsidiary of the Company, since September 1994. Formerly Vice President (April 1993-November 1994) and President (May 1990-November 1994) of McKesson Water Products Company, a wholly-owned subsidiary of McKesson. President of Deer Park Water Company, a bottled drinking water firm (1981-May 1990). Service with the Company - 5 years. Garret A. Scholz 55 Vice President Finance since July 1994. Formerly Vice President Finance (April 1990-November 1994) and Vice President and Treasurer (November 1984- April 1990) of McKesson. Service with the Company - 22 years. James H. Smith 51 Vice President and President of the McKesson Drug Company division since September 1994. Formerly Vice President and President (February-November 1994) of the McKesson Drug Company division of McKesson. Senior Vice President of Avnet, Inc., a distributor of electrical and computer components (1990-February 1994); Executive Vice President of the Hamilton Hallmark Division (1990-February 1994) and Vice President of the Hamilton Avnet Division (1986-1990). Service with the Company - 1.3 years.
10 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS (a) Market Information The principal market on which the Company's common stock is traded is the New York Stock Exchange. High and low prices for the common stock by quarter appear in Financial Note 17, "Quarterly Financial Information" on pages 43 and 44 of the Appendix which note is incorporated herein by reference. (b) Holders The number of record holders of the Company's common stock as of March 31, 1995 was 15,765. (c) Dividends Dividend information is included in Financial Note 17, "Quarterly Financial Information" on pages 43 and 44 of the Appendix, which note is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Selected financial data is shown on pages 2 to 5 of the Appendix and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of the Company's financial condition and results of operations appears in the Financial Review on pages 6 to 16 of the Appendix and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial Statements and Supplementary Data appear on pages 20 to 44 of the Appendix and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 11 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to Directors of the Company is incorporated by reference from the Company's 1995 Proxy Statement (the "Proxy Statement"). Certain information relating to Executive Officers of the Company appears at pages 9 and 10 of this Form 10-K Annual Report. The information with respect to this item required by Item 405 of Regulation S-K is incorporated herein by reference from the Company's 1995 Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION Information with respect to this item is incorporated herein by reference from the Company's Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to this item is incorporated herein by reference from the Company's Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to certain transactions with management is incorporated by reference from the Company's Proxy Statement. 12 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Exhibits and Financial Statement Schedules The following consolidated financial statements of the Company and the Independent Auditors' Report are included on pages 19 to 44 of the Appendix and are incorporated by reference in Item 8: Independent Auditors' Report Consolidated Financial Statements Statements of Consolidated Income for the years ended March 31, 1995, 1994 and 1993 Consolidated Balance Sheets, March 31, 1995, 1994 and 1993 Statements of Consolidated Stockholders' Equity for the years ended March 31, 1995, 1994 and 1993 Statements of Consolidated Cash Flows for the years ended March 31, 1995, 1994 and 1993 Financial Notes
The following are included herein: Page ---- Independent Auditors' Report on Supplementary Financial Schedule 15 Supplementary Financial Schedule: II Consolidated Valuation and Qualifying Accounts 16
Financial statements and schedules not included or incorporated by reference herein have been omitted because of the absence of conditions under which they are required or because the required information, where material, is shown in the financial statements, financial notes or supplementary financial information. Exhibits submitted with this Form 10-K as filed with the SEC and those incorporated by reference to other filings are listed on the Exhibit Index on pages 17 through 20. (b) Reports on Form 8-K None. 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. McKESSON CORPORATION Date: May 26, 1995 By: /s/Kevin B. Ferrell ------------------------------------- Kevin B. Ferrell, Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on May 26, 1995 by the following persons on behalf of the Registrant and in the capacities indicated: /s/Alan Seelenfreund /s/David E. McDowell - ------------------------------------- -------------------------------------- Alan Seelenfreund, Chairman and Chief David E. McDowell, President and Chief Executive Officer and Director Operating Officer and Director /s/Kevin B. Ferrell /s/Richard H. Hawkins - ------------------------------------- -------------------------------------- Kevin B. Ferrell, Vice President Richard H. Hawkins, Vice President and Chief Financial Officer and Controller /s/Tully M. Friedman - ------------------------------------- -------------------------------------- Mary G.F. Bitterman, Director Tully M. Friedman, Director /s/James R. Harvey /s/George M. Keller - ------------------------------------- -------------------------------------- James R. Harvey, Director George M. Keller, Director /s/Leslie L. Luttgens /s/John M. Pietruski - ------------------------------------- -------------------------------------- Leslie L. Luttgens, Director John M. Pietruski, Director /s/Jane E. Shaw /s/Robert H. Waterman - ------------------------------------- -------------------------------------- Jane E. Shaw, Director Robert H. Waterman, Jr., Director 14 INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY FINANCIAL SCHEDULE The Stockholders and Board of Directors of McKesson Corporation: We have audited the consolidated financial statements of McKesson Corporation and subsidiaries as of March 31, 1995, 1994 and 1993, and for the years then ended and have issued our report thereon dated May 12, 1995 which expresses an unqualified opinion and includes an explanatory paragraph relating to the Corporation's change in its method of accounting for postemployment benefits; such consolidated financial statements and report are included in the Appendix to your Proxy Statement for the 1995 annual meeting of stockholders of the Corporation and are incorporated herein by reference. Our audits also included the consolidated supplementary financial schedule of McKesson Corporation, listed in Item 14(a). This consolidated supplementary financial schedule is the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated supplementary financial schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP San Francisco, California May 12, 1995 15 Schedule II McKESSON CORPORATION - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED MARCH 31, 1995, 1994 AND 1993 (in thousands)
Column A Column B Column C Column D Column E - --------------------------------- ---------- ---------------------- ------------- ---------------- Additions ---------------------- Balance at Charged to Charged to Beginning Costs and Other Balance at Description of Period Expenses Accounts Deductions End of Period - --------------------------------- ---------- ---------- ---------- ------------- ---------------- AMOUNTS DEDUCTED FROM ASSETS TO WHICH THEY APPLY: Year Ended March 31, 1995 - ------------------------- Allowances for doubtful accounts receivable $18,637 $49,452 $ - $24,505 $43,584 Other reserves 15,599 6,066 - 5,621 16,044 ------- ------- ------- ------- ------- $34,236 $55,518 $ - $30,126/(1)/ $59,628/(2)/ ======= ======= ======= ======= ======= Year Ended March 31, 1994 - ------------------------- Allowances for doubtful accounts receivable $26,346 $ 9,994 $ 1 $17,704 $18,637 Other reserves 14,886 5,144 - 4,431 15,599 ------- ------- ------- ------- ------- $41,232 $15,138 $ 1 $22,135/(1)/ $34,236/(2)/ ======= ======= ======= ======= ======= Year Ended March 31, 1993 - ------------------------- Allowances for doubtful accounts receivable $19,585 $17,670 $ 76 $10,985 $26,346 Other reserves 13,823 3,855 - 2,792 14,886 ------- ------- ------- ------- ------- $33,408 $21,525 $ 76 $13,777/(1)/ $41,232/(2)/ ======= ======= ======= ======= ======= - ------------------------------------------- NOTES: 1995 1994 1993 ------ ------ ------ 1 Deductions: Written off $27,491 $17,704 $12,995 Credited to other accounts 2,635 4,431 782 ------- ------- ------- Total $30,126 $22,135 $13,777 ======= ======= ======= 2 Amounts shown as deductions from: Current receivables $56,023 $30,826 $38,014 Other assets 3,605 3,410 3,218 ------- ------- ------- Total $59,628 $34,236 $41,232 ======= ======= =======
16 EXHIBIT INDEX
Exhibit Number Description - ------- ---------------------------------------------------------------------- 2.1 Restructuring and Distribution Agreement dated as of July 10, 1994, by and among McKesson Corporation, a Delaware corporation ("Old McKesson"), McKesson Corporation, a Maryland corporation ("Maryland"), Clinical Pharmaceuticals, Inc. ("CPI"), PCS Health Systems, Inc. ("PCS") and the Company (Exhibit 2.1 (1)). 2.2 Amendment, dated as of October 10, 1994, by and among Old McKesson, Maryland, CPI, PCS and the Company, which amends the Distribution Agreement (Exhibit 2.2 (3)). 2.3 Second Amendment, dated as of November 3, 1994, by and among Old McKesson, Maryland, CPI, PCS and the Company, which amends the Distribution Agreement (Exhibit 2.5 (5)). 2.4 Agreement and Plan of Merger, dated as of July 10, 1994, by and among Old McKesson, Eli Lilly and Company ("Parent") and ECO Acquisition Corporation (the "Purchaser") (Exhibit 2.3 (4)). 2.5 Amendment, dated as of August 8, 1994, by and among Old McKesson, Parent and Purchaser, which amends the Merger Agreement (Exhibit 2.4 (5)) 3.1 Corrected Restated Certificate of Incorporation of the Company, as filed with the Office of the Delaware Secretary of State on June 9, 1995. 3.2 Restated By-Laws of the Company, as amended through April 26, 1995. 4 Rights Agreement dated as of September 14, 1994 between the Company and First Chicago Trust Company of New York, as Rights Agent (Exhibit 4.1 (4)). 10.1 Tax Sharing Agreement, dated as of July 10, 1994, among the Company, Old McKesson, Parent and the Purchaser (Exhibit 10.1 (1)). 10.2 HDS Services Agreement, dated as of July 10, 1994, among Parent, PCS and Healthcare Delivery Systems, Inc. (Exhibit 10.2 (1)). 10.3 McKesson Services Agreement, dated as of July 10, 1994, between PCS and the Company (Exhibit 10.3 (1)). 10.4 Memorandum of Understanding, dated as of July 10, 1994, between Parent and the Company (Exhibit 10.4 (1)). 10.5 Non-Competition Agreement, dated as of July 10, 1994, between the Company, Old McKesson, the Purchaser and Parent (Exhibit 10.5 (1)). 10.6 McKesson Corporation 1994 Stock Option and Restricted Stock Plan (Amended Effective April 26, 1995) (Exhibit A (6)). 10.7 McKesson Corporation Supplemental PSIP (Exhibit 10.7 (2)). 10.8 McKesson Corporation Deferred Compensation Administration Plan (Exhibit 10.8 (2)).
17 EXHIBIT INDEX
Exhibit Number Description - ------- ---------------------------------------------------------------------- 10.9 McKesson Corporation Deferred Compensation Administration Plan II (Exhibit 10.9 (2)). 10.10 McKesson Corporation Directors' Deferred Compensation Plan (Exhibit 10.10 (2)). 10.11 McKesson Corporation 1985 Directors' Elective Deferred Compensation Plan (Exhibit 10.11 (2)). 10.12 McKesson Corporation 1994 Option Gain Deferral Plan (Exhibit 10.12 (3)). 10.13 McKesson Corporation 1985 Executives' Elective Deferred Compensation Plan (Exhibit 10.13 (2)). 10.14 McKesson Corporation Management Deferred Compensation Plan (Exhibit 10.14 (2)). 10.15 McKesson Corporation 1984 Executive Benefit Retirement Plan (Exhibit 10.15 (2)). 10.16 McKesson Corporation 1988 Executive Survivor Benefits Plan (Exhibit 10.16 (2)). 10.17 McKesson Corporation Executive Medical Plan Summary (Exhibit 10.17 (3)). 10.18 McKesson Corporation 1988 Management Survivor Benefits Plan (Exhibit 10.18 (2)). 10.19 McKesson Corporation Severance Policy for Executive Employees (Exhibit 10.19 (2)). 10.20 McKesson Corporation 1989 Management Incentive Plan (Amended and Restated Effective April 26, 1995) (Exhibit B (6)). 10.21 McKesson Corporation 1981 Long-Term Incentive Plan (Exhibit 10.21 (2)). 10.22 McKesson Corporation 1973 Stock Purchase Plan (Exhibit 10.22 (2)). 10.23 Form of Termination Agreement by and between the Company and certain designated Executive Officers. 10.24 Description of McKesson Corporation Retirement Program for Nonemployee Directors. 10.25 Credit Agreement entered into as of March 31, 1995, among the Company, Medis Health and Pharmaceutical Services, Inc., an indirect wholly- owned subsidiary of the Company, the several financial institutions from time to time party to the agreement (collectively the "Banks"), Bank of America National Trust and Savings Association, as Agent for the Banks, Chemical Bank, as Co-Agent for the Banks and Bank of America Canada, as Canadian Administrative Agent. 10.26 Custodial Agreement Acknowledgment entered into as of March 31, 1995, among the Company and Bank of America National Trust and Savings Association (the "Custodian") in its capacity as Custodian under the Custodial Agreement and as Agent for the Banks from time to time party to the Credit Agreement.
18 EXHIBIT INDEX
Exhibit Number Description - ------- ---------------------------------------------------------------------- 10.27 Pledge Agreement entered into as of March 31, 1995 among the Company (the "Pledgor") and Bank of America National Trust and Savings Association, as Agent for the Banks from time to time party to the Credit Agreement. 10.28 Guaranty entered into as of March 31, 1995 by the Company (the "Guarantor"), in favor of and for the benefit of Bank of America National Trust and Savings Association, as Agent for and representative of the Banks party to the Credit Agreement. 11 Computation of Earnings Per Common Share for the Five Years Ended March 31, 1995. 13 1995 Annual Report to Security Holders Pursuant to Rule 14a-3(b). (7) 21 List of Subsidiaries of the Company. 23 Independent Auditors' Consent. 27 Financial Data Schedule.
Footnotes to Exhibit Index: (1) Incorporated by reference to designated exhibit to the Company's Registration Statement on Form 10 filed with the Commission on July 27, 1994, File No. 1-13252. (2) Incorporated by reference to designated exhibit to Amendment No. 1 to the Company's Registration Statement on Form 10 filed with the Commission on August 26, 1994, File No. 1-13252. (3) Incorporated by reference to designated exhibit to Amendment No. 2 to the Company's Registration Statement on Form 10 filed with the Commission on October 11, 1994, File No. 1-13252. (4) Incorporated by reference to designated exhibit to Amendment No. 3 to the Company's Registration Statement on Form 10 filed with the Commission on October 27, 1994, File No. 1-13252. (5) Incorporated by reference to designated exhibit to Amendment No. 4 to the Company's Registration Statement on Form 10 filed with the Commission on November 7, 1994, File No. 1-13252. (6) Incorporated by reference to designated exhibit attached to the Company's definitive Proxy Statement dated June 9, 1995 for the Annual Meeting of Stockholders to be held on July 26, 1995. (7) Filed as an Appendix to the Company's definitive Proxy Statement dated June 9, 1995 for the Annual Meeting of Stockholders to be held on July 26, 1995, and incorporated by reference herein. 19 Executive Compensation Plans and Arrangements 1. McKesson Corporation 1994 Stock Option and Restricted Stock Plan (Amended Effective April 26, 1995). 2. McKesson Corporation Supplemental PSIP. 3. McKesson Corporation Deferred Compensation Administration Plan. 4. McKesson Corporation Deferred Compensation Administration Plan II. 5. McKesson Corporation Directors' Deferred Compensation Plan. 6. McKesson Corporation 1985 Directors' Elective Deferred Compensation Plan. 7. McKesson Corporation 1994 Option Gain Deferral Plan. 8. McKesson Corporation 1985 Executives' Elective Deferred Compensation Plan. 9. McKesson Corporation Management Deferred Compensation Plan. 10. McKesson Corporation 1984 Executive Benefit Retirement Plan. 11. McKesson Corporation 1988 Executive Survivor Benefits Plan. 12. McKesson Corporation Executive Medical Plan Summary. 13. McKesson Corporation 1988 Management Survivor Benefits Plan. 14. McKesson Corporation Severance Policy for Executive Employees. 15. McKesson Corporation 1989 Management Incentive Plan (Amended and Restated Effective April 26, 1995). 16. McKesson Corporation 1981 Long-Term Incentive Plan. 17. McKesson Corporation 1973 Stock Purchase Plan. 18. Form of Termination Agreement by and between the Company and certain designated Executive Officers. 19. Description of McKesson Corporation Retirement Program for Nonemployee Directors. 20 EX-3.1 2 CORRECTED RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 CORRECTED RESTATED CERTIFICATION OF INCORPORATION OF McKESSON CORPORATION It is hereby certified that: 1. The name of the corporation (hereinafter called the "Corporation") is McKesson Corporation. 2. A Restated Certification of Incorporation of the Corporation was filed with the Secretary of State, State of Delaware, on March 29, 1995. 3. The Restated Certificate of Incorporation contained inacccuracies in the heading and in the introductory paragraphs preceding Article I in that the former name of the Corporation was omitted from the heading and that it contained references to Sections 141(f) and 242. A paragraph also stated that the Restatement was further amending the Certificate of Incorporation which was incorrect. 4. The Restated Certificate of Incorporation is corrected in its entirety in the form attached hereto as Exhibit A. IN WITNESS WHEREOF, SAID McKesson Corporation has caused this Certificate to be signed by Nancy A. Miller, its Vice President. McKESSON CORPORATION Date: June 9, 1995 By /s/ Nancy A. Miller -------------------------------- Nancy A. Miller Vice President Exhibit A CORRECTED RESTATED CERTIFICATE OF INCORPORATION OF McKESSON CORPORATION (Originally Incorporated on July 7, 1994 Under the Name of SP Ventures, Inc.) ARTICLE I. The name of the Corporation is McKesson Corporation. ARTICLE II. The address of the registered office of the Corporation within the State of Delaware is 32 Loockerman Square, Suite L-100, City of Dover 19901, County of Kent. The name of the registered agent of the Corporation at such address is The Prentice-Hall Corporation System, Inc. ARTICLE III. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV. The total number of shares of stock of all classes which the Corporation has authority to issue is 300,000,000 shares, divided into 100,000,000 shares of Series Preferred Stock, par value $0.01 per share (herein called the "Series Preferred Stock"), and 200,000,000 shares of Common Stock, par value $.01 per share (herein called the "Common Stock"). The aggregate par value of all shares having par value is $3,000,000. The Board of Directors of the Corporation is expressly authorized, as shall be stated and expressed in the resolution or resolutions it adopts, subject to limitations prescribed by law and the provisions of this Article IV, to provide for the issuance of the shares of Series Preferred Stock in one or more class or series, in addition to the shares thereof specifically provided for in this Article IV, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such distinctive designations, powers, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, including without limitation, the authority to provide that any such class or series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non- cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; (iv) convertible 1 into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments; or (v) subject to the terms and amounts of any sinking fund provided for the purchase or redemption of the shares of such series; all as may be stated in such resolution or resolutions. The number of authorized shares of Series Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Series Preferred Stock, as the case may be, or of any series thereof, unless a vote of any such holders is required pursuant to the provisions of this Article IV or the certificate or certificates establishing any additional series of such stock. A description of each class of the Corporation's stock, with the powers, designations, preferences and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions thereof, is as follows: I. SERIES PREFERRED STOCK A. General Provisions Relating to All Series 1. The Board of Directors shall have authority to classify and reclassify any unissued shares of the Series Preferred Stock from time to time by setting or changing in any one or more respects the powers, designations, preferences and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions of the Series Preferred Stock. Subject to the foregoing, the power of the Board of Directors to classify and reclassify any of the shares of Series Preferred Stock shall include, without limitation, subject to the provisions of this Certificate of Incorporation, authority to classify or reclassify any unissued shares of such stock into one or more series of Series Preferred Stock, and to divide and classify shares of any series into one or more series of Series Preferred Stock by determining, fixing or altering one or more of the following: (a) The distinctive designation of such series and the number of shares to constitute such series; provided that, unless otherwise prohibited by the terms of such or any other series, the number of shares of any series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such series may be increased by the Board of Directors in connection with any such classification or reclassification, and any shares of any series which have been redeemed, purchased, otherwise acquired or converted into shares of Common Stock or any other series shall remain part of the authorized Series Preferred Stock and be subject to classification and reclassification as provided in this Section. (b) Whether or not and, if so, the rates, amounts and times at which, and the conditions under which, dividends shall be payable on shares of such series, whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other series of Series Preferred Stock, and the status of any such dividends as cumulative, cumulative to a limited extent or non-cumulative and as participating or non-participating. (c) Whether or not shares of such series shall have voting rights, in addition to any voting rights provided by law and, if so, the terms of such voting rights. 2 (d) Whether or not shares of such series shall have conversion or exchange privileges and, if so, the terms and conditions thereof, including provision for adjustment of the conversion or exchange rate in such events or at such times as the Board of Directors shall determine. (e) Whether or not shares of such series shall be subject to redemption and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; and whether or not there shall be any sinking fund or purchase account in respect thereof, and if so, the terms thereof. (f) The rights of the holders of shares of such series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which rights may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other series of Series Preferred Stock. (g) Whether or not there shall be any limitations applicable, while shares of such series are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for purchase or redemption of, any stock of the Corporation, or upon any other action of the Corporation, including action under this Section, and, if so, the terms and conditions thereof . (h) Any other powers, designations, preferences and relative, participating, optional and other rights, if any, and any other qualifications, limitations and restrictions, on the shares of such series, not inconsistent with law and this Certificate of Incorporation. 2. For the purposes hereof and of any certificate providing for the classification or reclassification of any shares of Series Preferred Stock or of any other charter document of the Corporation (unless otherwise provided in any such certificate or document), any class or series of stock of the Corporation shall be deemed to rank: (a) Prior to a particular class or series of stock if the holders of such class or classes or series shall be entitled to the receipt of dividends or of amounts distributable in the event of any liquidation, dissolution or winding up, as the case may be, in preference to or with priority over the holders of such particular class or series of stock; (b) On a parity with a particular class or series of stock, whether or not the dividend rates, dividend payment dates, voting rights or redemption or liquidation prices per share thereof, be different from those of such particular class or series of stock, if the rights of holders of such class or classes or series to the receipt of dividends or of amounts distributable in event of any liquidation, dissolution or winding up, as the case may be, shall be neither (i) in preference to, or with priority over, nor (ii) subject or subordinate to, the rights of holders of such particular class or series of stock in respect of the receipt of dividends or of amounts distributable in the event of any liquidation, dissolution or winding up of the Corporation, as the case may be; and (c) Junior to a particular class or series of stock if the rights of the holders of such class or classes or series shall be subject or subordinate to the rights of the holders of such particular class or series of stock in respect of the receipt of dividends or of amounts distributable in the event of any liquidation, dissolution or winding up, as the case may be. 3 B. Series A Junior Participating Preferred Stock 1. Designation and Amount. The shares of this series shall be designated as "Series A Junior Participating Preferred Stock" and the number of shares constituting such series shall initially be 10,000,000, par value $0.01 per share, such number of shares to be subject to increase or decrease by action of the Board of Directors as evidenced by a certificate or certificates evidencing such change. 2. Dividends and Distributions. (a) The holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first business day of January, April, July and October in each year (each such date being referred to herein as a "Series A Quarterly Dividend Payment Date"), commencing on the first Series A Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $10.00 or (ii) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Series A Quarterly Dividend Payment Date, or, with respect to the first Series A Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Corporation shall at any time after November 1, 1994 (the "Rights Declaration Date") (A) declare any dividend on Common Stock payable in shares of Common Stock, (B) subdivide the outstanding Common Stock, or (C) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (a) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Series A Quarterly Dividend Payment Date and the next subsequent Series A Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Series A Quarterly Dividend Payment Date. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Series A Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Series A Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Series A Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Series A Quarterly Dividend Payment Date, in either of which events such 4 dividends shall begin to accrue and be cumulative from such Series A Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: (a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (c) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Series Preferred Stock, (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors. (ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(c) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Series Preferred Stock, if any, to increase, in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Series Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Series Preferred Stock of such voting right. At any meeting at which the holders of Series Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) 5 Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Series Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Series Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Series Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating ---- ----- Preferred Stock. (iii) Unless the holders of Series Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Series Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Series Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Series Preferred Stock are entitled to vote pursuant to this paragraph (c)(iii) shall be given to each holder of record of Series Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Series Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (c)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Series Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (A) the Directors so elected by the holders of Series Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (B) any vacancy in the Board of Directors may (except as provided in paragraph (c)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this paragraph (c) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (B) of the preceding sentence. (v) Immediately upon the expiration of a default period, (A) the right of the holders of Series Preferred Stock as a class to elect Directors shall cease, (B) the term of any Directors elected by the holders of Series Preferred Stock as a class shall terminate, and (C) the number of Directors shall be such number as may be provided for in this Certificate of Incorporation or the By-laws of the Corporation irrespective of any increase made pursuant to the provisions of paragraph (c)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in this Certificate of Incorporation or the By- laws of the Corporation). Any vacancies in the Board of Directors effected by the provisions of clauses (B) and (C) in the preceding sentence may be filled by a majority of the remaining Directors. 6 (d) Except as set forth herein or as otherwise required by applicable law, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 4. Certain Restrictions. (a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; (iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Series Preferred Stock and may be reissued as part of a new series of Series Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. 7 6. Liquidation, Dissolution or Winding Up. (a) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (b) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (c) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (a) declare any dividend on Common Stock payable in shares of Common Stock, (b) subdivide the outstanding Common Stock, or (c) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of 8 shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 8. No Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable. 9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Corporation's Series Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. 10. Amendment. This Certificate of Incorporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class. 11. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. II. COMMON STOCK A. Dividends. Subject to all of the rights of the Series Preferred Stock, dividends may be paid upon the Common Stock as and when declared by the Board of Directors out of funds legally available for the payment of dividends. B. Liquidation Rights. In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, and after the holders of the Series Preferred Stock shall have been paid in full amounts to which they respectively shall be entitled, or an amount sufficient to pay the aggregate amount to which such holders shall be entitled shall have been deposited in trust with a bank or trust company having its principal office in the Borough of Manhattan, City, County and State of New York, having a capital, undivided profits and surplus aggregating at least $5,000,000, for the benefit of the holders of the Series Preferred Stock, the remaining net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock. C. Voting Rights. Except as otherwise expressly provided with respect to the Series Preferred Stock and except as otherwise may be required by law, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes and each holder of Common Stock shall be entitled to one vote for each share held. ARTICLE V. A. Board of Directors of the Corporation. 1. General Provisions. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The exact number of directors shall be fixed from time to time by, or in the manner provided in, the By-Laws of the Corporation and may be increased or 9 decreased as therein provided. Directors of the Corporation need not be elected by ballot unless required by the By-laws. 2. Classification of Board of Directors. The directors shall be divided into three classes. Each such class shall consist, as nearly as may be possible, of one-third of the total number of directors, and any remaining directors shall be included within such group or groups as the Board of Directors shall designate. At the annual meeting of stockholders in 1994, a class of directors shall be elected for a one-year term, a class of directors for a two-year term and a class of directors for a three-year term. At each succeeding annual meeting of stockholders, beginning in 1995, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. A director may be removed from office for cause only and, subject to such removal, death, resignation, retirement or disqualification, shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and qualify. No alteration, amendment or repeal of this Article V or the By-Laws of the Corporation shall be effective to shorten the term of any director holding office at the time of such alteration, amendment or repeal, to permit any such director to be removed without cause, or to increase the number of directors in any class or in the aggregate from that existing at the time of such alteration, amendment or repeal until the expiration of the terms of office of all directors then holding office, unless (i) in the case of this Article V, such alteration, amendment or repeal has been approved by the holders of all shares of stock entitled to vote thereon, or (ii) in the case of the By-Laws, such alteration, amendment or repeal has been approved by either the holders of all shares entitled to vote thereon or by a vote of a majority of the entire Board of Directors. 3. Directors Appointed by a Specific Class of Stockholders. To the extent that any holders of any class or series of stock other than Common Stock issued by the Corporation shall have the separate right, voting as a class or series, to elect directors, the directors elected by such class or series shall be deemed to constitute an additional class of directors and shall have a term of office for one year or such other period as may be designated by the provisions of such class or series providing such separate voting right to the holders of such class or series of stock, and any such class of directors shall be in addition to the classes designated above. ARTICLE VI. A. General Provisions. The following provisions are hereby adopted for the purpose of defining, limiting and regulating the powers of the Corporation and of its directors and stockholders: 1. Amendments to the Certificate of Incorporation. Subject to the provisions of applicable law, the Corporation reserves the right from time to time to make any amendment to its Certificate of Incorporation, now or hereafter authorized by law, including any amendment which alters the contract rights as expressly set forth therein, of any outstanding stock. 2. Amendments to the By-Laws. The Board of Directors is expressly authorized to adopt, alter and repeal the By-Laws of the Corporation in whole or in part at any regular or special meeting of the Board of Directors, by vote of a majority of the entire Board of Directors. Except where this Certificate of Incorporation otherwise requires a higher vote, the By-Laws may also be adopted, altered or repealed in whole or in part at any annual or special meeting of the stockholders by the affirmative vote of three-fourths of the shares of the Corporation outstanding and entitled to vote thereon. 10 3. No Preemptive Rights. No holder of any class of stock of the Corporation, whether now or hereafter authorized or outstanding, shall have any preemptive, preferential or other right to subscribe for or purchase any class of the Corporation's stock, whether now or hereafter authorized or outstanding, which it may at any time issue or sell, or to subscribe for or purchase any notes, debentures, bonds or other securities which it may at any time issue or sell, whether or not the same be convertible into or exchangeable for or carry options or warrants to purchase shares of any class of the Corporation's stock or other securities, or to receive or purchase any warrants or options which may be issued or granted evidencing the right to purchase any such stock or other securities, it being intended by this Section 3 that all preemptive rights of any kind applicable to securities of the Corporation are eliminated. 4. Vote Required to Take Action; Action by Written Consent. Except as otherwise provided in this Certificate of Incorporation and except as otherwise provided by applicable law, the Corporation may take or authorize any action upon the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter thereof. Action shall be taken by stockholders of the Corporation only at annual or special meetings of stockholders, and stockholders may act in lieu of a meeting only by unanimous written consent. 5. Compensation of Directors. The Board of Directors may determine from time to time the amount and type of compensation which shall be paid to its members for service on the Board of Directors. The Board of Directors shall also have the power, in its discretion, to provide for and to pay to directors rendering services to the Corporation not ordinarily rendered by directors, as such, special compensation appropriate to the value of such services, as determined by the Board from time to time. 6. Interested Transactions. Any director or officer individually, or any partnership of which any director or officer may be a member, or any corporation or association of which any director or officer may be an officer, director, trustee, employee or stockholder, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Corporation, and in the absence of fraud no contract or other transaction shall be thereby affected or invalidated. Any director of the Corporation who is so interested, or who is also a director, officer, trustee, employee or stockholder of such other corporation or association or a member of such partnership which is so interested, may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize any such contract or transaction, and may vote thereat to authorize any such contract or transaction, with like force and effect as if he were not such director, officer, trustee, employee or stockholder of such other corporation or association or not so interested or a member of a partnership so interested; provided that in case a director, or a partnership, corporation or association - -------- of which a director is a member, officer, director, trustee or employee is so interested, such fact shall be disclosed or shall have been known to the Board of Directors or a majority thereof. This paragraph shall not be construed to invalidate any such contract or transaction which would otherwise be valid under the common and statutory law applicable thereto. 7. Indemnification. The Corporation shall indemnify (a) its directors to the fullest extent permitted by the laws of the State of Delaware now or hereafter in force, including the advancement of expenses under the procedures provided by such laws, (b) all of its officers to the same extent as it shall indemnify its directors, and (c) its officers who are not directors to such further extent as shall be authorized by the Board of Directors and be consistent with law. Subject only to any limitations prescribed by the laws of the State of Delaware now or hereafter in force, the foregoing shall not limit the authority of the Corporation to indemnify the directors, officers and other employees and agents of this Corporation consistent with law and shall not be deemed to be exclusive of any rights to which those indemnified may be entitled as a matter of law or under any resolution, By-Law provision, or agreement. 11 8. Court-Ordered Meetings of Creditors and/or Stockholders. Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as such court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which such application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. 9. Liability of Directors. To the fullest extent permitted by Delaware statutory or decisional law, as amended or interpreted, no director of this Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. This Section 9 does not affect the availability of equitable remedies for breach of fiduciary duties. ARTICLE VII. A. Vote Required for Certain Business Combinations 1. Voting Requirements. In addition to any vote otherwise required by law or this Certificate of Incorporation, a Business Combination (such term, and certain other capitalized terms referred to in this Article VII, as defined in Section 3 of this Article VII) shall be recommended by the Board of Directors and approved by the affirmative vote of at least: (a) 80 percent of the votes entitled to be cast by outstanding shares of voting stock of the Corporation, voting together as a single voting group; and (b) Two-thirds of the votes entitled to be cast by holders of voting stock other than voting stock held by an Interested Stockholder who is (or whose Affiliate is) a party to the Business Combination or an Affiliate or Associate of the Interested Stockholder, voting together as a single voting group. 2. When Voting Requirements Not Applicable. (a) The vote required by Section 1 of this Article VII does not apply to a Business Combination if each of the following conditions is met: (i) The aggregate amount of the cash and the Market Value as of the Valuation Date of consideration other than cash to be received per share by holders of common stock in such Business Combination is at least equal to the highest of the following: (A) The highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of common stock of the same class or series acquired by it: (x) within the 2 year period 12 immediately prior to the Announcement Date of the proposal of the Business Combination; or (y) in the transaction in which it became an Interested Stockholder, whichever is higher; or (B) The Market Value per share of common stock of the same class or series on the Announcement Date or on the Determination Date, whichever is higher; or (C) The price per share equal to the Market Value per share of common stock of the same class or series determined pursuant to subparagraph (i)(B) of this paragraph (a), multiplied by the fraction of: (x) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of common stock of the same class or series acquired by it within the 2 year period immediately prior to the Announcement Date, over (y) the Market Value per share of common stock of the same class or series on the first day in such 2 year period on which the Interested Stockholder acquired any shares of common stock. (ii) The aggregate amount of the cash and the Market Value as of the Valuation Date of consideration other than cash to be received per share by holders of shares of any class or series of outstanding stock other than Common Stock is at least equal to the highest of the following (whether or not the Interested Stockholder has previously acquired any shares of a particular class or series of stock): (A) The highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of such class of stock acquired by it: (x) within the 2 year period immediately prior to the Announcement Date of the proposal of the Business Combination; or (y) in the transaction in which it became an Interested Stockholder, whichever is higher; or (B) The highest preferential amount per share to which the holders of shares of such class of stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; or (C) The Market Value per share of such class of stock on the Announcement Date or on the Determination Date, whichever is higher; or (D) The price per share equal to the Market Value per share of such class of stock determined pursuant to subparagraph (ii)(B) of this paragraph (a), multiplied by the fraction of: (x) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of any class of Voting Stock acquired by it within the 2 year period immediately prior to the Announcement Date, over (y) the Market Value per share of the same class of voting stock on the first day in such 2 year period on which the Interested Stockholder acquired any shares of the same class of Voting Stock. (iii) The consideration to be received by holders of any class or series of outstanding stock is to be in cash or in the same form as the Interested Stockholder has previously paid for shares of the same class or series of stock. If the Interested Stockholder has paid for shares of any class of stock with varying forms of consideration, the form of consideration for such class of stock shall be either cash or the form used to acquire the largest number of shares of such class or series of stock previously acquired by it. 13 (iv) After the Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (A) There shall have been: (x) no reduction in the annual rate of dividends paid on any class or series of stock of the Corporation that is not preferred stock (except as necessary to reflect any subdivision of the stock); (y) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the stock; and (z) the Interested Stockholder did not become the beneficial owner of any additional shares of stock of the Corporation except as part of the transaction which resulted in such Interested Stockholder becoming an Interested Stockholder or by virtue of proportionate stock splits or stock dividends. (B) The provisions of subparagraphs (x) and (y) of subparagraph (iv)(A) do not apply if no Interested Stockholder or an Affiliate or Associate of the Interested Stockholder voted as a director of the Corporation in a manner inconsistent with such sub-subparagraphs and the Interested Stockholder, within 10 days after any act or failure to act inconsistent with such sub-subparagraphs, notifies the Board of Directors of the Corporation in writing that the Interested Stockholder disapproves thereof and requests in good faith that the Board of Directors rectify such act or failure to act. (v) After the Interested Stockholder has become an Interested Stockholder, the Interested Stockholder may not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation or any of its Subsidiaries, whether in anticipation of or in connection with such Business Combination or otherwise. (b) The requirements of Section 1 of this Article VII do not apply to Business Combinations that, as to specifically identified Interested Stockholders or their Affiliates, have been approved or exempted therefrom by resolution of the Board of Directors of the Corporation at any time prior to the time that the Interested Stockholder first became an Interested Stockholder. If the Board of Directors so provides, the resolution shall be subject to approval of the stockholders in the manner and by the vote specified in the resolution. 3. Definitions. In this Article VII, the following words have the meanings indicated: (a) "Affiliate," including the term "affiliated person," means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified person . (b) "Announcement Date" means the first general public announcement of the proposal or intention to make a proposal of the Business Combination or its first communication generally to stockholders of the Corporation, whichever is earlier; (c) "Associate," when used to indicate a relationship with any person, means: (i) Any corporation or organization (other than the Corporation or a Subsidiary of the Corporation) of which such person is an officer, director, or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of Equity Securities; 14 (ii) Any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) Any relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is a director or officer of the Corporation or any of its Affiliates. (d) "Beneficial Owner," when used with respect to any Voting Stock, means a person: (i) That, individually or with any of its Affiliates or Associates, beneficially owns Voting Stock, directly or indirectly; or (ii) That, individually or with any of its Affiliates or Associates, has: (A) The right to acquire Voting Stock (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement, or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; or (B) The right to vote Voting Stock pursuant to any agreement, arrangement, or understanding; or (iii) That has any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting or disposing of Voting Stock with any other person that beneficially owns, or whose Affiliates or Associates beneficially own, directly or indirectly, such shares of Voting Stock. (e) "Business Combination" means: (i) Unless the merger, consolidation, or share exchange does not alter the contract rights of the stock as expressly set forth in this Certificate of Incorporation or change or convert in whole or in part the outstanding shares of stock of the Corporation, any merger or consolidation of the Corporation or any Subsidiary with (A) any Interested Stockholder or (B) any other corporation (whether or not itself an Interested Stockholder) which is, or after the merger or consolidation, would be, an Affiliate of an Interested Stockholder that was an Interested Stockholder prior to the transaction. (ii) Any sale, lease, transfer or other disposition, other than in the ordinary course of business, in one transaction or a series of transactions in any 12-month period, to any Interested Stockholder or any Affiliate of any Interested Stockholder (other than the Corporation or any of its Subsidiaries) of any assets of the Corporation or any Subsidiary having, measured at the time the transaction or transactions are approved by the Board of Directors of the Corporation, an aggregate book value as of the end of the Corporation's most recently ended fiscal quarter of 10 percent or more of the total Market Value of the outstanding stock of the Corporation or of its net worth as of the end of its most recently ended fiscal quarter; (iii) The issuance or transfer by the Corporation, or any Subsidiary, in one transaction or a series of transactions, of any Equity Securities of the Corporation or any Subsidiary which have an aggregate Market Value of 5 percent or more of the total Market Value of the outstanding stock of the Corporation to any Interested Stockholder or any Affiliate of any Interested Stockholder (other than the Corporation or any of its Subsidiaries) except pursuant to the exercise of warrants or rights to purchase securities offered pro rata to all 15 holders of the Corporation's voting stock or any other method affording substantially proportionate treatment to the holders of Voting Stock; (iv) The adoption of any plan or proposal for the liquidation or dissolution of the Corporation in which anything other than cash will be received by an Interested Stockholder or any Affiliate of any Interested Stockholder; or (v) Any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation, of the Corporation with any of its Subsidiaries which has the effect, directly or indirectly, in one transaction or a series of transactions, of increasing by 5 percent or more of the total number of outstanding shares, the proportionate amount of the outstanding shares of any class of Equity Securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder. (f) "Common Stock" means any stock other than preferred or preference stock. (g) "Control," including the terms "controlling," "controlled by" and "under common control with," means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise, and the beneficial ownership of 10 percent or more of the votes entitled to be cast by a corporation's voting stock creates a presumption of control. (h) "Determination Date" means the date on which an Interested Stockholder first became an Interested Stockholder; (i) "Equity Security" means: (i) Any stock or similar security, certificate of interest, or participation in any profit sharing agreement, voting trust certificate, or certificate of deposit for an equity security; (ii) Any security convertible, with or without consideration, into an equity security, or any warrant or other security carrying any right to subscribe to or purchase an equity security; or (iii) Any put, call, straddle, or other option or privilege of buying an equity security from or selling an equity security to another without being bound to do so. (j) "Interested Stockholder" means any person (other than the Corporation or any Subsidiary) that: (i)(A) Is the beneficial owner, directly or indirectly, of 10 percent or more of the voting power of the outstanding voting stock of the Corporation; or (B) Is an Affiliate of the Corporation and at any time within the 2 year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10 percent or more of the Voting Power of the then outstanding voting stock of the Corporation. (ii) For the purpose of determining whether a person is an Interested Stockholder, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned by the person through application of subsection (d) of this section but may not include any other shares of Voting Stock which may be issuable pursuant to any 16 agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (k) "Market Value" means: (i) In the case of stock, the highest closing sale price during the 30 day period immediately preceding the date in question of a share of such stock on the composite tape for New York Stock Exchange listed stocks, or, if such stock is not quoted on the composite tape, on the New York Stock Exchange, or if such stock is not listed on such exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30 day period preceding the date in question on the National Association of Securities Dealers, Inc. automated quotations system or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors of the Corporation in good faith; and (ii) In the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors of the Corporation in good faith. (l) "Subsidiary" means any corporation of which voting stock having a majority of the votes entitled to be cast is owned, directly or indirectly, by the Corporation. (m) "Valuation Date" means: (i) for a Business Combination voted upon by stockholders, the later of the day prior to the date of the stockholders' vote or the day 20 days prior to the consummation of the Business Combination; and (ii) for a Business Combination not voted upon by stockholders, the date of the consummation of the Business Combination. (n) "Voting Stock" means shares of capital stock of the Corporation entitled to vote generally in the election of directors. IN WITNESS WHEREOF, this Restated Certificate of Incorporation restates and integrates, but does not further amend, the provisions of the Restated Certificate of Incorporation of the Corporation as adopted by the Board of Directors of the Corporation pursuant to Section 245 of the Delaware General Corporation Law, and has been executed and attested to by its duly authorized officers this 29th day of March, 1995. McKESSON CORPORATION By: /S/Nancy A. Miller ------------------ Nancy A. Miller Vice President and Corporate Secretary Attest: /S/Lorraine E. Peetz - -------------------- Lorraine E. Peetz Assistant Secretary 17 EX-3.2 3 RESTATED BY-LAWS EXHIBIT 3.2 ================================================================================ - -------------------------------------------------------------------------------- RESTATED BY-LAWS of McKESSON CORPORATION A Delaware Corporation ---------------------------------------- As amended through April 26, 1995 - -------------------------------------------------------------------------------- ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE I Offices...................................... 1 Section 1 Registered Office............................ 1 Section 2 Other Offices................................ 1 ARTICLE II Stockholders' Meetings....................... 1 Section 1 Place of Meetings............................ 1 Section 2 Annual Meetings.............................. 1 Section 3 Special Meetings............................. 1 Section 4 Notice of Meetings........................... 2 Section 5 Quorum....................................... 2 Section 6 Voting Rights................................ 3 Section 7 Voting Procedures and Inspectors of Elections................................. 3 Section 8 List of Stockholders......................... 4 Section 9 Stockholder Proposals at Annual Meetings.............................. 4 Section 10 Nominations of Persons for Election to the Board of Directors.................... 5 ARTICLE III Directors.................................... 6 Section 1 General Powers............................... 6 Section 2 Number and Term of Office; Removal........... 6 Section 3 Election of Directors........................ 7 Section 4 Vacancies.................................... 7 Section 5 Resignations................................. 7 Section 6 Annual Meetings.............................. 7 Section 7 Regular Meetings............................. 7 Section 8 Special Meetings; Notice..................... 7 Section 9 Quorum and Manner of Acting.................. 8 Section 10 Consent in Writing........................... 8 Section 11 Committees................................... 8 Section 12 Telephone Meetings........................... 9 Section 13 Compensation................................. 9 Section 14 Interested Directors......................... 9 Section 15 Directors Elected by Special Class or Series. 10 ARTICLE IV Officers..................................... 10 Section 1 Designation of Officers...................... 10 Section 2 Term of Office; Resignation; Removal......... 10 Section 3 Vacancies.................................... 10 Section 4 Authority of Officers........................ 10 Section 5 Divisional Titles............................ 11 Section 6 Salaries..................................... 11 ARTICLE V Execution of Corporate Instruments and Voting of Securities Owned by the Corporation....... 12 Section 1 Execution of Instruments..................... 12 Section 2 Voting of Securities Owned by the Corporation 12
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Page ---- ARTICLE VI Shares of Stock and Other Securities......... 12 Section 1 Form and Execution of Certificates........... 12 Section 2 Lost Certificates............................ 12 Section 3 Transfers.................................... 13 Section 4 Fixing Record Dates.......................... 13 Section 5 Registered Stockholders...................... 13 Section 6 Regulations.................................. 13 Section 7 Other Securities of the Corporation.......... 14 ARTICLE VII Corporate Seal............................... 14 ARTICLE VIII Indemnification of Officers, Directors, Employees and Agents....................... 14 Section 1 Power to Indemnify in Actions, Suits or Proceedings other Than Those by or in the Right of the Corporation................... 14 Section 2 Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation................................ 15 Section 3 Authorization of Indemnification............. 15 Section 4 Good Faith Defined........................... 15 Section 5 Indemnification by a Court................... 15 Section 6 Expenses Payable in Advance.................. 16 Section 7 Nonexclusivity of Indemnification and Advancement of Expenses.................... 16 Section 8 Insurance.................................... 16 Section 9 Certain Definitions.......................... 16 Section 10 Survival of Indemnification and Advancement of Expenses................................ 17 Section 11 Limitation on Indemnification................ 17 Section 12 Indemnification of Employees and Agents...... 17 Section 13 Effect of Amendment.......................... 17 Section 14 Authority to Enter into Indemnification Agreements................................. 17 ARTICLE IX Notices...................................... 18 ARTICLE X Amendments................................... 18
ii RESTATED BY-LAWS OF McKESSON CORPORATION A Delaware Corporation ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office of McKesson Corporation (the "Corporation") in the State of Delaware shall be in the City of Dover, County of Kent. SECTION 2. OTHER OFFICES. The Corporation shall also have and maintain an office or principal place of business at One Post Street, San Francisco, California and may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS' MEETINGS SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders of the Corporation shall be held at such place, either within or without the State of Delaware, as may be designated from time to time by the Board of Directors, or, if not so designated, then at the office of the Corporation required to be maintained pursuant to Section 2 of ARTICLE I hereof. SECTION 2. ANNUAL MEETINGS. The annual meetings of stockholders of the Corporation for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors, or, if not so designated, then at 10:00 a.m. on the last Wednesday in July in each year if not a legal holiday, and, if a legal holiday, at the same hour and place on the next succeeding day not a holiday. SECTION 3. SPECIAL MEETINGS. Special Meetings of the stockholders of the Corporation may be called, for any purpose or purposes, by the Chairman of the Board or the President or the Board of Directors at any time. Stockholders may not call Special Meetings of the stockholders of the Corporation. 1 SECTION 4. NOTICE OF MEETINGS. (a) Except as otherwise provided by law or the Certificate of Incorporation, written notice of each meeting of stockholders, specifying the place, date and hour and purpose or purposes of the meeting, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote thereat, directed to his address as it appears upon the books of the Corporation; except that where the matter to be acted on is a merger or consolidation of the Corporation or a sale, lease or exchange of all or substantially all of its assets, such notice shall be given not less than 20 nor more than 60 days prior to such meeting. (b) If at any meeting action is proposed to be taken which, if taken, would entitle stockholders fulfilling the requirements of Section 262(d) of the Delaware General Corporation Law to an appraisal of the fair value of their shares, the notice of such meeting shall contain a statement of that purpose and to that effect and shall be accompanied by a copy of that statutory section. (c) When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken unless the adjournment is for more than thirty days, or unless after the adjournment a new record date is fixed for the adjourned meeting, in which event a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. (d) Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, either before or after such meeting, and to the extent permitted by law, will be waived by any stockholder by his attendance thereat, in person or by proxy. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given. (e) Unless and until voted, every proxy shall be revocable at the pleasure of the person who executed it or of his legal representatives or assigns, except in those cases where an irrevocable proxy permitted by statute has been given. SECTION 5. QUORUM. At all meetings of stockholders, except where otherwise provided by law, the Certificate of Incorporation, or these By-Laws, the presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. Shares, the voting of which at said meeting has been enjoined, or which for any reason cannot be lawfully voted at such meeting, shall not be counted to determine a quorum at said meeting. In the absence of a quorum any meeting of stockholders may be adjourned, from time to time, by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. At such adjourned meeting at which a quorum is present or represented any business may be transacted which might have been transacted at the original meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, all action taken by the holders of a majority of the voting power represented at any meeting at which a quorum is present shall be valid and binding upon the Corporation. In the event that at any meeting at which the holders of more than one class or series of the Corporation's capital stock are entitled to vote as a class, a quorum of any such class or series is lacking, the holders of any class or series represented by a quorum may proceed with the 2 transaction of the business to be transacted by that class or series, and if such business is the election of directors, the director whose successors shall not have been elected shall continue in office until their successors shall have been duly elected and shall have qualified. SECTION 6. VOTING RIGHTS. (a) Except as otherwise provided by law, only persons in whose names shares entitled to vote stand on the stock records of the Corporation on the record date for determining the stockholders entitled to vote at said meeting shall be entitled to vote at such meeting. Shares standing in the names of two or more persons shall be voted or represented in accordance with the determination of the majority of such persons, or, if only one of such persons is present in person or represented by proxy, such person shall have the right to vote such shares and such shares shall be deemed to be represented for the purpose of determining a quorum. (b) Every person entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent, which proxy shall be filed with the Secretary of the Corporation at or before the meeting at which it is to be used. Said proxy so appointed need not be a stockholder. No proxy shall be voted on after three years from its date unless the proxy provides for a longer period. (c) Without limiting the manner in which a stockholder may authorize another person or persons to act for him as proxy pursuant to subsection (b) of this Section, the following shall constitute a valid means by which a stockholder may grant such authority: (1) A stockholder may execute a writing authorizing another person or persons to act for him as proxy. Execution may be accomplished by the stockholder or his authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature. (2) A stockholder may authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. (d) Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to subsection (c) of this Section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. SECTION 7. VOTING PROCEDURES AND INSPECTORS OF ELECTIONS. (a) The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate 3 one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. (b) The inspectors shall (i) ascertain the number of shares outstanding and the voting power of each, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. (c) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise. (d) In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 212(c)(2) of the Delaware General Corporation Law, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification pursuant to subsection (b)(v) of this Section shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. (e) The provisions of this Section 7 shall not apply to any annual meeting of stockholders held prior to the annual meeting of stockholders to be held in 1995. SECTION 8. LIST OF STOCKHOLDERS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held and which place shall be specified in the notice of the meeting, or, if not specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 9. STOCKHOLDER PROPOSALS AT ANNUAL MEETINGS. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, 4 otherwise properly brought before the meeting by or at the direction of the Board of Directors or otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting, (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the stockholder, (iv) a description of all arrangements or understandings between the stockholder and any other person or persons (including their names) in connection with the proposal of such business by the stockholder and any material interest of the stockholder in such business, and (v) a representation that the stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 9, provided, however, that nothing in this Section 9 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with said procedure. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 9, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 10. NOMINATIONS OF PERSONS FOR ELECTION TO THE BOARD OF DIRECTORS. In addition to any other applicable requirements, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 10. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the 5 stockholder giving the notice, (i) the name and record address of the stockholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the stockholder, (iii) a description of all arrangements or understandings between the stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by the stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in such notice and (v) any other information relating to the stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee being named as a nominee and to serve as a director if elected. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein. These provisions shall not apply to nomination of any persons entitled to be separately elected by holders of preferred stock. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The property, affairs and business of the Corporation shall be managed under the direction of its Board of Directors, which may exercise all of the powers of the Corporation, except such as are by law or by the Certificate of Incorporation or by these By-Laws expressly conferred upon or reserved to the stockholders. SECTION 2. NUMBER AND TERM OF OFFICE; REMOVAL. The number of directors of the Corporation shall be fixed from time to time by these By-Laws but in no event shall be less than three (3). Until these By-Laws are further amended, the number of directors shall be ten. The directors shall be divided into three classes. Each such class shall consist, as nearly as may be possible, of one- third of the total number of directors, and any remaining directors shall be included within such group or groups as the Board of Directors shall designate. At the initial annual meeting of stockholders in 1994, a class of directors shall be elected for a one-year term, a class of directors for a two-year term and a class of directors for a three-year term. At each succeeding annual meeting of stockholders, beginning in 1995, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. A director may be removed from office for cause only and, subject to such removal, death, resignation, retirement or disqualification, shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and qualify. No alteration, amendment or repeal of these By-Laws shall be effective to shorten the term of any director holding office at the time of such alteration, amendment or repeal, to permit any such director to be removed without cause, or to increase the number of directors in any class or in the aggregate from that existing at the time of such alteration, amendment or repeal until the expiration of the terms of office of all directors then 6 holding office, unless such alteration, amendment or repeal has been approved by either the holders of all shares of stock entitled to vote thereon or by a vote of a majority of the entire Board of Directors. The provisions of this Section 2 shall not apply to directors governed by Section 15 of this ARTICLE III. SECTION 3. ELECTION OF DIRECTORS. At each meeting of the stockholders for the election of directors, the directors to be elected at such meeting shall be elected by a plurality of votes given at such election. SECTION 4. VACANCIES. Any vacancy occurring in the Board of Directors for any cause other than by reason of an increase in the number of directors may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, or by the stockholders. Any vacancy occurring by reason of an increase in the number of directors may be filled by action of a majority of the entire Board of Directors or by the stockholders. A director elected by the Board of Directors to fill a vacancy shall be elected to hold office until the expiration of the term for which he was elected and until his successor shall have been elected and shall have qualified. A director elected by the stockholders to fill a vacancy shall be elected to hold office until the expiration of the term for which he was elected and until his successor shall have been elected and shall have qualified. The provisions of this Section 4 shall not apply to directors governed by Section 15 of this ARTICLE III. SECTION 5. RESIGNATIONS. A director may resign at any time by giving written notice to the Board of Directors or to the Secretary. Such resignation shall take effect at the time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6. ANNUAL MEETINGS. The Board of Directors, as constituted following the vote of stockholders at any meeting of the stockholders for the election of directors, may hold its first meeting for the purpose of organization and the transaction of business, if a quorum be present, immediately after such meeting and at the same place, and notice of such meeting need not be given. Such first meeting may be held at any other time and place specified in a notice given as hereinafter provided for special meetings of the Board of Directors or in a consent and waiver of notice thereof signed by all the directors. SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such places and times as may be fixed from time to time by resolution of the Board. SECTION 8. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or the President and shall be called by the Secretary upon the written request of any three directors and each special meeting shall be held at such place and time as shall be specified in the notice thereof. At least twenty-four (24) hours' notice of each such special meeting shall be given to each director personally or sent to him addressed to his residence or usual place of business by telephone, telegram or facsimile transmission, or at least 120 hours' notice of each such special meeting shall be given to each director by letter sent to him addressed as aforesaid or on such shorter notice and by such means as the person or persons calling such meeting may deem reasonably necessary or appropriate in light of the circumstances. Any notice by letter or telegram shall be deemed to be given when deposited in the United States mail so addressed or when duly deposited at an appropriate office for transmission by telegram, as 7 the case may be. Such notice need not state the business to be transacted at or the purpose or purposes of such special meeting. No notice of any such special meeting of the Board of Directors need be given to any director who attends in person or who, in writing executed and filed with the records of the meeting, either before or after the holding thereof, waives such notice. No notice need be given of an adjourned meeting of the Board of Directors. SECTION 9. QUORUM AND MANNER OF ACTING. A majority of the total number of directors, but in no event less than two directors, shall constitute a quorum for the transaction of business at any annual, regular or special meeting of the Board of Directors. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws, the act of a majority of the directors present at any meeting, at which a quorum is present, shall be the act of the Board of Directors. In the absence of a quorum, a majority of the directors present may adjourn the meeting from time to time until a quorum be had. SECTION 10. CONSENT IN WRITING. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting, if a written consent to such action is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or such committee. SECTION 11. COMMITTEES. (a) EXECUTIVE COMMITTEE. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Executive Committee of not less than three members, each of whom shall be a director. The Executive Committee, to the extent permitted by law, shall have and may exercise when the Board of Directors is not in session all powers of the Board in the management of the business and affairs of the Corporation, including, without limitation, the power and authority to declare a dividend or to authorize the issuance of stock, except such Committee shall not have the power or authority to amend the Certificate of Incorporation, to adopt an agreement of merger or consolidation, to recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, to recommend to the stockholders of the Corporation a dissolution of the Corporation or a revocation of a dissolution, or to amend these By-Laws. (B) OTHER COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, from time to time appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committee, but in no event shall any such committee have the powers denied to the Executive Committee in these By- Laws. (c) TERM. The members of all committees of the Board of Directors shall serve a term coexistent with that of the Board of Directors which shall have appointed such committee. The Board, subject to the provisions of subsections (a) or (b) of this Section 11, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee; provided, that no committee shall consist of less than one member. The membership of a committee member shall terminate on the date of his death or voluntary resignation, but the Board may at any time for any reason remove any individual committee member and the Board may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the 8 committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. (d) MEETINGS. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 11 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter; special meetings of any such committee may be held at the principal office of the Corporation required to be maintained pursuant to Section 2 of ARTICLE I hereof; or at any place which has been designated from time to time by resolution of such committee or by written consent of all members thereof, and may be called by any director who is a member of such committee, upon written notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time after the meeting and will be waived by any director by attendance thereat. A majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee. SECTION 12. TELEPHONE MEETINGS. The Board of Directors or any committee thereof may participate in a meeting by means of a conference telephone or similar communications equipment if all members of the Board or of such committee, as the case may be, participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. SECTION 13. COMPENSATION. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors and/or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 14. INTERESTED DIRECTORS. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a 9 quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. SECTION 15. DIRECTORS ELECTED BY SPECIAL CLASS OR SERIES. To the extent that any holders of any class or series of stock other than Common Stock issued by the Corporation shall have the separate right, voting as a class or series, to elect directors, the directors elected by such class or series shall be deemed to constitute an additional class of directors and shall have a term of office for one year or such other period as may be designated by the provisions of such class or series providing such separate voting right to the holders of such class or series of stock, and any such class of directors shall be in addition to the classes referred to in Section 2 of this ARTICLE III. Any directors so elected shall be subject to removal in such manner as may be provided by law or by the Certificate of Incorporation of this Corporation. The provisions of Sections 2 and 4 of this ARTICLE III do not apply to directors governed by this Section 15. ARTICLE IV OFFICERS SECTION 1. DESIGNATION OF OFFICERS. The officers of the Corporation, who shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders, shall be a Chairman of the Board, a President, one or more Vice Presidents, a Treasurer, a Secretary and a Controller. The Board of Directors from time to time may choose such other officers as it shall deem appropriate. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by law. The Chairman of the Board and the President shall be chosen from among the directors; the other officers need not be directors. SECTION 2. TERM OF OFFICE; RESIGNATION; REMOVAL. The term of office of each officer shall be until the first meeting of the Board of Directors following the next annual meeting of stockholders and until his successor is elected and shall have qualified, or until his death, resignation or removal, whichever is sooner. Any officer may resign at any time by giving written notice to the Board of Directors or to the Secretary. Such resignation shall take effect at the time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any officer may be removed at any time either with or without cause by the Board of Directors. SECTION 3. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause, may be filled for the unexpired portion of the term by the Board of Directors. SECTION 4. AUTHORITY OF OFFICERS. Subject to the power of the Board of Directors in its discretion to change and redefine the duties of the officers of the Corporation by resolution in such manner as it may from time to time determine, the duties of the officers of the Corporation shall be as follows: (a) CHAIRMAN OF THE BOARD. The Chairman of the Board shall be the Chief Executive Officer of the Corporation, and shall execute all the powers and perform all the duties usual to such office. Subject to the direction of the Board of Directors, he shall have the responsibility for the general management of the Corporation. The Chairman shall preside at meetings of the stockholders and 10 the Board of Directors. He shall recommend to the Board, for its approval, the membership of Board committees. Subject to the direction of the Board of Directors, he shall generally manage the affairs of the Board and perform such other duties as are assigned by the Board. (b) PRESIDENT. The President shall be the Chief Operating Officer of the Corporation and shall execute all the powers and perform all the duties usual to such office. The President shall perform such other duties as may be prescribed or assigned to him from time to time by the Board of Directors, the Executive Committee or the Chief Executive Officer. (c) OTHER OFFICERS. The other officers of the Corporation shall have such powers and shall perform such duties as generally pertain to their respective offices, as well as such powers and duties as the Board of Directors, the Executive Committee or the Chief Executive Officer may prescribe. SECTION 5. DIVISIONAL TITLES. Any one of the Chief Executive Officer, President, or Vice President Human Resources and Administration (each one an "Appointing Person"), may from time to time confer upon any employee of a division of the Corporation the title of President, Vice President, Treasurer or Secretary of such division or any other divisional title or titles deemed appropriate. Any such titles so conferred may be discontinued and withdrawn at any time by any one Appointing Person. Any employee of a division designated by such a divisional title shall have the powers and duties with respect to such division as shall be prescribed by the Appointing Person. The conferring, withdrawal or discontinuance of divisional titles shall be in writing and shall be filed with the Secretary of the Corporation. SECTION 6. SALARIES. The salaries and other compensation of the principal officers of the Corporation shall be fixed from time to time by the Board of Directors. ARTICLE V EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION SECTION 1. EXECUTION OF INSTRUMENTS. The Board of Directors may in its discretion determine the method and designate the signatory officer or officers or other person or persons, to execute any corporate instrument or document, or to sign the corporate name without limitation, except where otherwise provided by law, and such execution or signature shall be binding upon the Corporation. All checks and drafts drawn on banks or other depositories on funds to the credit of the Corporation or in special accounts of the Corporation, shall be signed by such person or persons as the Treasurer or such other person designated by the Board of Directors for that purpose shall authorize so to do. SECTION 2. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and other securities of other corporations and business entities owned or held by the Corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized to do so by resolution of the Board of Directors. 11 ARTICLE VI SHARES OF STOCK AND OTHER SECURITIES SECTION 1. FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares of stock of the Corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman of the Board (if there be such an officer appointed), or by the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the Corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to indemnify the Corporation in such manner as it shall require and/or to give the Corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. SECTION 3. TRANSFERS. Transfers of record of shares of stock of the Corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a certificate or certificates for a like number of shares, properly endorsed. SECTION 4. FIXING RECORD DATES. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 12 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed; (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. SECTION 6. REGULATIONS. The Board of Directors may make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the stock and other securities of the Corporation, and may appoint transfer agents and registrars of any class of stock or other securities of the Corporation. SECTION 7. OTHER SECURITIES OF THE CORPORATION. All bonds, debentures and other corporate securities of the Corporation, other than stock certificates, may be signed by the Chairman of the Board (if there be such an officer appointed), or the President or any Vice President or such other person as may be authorized by the Board of Directors and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signature of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the Corporation, or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security or whose facsimile signature shall appear thereon shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation. 13 ARTICLE VII CORPORATE SEAL The corporate seal shall consist of a die bearing the name of the Corporation and the state and date of its incorporation. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this ARTICLE VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director or officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a ---- ---------- presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. The right to indemnification conferred in this ARTICLE VIII shall be a contract right. SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this ARTICLE VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. 14 SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under this ARTICLE VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 of this ARTICLE VIII, as the case may be. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. To the extent, however, that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case. SECTION 4. GOOD FAITH DEFINED. For purposes of any determination under Section 3 of this ARTICLE VIII, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term "another enterprise" as used in this Section 4 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Sections 1 or 2 of this ARTICLE VIII, as the case may be. SECTION 5. INDEMNIFICATION BY A COURT. Notwithstanding any contrary determination in the specific case under Section 3 of this ARTICLE VIII, and notwithstanding the absence of any determination thereunder, any director or officer may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Sections 1 and 2 of this ARTICLE VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because he has met the applicable standards of conduct set forth in Sections 1 or 2 of this ARTICLE VIII, as the case may be. Neither a contrary determination in the specific case under Section 3 of this ARTICLE VIII nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 5 shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application. SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a director or officer in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be 15 determined that he is not entitled to be indemnified by the Corporation as authorized in this ARTICLE VIII. SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The indemnification and advancement of expenses provided by or granted pursuant to this ARTICLE VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any By-Law, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Sections 1 and 2 of this ARTICLE VIII shall be made to the fullest extent permitted by law. The provisions of this ARTICLE VIII shall not be deemed to preclude the indemnification of any person who is not specified in Sections 1 or 2 of this ARTICLE VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise. SECTION 8. INSURANCE. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this ARTICLE VIII. SECTION 9. CERTAIN DEFINITIONS. For purposes of this ARTICLE VIII, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this ARTICLE VIII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. For purposes of this ARTICLE VIII, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this ARTICLE VIII. SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The indemnification and advancement of expenses provided by, or granted pursuant to, this ARTICLE VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. 16 SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding anything contained in this ARTICLE VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 hereof), the Corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation. SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this ARTICLE VIII to directors and officers of the Corporation. SECTION 13. EFFECT OF AMENDMENT. Any amendment, repeal or modification of this ARTICLE VIII shall not (a) adversely affect any right or protection of any director or officer existing at the time of such amendment, repeal or modification, or (b) apply to the indemnification of any such person for liability, expense, or loss stemming from actions or omissions occurring prior to such amendment, repeal, or modification. SECTION 14. AUTHORITY TO ENTER INTO INDEMNIFICATION AGREEMENTS. The Corporation may enter into indemnification agreements with the directors and officers of the Corporation, including, without limitation, any indemnification agreement in substantially the form set forth in Exhibit 1 attached to these By- Laws. ARTICLE IX NOTICES Whenever, under any provisions of these By-Laws, notice is required to be given to any stockholder, the same shall be given in writing, timely and duly deposited in the United States Mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the Corporation or its transfer agent. Any notice required to be given to any director may be given by any of the methods stated in Section 8 of ARTICLE III hereof, except that such notice other than one which is delivered personally, shall be sent to such address or (in the case of facsimile telecommunication) facsimile telephone number as such director shall have disclosed in writing to the Secretary of the Corporation, or, in the absence of such filing, to the last known post office address of such director. If no address of a stockholder or director be known, such notice may be sent to the office of the Corporation required to be maintained pursuant to Section 2 of ARTICLE I hereof. An affidavit of mailing, executed by a duly authorized and competent employee of the Corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stockholder or stockholders, director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall be conclusive evidence of the statements therein contained. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing and all notices given by telegram or other means of electronic transmission shall be deemed to have been given as at the sending time recorded by the telegraph company or other electronic transmission equipment operator transmitting the same. It shall not be necessary that the same method of giving be employed in respect of all directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to 17 act, or within which any director may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him in the manner above provided, shall not be affected or extended in any manner by the failure of such a stockholder or such director to receive such notice. Whenever any notice is required to be given under the provisions of this statutes or of the Certificate of Incorporation, or of these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or By-Laws of the Corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. ARTICLE X AMENDMENTS The Board of Directors is expressly authorized to adopt, alter and repeal the By-Laws of the Corporation in whole or in part at any regular or special meeting of the Board of Directors, by vote of a majority of the entire Board of Directors. Except where ARTICLE V of the Certificate of Incorporation of the Corporation requires a higher vote, the By-Laws may also be adopted, altered or repealed in whole or in part at any annual or special meeting of the stockholders by the affirmative vote of three fourths of the shares of the Corporation outstanding and entitled to vote thereon. CERTIFICATE OF SECRETARY The undersigned, Vice President and Corporate Secretary of McKesson Corporation, a Delaware corporation, hereby certifies that the foregoing is a full, true and correct copy of the By-Laws of said Corporation, with all amendments to date of this Certificate. WITNESS the signature of the undersigned and the seal of the Corporation this ____ day of ___________, 19__. ---------------------------------------- Vice President and Corporate Secretary 18 EXHIBIT 1 INDEMNIFICATION AGREEMENT AGREEMENT, effective as of ______, 19__, between McKesson Corporation, a Delaware corporation (the "Company"), and ______________ (the "Indemnitee"). WHEREAS, it is essential to the Company to retain and attract as directors and officers the most capable persons available. WHEREAS, Indemnitee is a director/officer of the Company; WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors of public companies in today's environment; WHEREAS, the Certificate of Incorporation and the By-laws of the Company require the Company to indemnify and advance expenses to its directors to the fullest extent permitted by law and the Indemnitee has been serving and continues to serve as a director or officer of the Company in part in reliance on such Certificate of Incorporation and By-laws; WHEREAS, in recognition of Indemnitee's need for substantial protection against personal liability in order to enhance Indemnitee's continued service to the Company in an effective manner and Indemnitee's reliance on the aforesaid Certificate of Incorporation and By-laws, and in part to provide Indemnitee with specific contractual assurance that the protection promised by such Certificate of Incorporation and By-laws will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of such Certificate of Incorporation and By-laws or any change in the composition of the Company's Board of Directors or acquisition transaction relating to the Company), and in order to induce Indemnitee to continue to provide services to the Company as a director or officer thereof, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company's directors' and officers' liability insurance policies. NOW, THEREFORE, in consideration of the premises and of Indemnitee continuing to serve the Company directly or, at its request, with another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. (a) CHANGE IN CONTROL: shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two- thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company's assets. (b) EXPENSE: include attorneys' fees and all other costs, expenses and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Proceeding relating to any Indemnifiable Event. (c) INDEMNIFIABLE EVENT: any event or occurrence that takes place either prior to or after the execution of this Agreement, related to the fact that Indemnitee is or was a director or an officer of the Company, or while a director or officer is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity. (d) POTENTIAL CHANGE IN CONTROL: shall be deemed to have occurred if (i) the Company enters into an agreement or arrangement, the consummation of which would result in the occurrence of Change in Control; (ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute Change in Control; (iii) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company's then outstanding Voting Securities, increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such person on the date hereof; or (iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (e) PROCEEDING: any threatened, pending or completed action, suit or proceeding, or any inquiry, hearing or investigation, whether conducted by the Company or any other party, that Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other. (f) REVIEWING PARTY: any appropriate person or body consisting of a member or members of the Company's Board of Directors or any other person or body appointed by the Board (including the special, independent counsel referred to in Section 3) who is not a party to the particular Proceeding with respect to which Indemnitee is seeking indemnification. (g) VOTING SECURITIES: any securities of the Company which vote generally in the election of directors. 2 2. AGREEMENT TO INDEMNIFY. (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by law, as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Proceeding and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement (including the creation of the Trust). Notwithstanding anything in this Agreement to the contrary and except as provided in Section 5, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Proceeding initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Proceeding. If so requested by Indemnitee, the Company shall advance (within ten business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). (b) Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the special, independent counsel referred to in Section 3 hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2(a) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon. If there has not been a Change in Control the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the special, independent counsel referred to in Section 3 hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the States of California or Delaware having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. 3. CHANGE IN CONTROL. The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control) then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or under applicable 3 law or the Company's Certificate of Incorporation or By-Laws now or hereafter in effect relating to indemnification for Indemnifiable Events, the Company shall seek legal advice only from special, independent counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or the Indemnitee (other than in connection with such matters) within the last five years. Such independent counsel shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the special, independent counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or the engagement of special, independent counsel pursuant hereto. 4. ESTABLISHMENT OF TRUST. In the event of a Potential Change in Control, the Company shall, upon written request by Indemnitee, create a Trust for the benefit of the Indemnitee and from time to time upon written request of Indemnitee shall fund such Trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with investigating, preparing for and defending any Proceeding relating to an Indemnifiable event, and any and all judgments, fines, penalties and settlement amounts of any and all Proceedings relating to an Indemnifiable Event from time to time actually paid or claimed, reasonably anticipated or proposed to be paid. The amount or amounts to be deposited in the Trust pursuant to the foregoing funding obligation shall be determined by the Reviewing Party, in any case in which the special, independent counsel referred to above is involved. The terms of the Trust shall provide that upon a Change in Control (i) the Trust shall not be revoked or the principal thereof invaded, without the written consent of the Indemnitee, (ii) the Trustee shall advance, within ten business days of a request by the Indemnitee, any and all Expenses to the Indemnitee (and the Indemnitee hereby agrees to reimburse the Trust under the circumstances under which the Indemnitee would be required to reimburse the Company under Section 2(b) of this Agreement), (iii) the Trust shall continue to be funded by the Company in accordance with the funding obligation set forth above, (iv) the Trustee shall promptly pay to the Indemnitee all amounts for which the Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise, and (v) all unexpended funds in such Trust shall revert to the Company upon a final determination by the Reviewing Party or a court of competent jurisdiction, as the case may be, that the Indemnitee has been fully indemnified under the terms of this Agreement. The Trustee shall be chosen by the Indemnitee. Nothing in this Section 4 shall relieve the Company of any of its obligations under this Agreement. All income earned on the assets held in the Trust shall be reported as income by the Company for federal, state, local and foreign tax purposes. 5. INDEMNIFICATION FOR EXPENSES INCURRED IN ENFORCING THIS AGREEMENT. The Company shall indemnify Indemnitee against any and all expenses (including attorneys' fees), and, if requested by Indemnitee, shall (within ten business days of such request) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any claim asserted against or action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or under applicable law or the Company's Certificate of Incorporation or By-laws now or hereafter in effect relating to indemnification for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be. 4 6. PARTIAL INDEMNITY. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Proceeding but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Proceedings relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith. 7. DEFENSE TO INDEMNIFICATION, BURDEN OF PROOF AND PRESUMPTIONS. It shall be a defense to any action brought by the Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for expenses incurred in defending a Proceeding in advance of its final disposition where the required undertaking has been tendered to the Company) that the Indemnitee has not met the standards of conduct that make it permissible under the Delaware General Corporation Law for the Company to indemnify the Indemnitee for the amount claimed. In connection with any determination by the Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the burden of proving such a defense shall be on the Company. Neither the failure of the Company (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action by the Indemnitee that indemnification of the claimant is proper under the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Company (including its Board of Directors, independent legal counsel, or its stockholders) that the Indemnitee had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. 8. NON-EXCLUSIVITY. The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Certificate of Incorporation or By-laws or the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Certificate of Incorporation and By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. 9. LIABILITY INSURANCE. To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director or officer. 10. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause of action shall be asserted by or on behalf of the Company or any affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, or such longer period as may be required by state law under the circumstances, and any claim or cause of action of the Company or 5 its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern. 11. AMENDMENT OF THIS AGREEMENT. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 12. SUBROGATION. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 13. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, By-law or otherwise) of the amounts otherwise indemnifiable hereunder. 14. SETTLEMENT OF CLAIMS. The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without the Company's written consent. The Company shall not settle any action or claim in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent. Neither the Company nor the Indemnitee will unreasonably withhold their consent to any proposed settlement. The Company shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial award if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action. 15. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director or officer of the Company or of any other enterprise at the Company's request. 16. SEVERABILITY. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that 6 is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 17. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the _______________ day of __________________, 19___. McKESSON CORPORATION By: ______________________ Name: Title: ______________________ (Indemnitee) 7 EX-10.23 4 TERMINATION AGREEMENT EXHIBIT 10.23 TERMINATION AGREEMENT --------------------- THIS TERMINATION AGREEMENT, dated as of ________________ is made and entered into by and between McKESSON CORPORATION, a Delaware corporation with its principal office at One Post Street, San Francisco, California (the "Company"), and ________________ ("Executive"). R E C I T A L S - - - - - - - - A. Company desires to enter into an agreement with Executive whereby severance benefits will be paid to Executive on change in control of the Company and consequent actual or constructive termination of Executive's employment. B. This Agreement sets forth the severance benefits which the Company agrees that it will pay to the Executive if Executive's employment with the Company terminates under one of the circumstances described herein following a Change in Control of the Company. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the parties hereto agree as follows: 1. Term of Agreement. This Agreement shall be effective immediately on ----------------- the date hereof and shall continue in effect through ____________; provided, however, that commencing on January 1, 19__ and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless not later than September 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; provided, further, that notwithstanding any such notice by the Company not to extend, this Agreement shall automatically be extended for 24 months beyond the term provided herein if a Change in Control, as defined in Section 3 of this Agreement has occurred during the term of this Agreement. 2. Effect on Employment Rights. This Agreement is not part of any --------------------------- employment agreement that the Company and Executive may have entered into. Nothing in this Agreement shall confer upon Executive any right to continue in the employ of the Company or interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to terminate Employee's employment at any time prior to a Change in Control for any reason, with or without cause. Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company (as defined below), Executive will remain in the employ of the Company during the pendency of any such potential change in control and for a period of one year after the occurrence of an actual Change in Control. For this purpose, a "potential change in control of the Company" shall be deemed to have occurred if (a) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, (b) any person (including the Company) publicly announces an intention to take or consider taking action which if consummated would constitute a Change in Control or (c) the Board of Directors of the Company (the "Board") adopts a resolution to the effect that a potential change in control of the Company has occurred. 3. Change in Control. For purposes of this Agreement, a "Change in ----------------- Control" of the Company shall be deemed to have occurred if any of the events set forth in any one of the following paragraphs shall occur: (a) any "person" (as defined in section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as such term is modified in sections 13(d) and 14(d) of the Exchange Act), excluding the Company or any of its subsidiaries, a trustee or any fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, an underwriter temporarily holding securities pursuant to an offering of such securities or a corporation owned, directly or indirectly, by stockholders of the Company in substantially the same proportions as their ownership of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (b) during any period of not more than two consecutive years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (c) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which, in the judgment of the Compensation Committee of the Board, the holders of the Company's Common Stock immediately prior to such transaction or series of transactions continue to have the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately prior to such transaction or series of transactions. 4. Termination of Employment Following a Change in Control. Executive ------------------------------------------------------- shall be entitled to the benefits provided in Section 5 hereof upon the subsequent termination of Executive's employment by the company within two years after a Change in Control which occurs during the term of this Agreement, provided such termination is (a) by the Company other than for Cause, as defined below, or (b) by Executive for Good Reason, as defined below. Executive shall not be entitled to the benefits of Section 5, any other provision of the Plan to the contrary notwithstanding, if Executive's employment terminates: (i) pursuant to a mandatory retirement policy in effect prior to the Change in Control, (ii) by reason of Executive's death or (iii) by reason of Executive's total and permanent disability. As used herein, "total and permanent disability" means a condition which prevents Executive from performing to a significant degree the essential duties of his or her position and is expected to be of long-term duration or result in death. A determination of total and permanent disability must be based on competent medical evidence. (a) Cause. ----- (i) Definition. Termination by the Company of Executive's employment ---------- for Cause shall mean termination upon Executive's willful engaging in misconduct which is demonstrably and materially injurious to the Company and its subsidiaries taken as a whole. No act, or failure to act, on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that Executive's action or omission was in the best interest of the Company or its subsidiaries. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose of making a determination of whether Cause for termination exists (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board), finding that in the good faith opinion of the Board Executive was guilty of misconduct as set forth above in this subsection 4 and specifying the particulars thereof in detail. (ii) Remedy by Executive. If the Company gives Executive a Notice of ------------------- Termination which states that the basis for terminating Executive's employment is Cause, Executive shall have ten days after receipt of such Notice to remedy the facts and circumstances which provided Cause. The Board (or any duly authorized Committee thereof) shall make a good faith reasonable determination immediately after such ten-day period whether such facts and circumstances have been remedied and shall communicate such determination in writing to Executive. If the Board determines that adequate remedy has not occurred, then the initial Notice of Termination shall remain in effect. (b) Good Reason. After a Change in Control, Executive may terminate ----------- employment with the Company at any time during the term of this Agreement if Executive has made a good faith reasonable determination that Good Reason exists for this termination. (i) Definition. For purposes of this Agreement, "Good Reason" ---------- shall mean any of the following actions, if taken without the express written consent of Executive: A. any material change by the Company in Executive's functions, duties, or responsibilities which change would cause Executive's position with the Company to become of less dignity, responsibility, importance, or scope from the position and attributes that applied to Executive immediately prior to the Change in Control; B. any significant reduction in Executive's base salary, other than a reduction effected as part of an across-the-board reduction affecting all executive employees of the Company; C. any material failure by the Company to comply with any of the provisions of this Agreement (or of any employment agreement between the parties); D. the Company's requiring Executive to be based at any office or location more than 25 miles from the office at which Executive is based on the date immediately preceding the Change in Control, except for travel reasonably required in the performance of Executive's responsibilities and commensurate with the amount of travel required of Executive prior to the Change in Control; or E. any failure by the Company to obtain the express assumption of this Agreement by any successor or assign of the Company. Executive's right to terminate employment for Good Reason pursuant to this subsection 4 shall not be affected by Executive's incapacity due to physical or mental illness. (ii) Remedy by Company. If Executive gives the Company a Notice ----------------- of Termination which states that the basis for Executive's termination of employment is Good Reason, the Company shall have ten days after receipt of such Notice to remedy the facts and circumstances which provided Good Reason. Executive shall make a good faith reasonable determination immediately after such ten-day period whether such facts and circumstances have been remedied and shall communicate such determination in writing to the Company. If Executive determines that adequate remedy has not occurred, then the initial Notice of Termination shall remain in effect. (iii) Determination by Executive Presumed Correct. Any ------------------------------------------- determination by Executive pursuant to this Section 4 that Good Reason exists for Executive's termination of employment and that adequate remedy has not occurred shall be presumed correct and shall govern unless the party contesting the determination shows by a clear preponderance of the evidence that it was not a good faith reasonable determination. (iv) Severance Payment Made Notwithstanding Dispute. ---------------------------------------------- Notwithstanding any dispute concerning whether Good Reason exists for termination of employment or whether adequate remedy has occurred, the Company shall immediately pay to Executive, as specified in Section 5, any amounts otherwise due under this Agreement. Executive may be required to repay such amounts to the Company if any such dispute is finally determined adversely to Executive. (c) Notice of Termination. Any termination of Executive's employment --------------------- by the Company or by Executive hereunder shall be communicated by a Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provisions in this Agreement relied upon and which sets forth (i) in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (ii) the date of Executive's termination of employment, which shall be no earlier than 10 days after such Notice is received by the other party. Any purported termination of the Executive's employment by the Company which is not effected pursuant to a Notice of Termination satisfying the requirements of this Agreement shall not be effective. In the case of a termination for Cause, the Notice of Termination shall also satisfy the requirements set forth in Section 4B. 5. Severance Payment Upon Termination of Employment. If Executive's ------------------------------------------------ employment with the Company is terminated during the term of this Agreement and after a Change in Control (a) by the Company other than for Cause, or (b) by Executive for Good Reason, then Executive shall be entitled to the following: (a) The Company shall immediately pay to Executive in a cash lump sum an amount equal to (i) 2.99 multiplied by Executive's "base amount" determined pursuant to section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), less (ii) any other amount which constitutes a "parachute payment" to Executive as defined in section 280G(b)(2) of the Code. (b) The Company shall continue Executive's coverage in the health and welfare benefit plans in which Executive was a participant as of the date of Executive's termination of employment for the period of time with respect to which Executive would be entitled to payments under the Company's executive severance policy if Executive's termination of employment were covered by such policy. (c) Executive shall continue to accrue benefits under the Executive Benefit Retirement Plan for the period of time with respect to which Executive would be entitled to payments under the Company's executive severance policy if Executive's termination of employment were covered by such policy. In addition, if Executive is age 55 or more and has 15 or more years of service (as determined under such Plan on the date of Executive's termination of employment), then such termination shall automatically be deemed to be an "Approved Retirement" under the terms of such Executive Benefit Retirement Plan. 6. Section 280G Cap. It is the intent of the parties hereto that no ---------------- amount payable pursuant to the terms of this Agreement shall cause any payment or transfer by the Company to or for the benefit of Executive, whether paid or payable (or transferred or transferable) pursuant to the terms of this Agreement or otherwise (a "Payment"), to be subject to taxation under section 4999 of the Code and as an "excess parachute payment" as defined in section 280G of the Code. In the event that the last independent auditors selected by the Board prior to the termination of Executive under this Agreement (the "Auditors") determine that any such item constitutes an "excess parachute payment," and that the limitation of this Section 6 would result in a larger after-tax benefit to Executive, then Executive may (but is not required to) irrevocably elect to relinquish or not exercise any payments or benefits available to Executive under any plan, contract or program before the payment or enjoyment thereof in order to limit such payments or benefits for the purpose of (i) eliminating any "excess parachute payment" or (ii) causing Executive to become eligible to receive all or any portion of the cash payment that would be made pursuant to Section 5 of this Agreement if Executive had no "parachute payments" as defined in section 280G(b)(2) of the Code. For purposes of these calculations, (i) all amounts received in connection with Executive's employment by the Company or to be received by Executive in connection with a change in the ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company (including but not limited to payments or benefits that Executive becomes entitled to in connection with a "Change in Control" as defined in Section 3 hereof) shall be treated as "parachute payments" within the meaning of section 280G(b)(2) of the Code, except to the extent that such amounts are (A) relinquished pursuant to the preceding sentence or (B) identified in the written opinion of independent tax counsel selected by the Auditors and approved by Executive (which approval shall not be unreasonably withheld) as not constituting parachute payments or excess parachute payments (in whole or in part), or as representing reasonable compensation for personal services to be rendered or actually rendered before the Change in Control in excess of the base amount, within the meaning of section 280G(b)(4)(B) of the Code, and (ii) the value of any non-cash benefit or any deferred cash payment included in the calculations shall be determined by the Auditors in accordance with the principles of section 280G(d)(3) and (4) of the Code. The Company shall bear the expense of obtaining the opinion of the independent tax counsel referred to in the preceding sentence. 7. Damages. Executive shall not be required to mitigate damages with ------- respect to the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided under this Agreement be reduced by retirement benefits, deferred compensation or any compensation earned by Executive as a result of employment by another employer. 8. Successor to Company. The Company shall require any successor or -------------------- assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this section or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. 9. Heirs of Executive. This Agreement shall inure to the benefit of and ------------------ be enforceable by Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amounts are still payable to Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee, or other designee or, if there be so such designee, to Executive's estate. 10. Arbitration. Any dispute, controversy or claim arising under or in ----------- connection with this Agreement, or the breach hereof, shall be settled exclusively by arbitration in accordance with the Rules of the American Arbitration Association then in effect. Judgment upon the award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction. Any arbitration held pursuant to this section in connection with Executive's termination of employment shall take place in San Francisco, California at the earliest possible date. If any proceeding is necessary to enforce or interpret the terms of this Agreement, or to recover damages for breach thereof, the prevailing party shall be entitled to reasonable attorneys fees and necessary costs and disbursements, not to exceed in the aggregate one percent (1%) of the net worth of the other party, in addition to any other relief to which he or it may be entitled. 11. Notice. For purposes of this Agreement, notices and all other ------ communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by messenger or in person, or when mailed by United States registered mail, return receipt requested, postage prepaid, as follows: If to the Company: McKesson Corporation One Post Street San Francisco, CA 94104 Attention: Office of the General Counsel If to the Executive: ___________________ c/o McKesson Corporation One Post Street San Francisco, CA 94104 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 12. Legal Costs. The Company shall pay to Executive all reasonable ----------- attorneys' fees and necessary costs and disbursements incurred by or on behalf of Executive as a result of any dispute arising out of this Agreement. Such fees shall be either paid directly by the Company or reimbursed to Executive as soon as reasonably practicable after Executive has provided the Company with satisfactory evidence that Executive has incurred liability for and paid such fees. To the extent of any conflict, this section shall supersede the last sentence of Section 10 of this Agreement. 13. General Provisions. ------------------ (a) Executive's rights and obligations under this Agreement shall not be transferable by assignment or otherwise, nor shall Executive's rights be subject to encumbrance or subject to the claims of the Company's creditors. Nothing in this Agreement shall prevent the consolidation of the Company with, or its merger into, any other corporation, or the sale by the Company of all or substantially all of its properties or assets; and this Agreement shall inure to the benefit of, be binding upon and be enforceable by, any successor surviving or resulting corporation, or other entity to which such assets shall be transferred. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company. (b) This Agreement constitutes the entire agreement between the parties hereto in respect to the rights and obligations of the parties following a Change in Control. This Agreement supersedes and replaces all prior oral and written agreements, understandings, commitments, and practices between the parties (whether or not fully performed by Executive prior to the date hereof), which shall be of no further force or effect. (c) The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part thereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts thereof and the applicability thereof shall not be affected thereby. (d) This Agreement may not be amended or modified except by a written instrument executed by the Company and Executive. (e) This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. McKESSON CORPORATION A Delaware corporation By ___________________________ Attest: By ______________________________ Secretary By the authority of the ______________________________ Compensation Committee of Executive the Board of Directors of McKesson Corporation on _______________. EX-10.24 5 RETIREMENT PROGRAM EXHIBIT 10.24 RETIREMENT PROGRAM FOR NONEMPLOYEE DIRECTORS Effective Date: July 27, 1983 Eligibility: Five years of Board service as a Nonemployee Director. The minimum retirement age is 65. Annual Payment For service as a Nonemployee Director prior Amount: to July 29, 1992: 100% of annual retainer at time of retirement and an amount equal to the sum of all Board and Committee meeting fees paid to an eligible Director in the preceding twelve months. For service as a Nonemployee Director from and after July 29, 1992: 100% of annual retainer at time of retirement. Payment Duration: Payments will be made for a period equal to length of Board service as a Nonemployee Director with the annual amount prorated for periods of less than one year. In the event of the death of an eligible Director prior to retirement, benefit payments will be made to the designated beneficiary or to the estate. If death occurs after retirement, any remaining benefit payments will continue to the designated beneficiary or to the estate. Regulations: The members of the Board who are not Nonemployee Directors, shall construe, interpret and administer this program, and shall have the power to adopt regulations relating thereto. EX-10.25 6 CREDIT AGREEMENT EXHIBIT 10.25 ================================================================================ - -------------------------------------------------------------------------------- CREDIT AGREEMENT DATED AS OF MARCH 31, 1995 AMONG MCKESSON CORPORATION, MEDIS HEALTH AND PHARMACEUTICAL SERVICES INC., BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS AGENT, CHEMICAL BANK, AS CO-AGENT, BANK OF AMERICA CANADA, AS CANADIAN ADMINISTRATIVE AGENT, AND THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO ARRANGED BY BA SECURITIES, INC. ================================================================================ - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Section Page ARTICLE I DEFINITIONS......................... 1 ----------- 1.01 Certain Defined Terms........................................ 1 --------------------- 1.02 Other Interpretive Provisions................................ 26 ----------------------------- 1.03 Accounting Principles........................................ 27 --------------------- 1.04 Canadian Currency Equivalents................................ 28 ----------------------------- ARTICLE II THE CREDITS......................... 28 ----------- 2.01 Amounts and Terms of Commitments............................. 28 -------------------------------- 2.02 Loan Accounts................................................ 29 ------------- 2.03 Procedure for Borrowing...................................... 30 ----------------------- 2.04 Conversion and Continuation Elections........................ 31 ------------------------------------- 2.05 Voluntary Termination or Reduction of Commitments............ 34 ------------------------------------------------- 2.06 Optional Prepayments......................................... 34 -------------------- 2.07 Repayment.................................................... 35 --------- 2.08 Interest..................................................... 35 -------- 2.09 Fees......................................................... 37 ---- (a) Arrangement, Agency Fees................................ 37 ------------------------ (b) Facility Fees........................................... 37 ------------- 2.10 Computation of Fees and Interest............................. 39 -------------------------------- 2.11 Payments by the Borrowers.................................... 40 ------------------------- 2.12 Payments by the Banks to the Applicable Agent................ 41 --------------------------------------------- 2.13 Sharing of Payments, Etc..................................... 42 ------------------------- 2.14 Collateral Pledge............................................ 44 ----------------- 2.15 Utilization of Tranche B Commitments in Canadian Dollars..... 44 -------------------------------------------------------- 2.16 Currency Exchange Fluctuations............................... 45 ------------------------------ 2.17 Bankers' Acceptances for Medis............................... 45 ------------------------------ (a) Acceptance Commitment................................... 45 (b) Drawing Notice.......................................... 46 (c) Form of Bankers' Acceptances............................ 47 (d) Acceptance and Purchase of Drafts....................... 47 (e) Payment of Drawing Purchase Price....................... 48 (f) Effective Discount Rate Determination................... 48 (g) Payment at Maturity..................................... 48 (h) Presigned Draft Forms................................... 49 (i) Conversion or Renewal of Bankers' Acceptances........... 49 (j) Circumstances Making Bankers' Acceptances Unavailable............................................. 50 (k) Prepayments............................................. 50 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY............ 51 -------------------------------------- 3.01 Taxes........................................................ 51 ----- 3.02 Illegality................................................... 52 ---------- 3.03 Increased Costs and Reduction of Return...................... 53 ---------------------------------------
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Section Page 3.04 Funding Losses............................................... 55 -------------- 3.05 Inability to Determine Rates................................. 56 ---------------------------- 3.06 Certificates of Banks........................................ 57 --------------------- 3.07 Survival..................................................... 57 -------- ARTICLE IV CONDITIONS PRECEDENT..................... 57 -------------------- 4.01 Conditions of Initial Loans.................................. 57 --------------------------- (a) Credit Agreement........................................ 57 ---------------- (b) Collateral Documents and Guaranty....................... 57 --------------------------------- (c) Resolutions; Incumbency................................. 57 ----------------------- (d) Organization Documents; Good Standing................... 58 ------------------------------------- (e) Legal Opinions.......................................... 58 -------------- (f) Payment of Fees......................................... 58 --------------- (g) Company Certificates.................................... 58 -------------------- (i) Notice of Election...................................... 59 ------------------ (j) UCC Searches............................................ 59 ------------ (k) Independent Auditor's Letter............................ 59 ---------------------------- (l) Collateral Certificate.................................. 59 ---------------------- (m) Other Documents......................................... 60 --------------- 4.02 Conditions to All Borrowings................................. 60 ---------------------------- (a) Notice of Borrowing or Conversion/Continuation.......... 60 ---------------------------------------------- (b) Continuation of Representations and Warranties.......... 60 ---------------------------------------------- (c) No Existing Default..................................... 60 ------------------- (d) Medis Loans............................................. 60 ----------- 4.03 Conditions to Bankers' Acceptance Facility................... 60 ------------------------------------------ ARTICLE V REPRESENTATIONS AND WARRANTIES............... 61 ------------------------------ 5.01 Corporate Existence and Power................................ 61 ----------------------------- 5.02 Corporate Authorization; No Contravention.................... 61 ----------------------------------------- 5.03 Governmental Authorization................................... 62 -------------------------- 5.04 Binding Effect............................................... 62 -------------- 5.05 Litigation................................................... 62 ---------- 5.06 No Default................................................... 62 ---------- 5.07 Use of Proceeds; Margin Regulations.......................... 63 ----------------------------------- 5.08 Financial Condition.......................................... 63 ------------------- 5.09 Regulated Entities........................................... 63 ------------------ 5.10 No Burdensome Restrictions................................... 63 -------------------------- 5.11 Subsidiaries and Certain Liens As of the Closing Date........ 64 ----------------------------------------------------- 5.12 Collateral Documents......................................... 64 -------------------- ARTICLE VI AFFIRMATIVE COVENANTS.................... 64 --------------------- 6.01 Financial Statements......................................... 64 -------------------- 6.02 Certificates; Other Information.............................. 65 ------------------------------- 6.03 Notices...................................................... 65 -------
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Section Page 6.04 Preservation of Corporate Existence, Etc..................... 66 ---------------------------------------- 6.05 Insurance.................................................... 66 --------- 6.06 Payment of Taxes............................................. 66 ---------------- 6.07 Compliance with Laws......................................... 67 -------------------- 6.08 Inspection of Property and Books and Records................. 67 -------------------------------------------- 6.09 Use of Proceeds.............................................. 67 --------------- 6.10 Notice of Rating Change...................................... 67 ----------------------- ARTICLE VII NEGATIVE COVENANTS...................... 68 ------------------ 7.01 Limitation on Liens.......................................... 68 ------------------- 7.02 Consolidations and Mergers................................... 69 -------------------------- 7.03 Use of Proceeds.............................................. 69 --------------- 7.04 Maximum Debt to Capitalization Ratio......................... 70 ------------------------------------ ARTICLE VIII EVENTS OF DEFAULT....................... 70 ----------------- 8.01 Event of Default............................................. 70 ---------------- (a) Non-Payment............................................. 70 ----------- (b) Representation or Warranty.............................. 70 -------------------------- (c) Specific Defaults....................................... 70 ----------------- (d) Other Defaults.......................................... 70 -------------- (e) Cross-Default........................................... 71 ------------- (f) Insolvency; Voluntary Proceedings....................... 71 --------------------------------- (g) Involuntary Proceedings................................. 71 ----------------------- (h) ERISA................................................... 72 ----- 8.02 Remedies..................................................... 72 -------- 8.03 Rights Not Exclusive......................................... 72 -------------------- ARTICLE IX THE AGENTS.......................... 73 ---------- 9.01 Appointment and Authorization................................ 73 ----------------------------- 9.02 Delegation of Duties......................................... 73 -------------------- 9.03 Liability of Agent........................................... 73 ------------------ 9.04 Reliance by the Agents....................................... 74 ---------------------- 9.05 Notice of Default............................................ 74 ----------------- 9.06 Credit Decision.............................................. 75 --------------- 9.07 Indemnification of Agent..................................... 75 ------------------------ 9.08 Agents in Individual Capacity................................ 76 ----------------------------- 9.09 Successor Agent.............................................. 76 --------------- 9.10 Withholding Tax.............................................. 77 --------------- 9.11 Collateral Matters........................................... 79 ------------------ 9.12 Co-Agent..................................................... 80 -------- ARTICLE X MISCELLANEOUS........................ 80 -------------
iii
Section Page 10.01 Amendments and Waivers...................................... 80 ---------------------- 10.02 Notices..................................................... 81 ------- 10.03 No Waiver; Cumulative Remedies.............................. 82 ------------------------------ 10.04 Costs and Expenses.......................................... 82 ------------------ 10.05 Borrower Indemnification.................................... 83 ------------------------ 10.06 Payments Set Aside.......................................... 83 ------------------ 10.07 Successors and Assigns...................................... 84 ---------------------- 10.08 Assignments, Participations, etc............................ 84 --------------------------------- 10.09 Confidentiality............................................. 86 --------------- 10.10 Set-off..................................................... 87 ------- 10.11 Notification of Addresses, Lending Offices, Etc............. 87 ------------------------------------------------ 10.12 Counterparts................................................ 88 ------------ 10.13 Severability................................................ 88 ------------ 10.14 No Third Parties Benefited.................................. 88 -------------------------- 10.15 Governing Law and Jurisdiction; Language.................... 88 ---------------------------------------- 10.16 Waiver of Jury Trial........................................ 89 -------------------- 10.17 Judgment.................................................... 89 -------- 10.18 Entire Agreement............................................ 90 ----------------
iv McKesson Corporation Medis Health and Pharmaceutical Services Inc. List of Schedules and Exhibits to Credit Agreement
SCHEDULES Schedule 2.01 Commitments and Canadian Commitments Schedule 5.11 Subsidiaries and Liens Securing Indebtedness for Borrowed Money Schedule 10.02 Lending Offices; Addresses for Notices EXHIBITS Exhibit A Form of Notice of Borrowing Exhibit B Form of Notice of Conversion/Continuation Exhibit C Form of Compliance Certificate Exhibit D-1 Form of Legal Opinion of Company's Counsel Exhibit D-2 Form of Legal Opinion of Company's Canadian Counsel Exhibit D-3 Form of Legal Opinion re Collateral Exhibit E Form of Assignment and Acceptance Exhibit F-1 Form of Company Promissory Note (Tranche A) Exhibit F-2 Form of Company Promissory Note (Tranche B) Exhibit F-3 Form of Medis Promissory Note (Tranche B) Exhibit G Form of Drawing Notice Exhibit H-1 Form of Draft Exhibit H-2 Form of Acceptance Exhibit I Form of Pledge Agreement Exhibit J Form of Custodial Agreement Acknowledgement Exhibit K Notice of Election of Projected Market Value Exhibit L Form of Guaranty Exhibit M Form of Independent Auditor's Letter
v CREDIT AGREEMENT ---------------- This CREDIT AGREEMENT is entered into as of March 31, 1995, among McKesson Corporation, a Delaware corporation (the "Company"), Medis Health and ------- Pharmaceutical Services Inc., an Ontario corporation and indirect wholly owned subsidiary of the Company ("Medis"), the several financial institutions from ----- time to time party to this Agreement (collectively, the "Banks"; individually, a ----- "Bank"), Bank of America Canada, as administrative agent with respect to Tranche ---- B Canadian Loans and the Bankers' Acceptance Facility (as hereinafter defined), Chemical Bank, as co-agent for the Banks, and Bank of America National Trust and Savings Association, as agent for the Banks. WHEREAS, the Tranche A Banks (as hereinafter defined) have agreed to make available to the Company a revolving credit facility upon the terms and conditions set forth in this Agreement; WHEREAS, the Tranche B Banks (as hereinafter defined) have agreed to make available to the Company and Medis a revolving credit facility and to Medis the Bankers' Acceptance Facility upon the terms and conditions set forth in this Agreement; WHEREAS, Company has agreed to guaranty the obligations of Medis under such revolving credit facility and the Bankers' Acceptance Facility; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS ----------- 1.01 Certain Defined Terms . As used in this Agreement and the other Loan ---------------------- Documents, the following terms have the following meanings: "Acceptance Usage" means, as at any date of determination, the ---------------- aggregate Face Amount of all completed Bankers' Acceptances which have not been repaid by Medis or the Company whether or not due and whether or not held by a Tranche B Bank. For purposes of this definition, any Bankers' Acceptance that has been prepaid in full shall not be deemed to be outstanding and all Bankers' Acceptances shall be valued in Dollar Equivalents as of the applicable Computation Date. "Affiliate" means, as to any Person, any other Person which, directly --------- or indirectly, is in control of, is 1 controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise. "Affiliate Bank" means (i) with respect to any Tranche B Bank which is -------------- a Tranche B Domestic Bank but is not a Tranche B Canadian Bank, the affiliate of such Tranche B Domestic Bank which is serving as a Tranche B Canadian Bank and (ii) with respect to any Tranche B Bank which is a Tranche B Canadian Bank but is not a Tranche B Domestic Bank, the affiliate of such Tranche B Canadian Bank which is serving as a Tranche B Domestic Bank. The Affiliate Bank of each Tranche B Bank as of the Closing Date is set forth on Schedule 2.01 hereof. "Agent" means BofA in its capacity as agent for the Banks hereunder, ----- and any successor agent arising under Section 9.09. "Agent-Related Persons" means the Agent and the Canadian --------------------- Administrative Agent together with their respective Affiliates (including, in the case of BofA, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Agents" means the Agent and the Canadian Administrative Agent. ------ "Agent's Payment Office" means the address for payments set forth on ---------------------- Schedule 10.02 in relation to the Agent, or such other address as the Agent -------------- may from time to time specify. "Agreement" means this Credit Agreement. --------- "Applicable Agent" shall mean the Agent in the case of Tranche A Loans ---------------- and Tranche B Domestic Loans and the Canadian Administrative Agent in the case of Tranche B Canadian Loans and in connection with the Bankers' Acceptance Facility. "Applicable Currency" means, as to any particular payment or Loan, ------------------- Dollars in the case of Tranche A Loans and Tranche B Domestic Loans and Canadian Dollars in the case of Tranche B Canadian Loans and the Bankers' Acceptance Facility. "Applicable Facility Fee Margin" means, on any date (subject to ------------------------------ clauses (b) through (d) of the definition of "Applicable Rating Level"), the applicable margin set forth below based on the Applicable Rating Level on such date: 2
Applicable Rating Level Margin ------------ ------ Level I 0.0800% Level II 0.1350% Level III 0.2000%
"Applicable Margin" means, on any date and with respect to each Loan ----------------- or Bankers' Acceptance (subject to clauses (b) through (d) of the definition of "Applicable Rating Level"), the applicable margin set forth below based on the Type of Loan or, in the case of Bankers' Acceptances, under the heading Bankers' Acceptances and the Applicable Rating Level on such date:
Applicable Offshore Rate CD Rate Bankers' Rating Level Loans Loans Acceptances - ------------ ------------- ------- ----------- Level I 0.1700% 0.2950% 0.1700% Level II 0.2250% 0.3500% 0.2250% Level III 0.3250% 0.4500% 0.3250%
"Applicable Rating Level" shall mean and be determined by the ratings ----------------------- issued from time to time by S&P and Moody's (or S&P or Moody's, if ratings shall be available from only one of such Rating Agencies) in respect of the Company's long-term, senior unsecured debt in accordance with the following:
Rating Level S&P Moody's Duff & Phelps - ------------ --- ------- ------------- Level I A A2 A or More Favorable or More Favorable or More Favorable Level II BBB Baa2 BBB or More Favorable or More Favorable or More Favorable but Less Favorable than A but Less Favorable than A2 but less than A Level III BBB- or Less Baa3 or Less BBB- or Less Favorable Favorable Favorable or Not Rated or Not Rated or Not Rated
For purposes of the foregoing, (a) if ratings are available from both S&P and Moody's, and the ratings available from such Rating Agencies do not correspond to the same Rating Level, the Rating Level corresponding to the lower rating shall be the Applicable Rating Level unless the higher rating is consistent with the Rating Level of Duff & Phelps as set forth above; (b) if determinative ratings shall change (other than as a result of a change in the rating system used by any applicable Rating Agency) such that a change in the Applicable Rating Level would result, such change shall effect a change in the Applicable Rating Level as of the day on which the Agent receives notice of such change (such day, a "Change Day"), and any change in the Applicable Margin shall ---------- take effect commencing on such 3 Change Day and ending on the date immediately preceding the next Change Day; (c) if the rating system of any of the Rating Agencies shall change prior to the date all obligations hereunder have been paid and the Commitments cancelled, the Company and the Majority Banks shall negotiate in good faith to amend the references to specific ratings in this definition to reflect such changed rating system, and pending such amendment, if no Applicable Rating Level is otherwise determinable based upon the foregoing, the most recent Applicable Rating Level in effect shall apply; (d) if the Company shall fail to give notice to the Agent of any change in rating by any Rating Agency in respect of the Company's long- term, senior unsecured debt on the date required by Section 6.10, the Applicable Rating Level shall be deemed to be Level III for the period from the date such notice was required to be delivered to the date such notice is received by the Agent; and (e) subject to subsection 2.08(c), upon the occurrence of and during the existence of an Event of Default, the Applicable Rating Level shall be deemed to be Level III. "Approved Custodian" means BofA, in its capacity as the initial ------------------ custodian under the Custodial Agreement and its successors and assigns, any Bank (or any Affiliate of a Bank) and any other Persons that may be approved in writing as additional or successor custodians by the Company, the Agent and Majority Banks. "Arranger" means BA Securities, Inc., a Delaware corporation. -------- "Assessment Rate" has the meaning specified in the definition of "CD --------------- Rate." "Assignee" has the meaning specified in subsection 10.08(a). -------- "Attorney Costs" means and includes all reasonable fees and -------------- disbursements of any law firm or other external counsel, the allocated reasonable cost of internal legal services and all reasonable disbursements of internal counsel; provided that no fees or disbursements shall qualify -------- as Attorney Costs unless written evidence substantiating such fees and disbursements is available to the Company upon request. "Bank" has the meaning specified in the introductory clause hereto. ---- "Bankers' Acceptance" has the meaning assigned to that term in Section ------------------- 2.17(a). "Bankers' Acceptance Facility" means the facility established by ---------------------------- Section 2.17. 4 "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 --------------- U.S.C. (S)101, et seq.). ------- "Base Rate" means, for any day, the higher of: (a) 0.50% per annum --------- above the Federal Funds Rate in effect for that day; and (b) the rate of interest in effect for such day as publicly announced from time to time by BofA in San Francisco, California, as its "reference rate." (The "reference rate" is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the reference rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan that bears interest based on the Base -------------- Rate. "BofA" means Bank of America National Trust and Savings Association, a ---- national banking association. "BofA Canada" means Bank of America Canada. ----------- "Borrower" or "Borrowers" means the Company and/or Medis. -------- --------- "Borrowing" means a borrowing hereunder consisting of Loans of the --------- same Tranche and Type made to the same Borrower on the same day by the Banks under Article II, and, other than in the case of Base Rate Loans, having the same Interest Period. "Borrowing Date" means any date on which a Borrowing occurs under -------------- Section 2.03. "Business Day" means any day other than a Saturday, Sunday or other ------------ day on which commercial banks in New York City, Chicago or San Francisco or, in the case of Tranche B Canadian Loans or in connection with the Bankers' Acceptance Facility, Toronto or Montreal are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings in the Applicable Currency are carried on in the applicable offshore interbank market. "Canadian Administrative Agent" means BofA Canada in its capacity as ----------------------------- the Canadian administrative agent for the Tranche B Canadian Banks, and any successor arising under Section 9.09. "Canadian Administrative Agent's Payment Office" means the address for ---------------------------------------------- payments set forth on Schedule 10.02 in 5 relation to the Canadian Administrative Agent, or such other address as the Canadian Administrative Agent may from time to time specify. "Canadian Dollars" or "Cdn.$" means lawful money of Canada. ---------------- ----- "Canadian Prime Rate" means, for any day, with respect to any Tranche ------------------- B Canadian Loan, the higher of (a) the rate announced by the Canadian Administrative Agent from time to time as its prime lending rate, as in effect from time to time, and (b) a rate equal to the effective rate that a Bankers' Acceptance would bear if made on such day in accordance with Section 2.17. As to any loan, the Canadian Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Canadian Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Canadian Prime Rate. Any change in the reference rate announced by the Canadian Administrative Agent shall take effect at the opening of business on the day specified in the announcement of such change. "Canadian Prime Rate Loans" means Tranche B Canadian Loans bearing ------------------------- interest at rates determined by reference to the Canadian Prime Rate. "Canadian Spot Rate" means the rate quoted by BofA as the spot rate ------------------ for the purchase by BofA of such currency with another currency through its FX Trading Office at approximately 8:00 a.m. (San Francisco time) on the date two Business Days prior to the date as of which the foreign exchange computation is made. "Capital Adequacy Regulation" means any guideline, request or --------------------------- directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "CD Rate" means, for any Interest Period with respect to CD Rate Loans ------- comprising part of the same Borrowing, the rate of interest (rounded upward to the next 1/100th of 1%) determined as follows: CD Rate = Certificate of Deposit Rate + Assessment --------------------------- 1.00 - Reserve Percentage Rate Where: "Assessment Rate" means, for any day of such Interest Period, the --------------- rate determined by the Agent as equal to the annual assessment rate in effect on such 6 day payable to the FDIC by a member of the Bank Insurance Fund that is classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification within the meaning of 12 C.F.R. (S)327.3) for insuring time deposits at offices of such member in the United States; or, in the event that the FDIC shall at any time hereafter cease to assess time deposits based upon such classifications or successor classifications, equal to the maximum annual assessment rate in effect on such day that is payable to the FDIC by commercial banks (whether or not applicable to any particular Bank) for insuring time deposits at offices of such banks in the United States. "Certificate of Deposit Rate" means the rate of interest per --------------------------- annum determined by the Agent to be the arithmetic mean (rounded upward to the next 1/100th of 1%) of the rates notified to the Agent by each Reference Bank as the rates of interest bid by two or more certificate of deposit dealers of recognized standing selected by such Reference Bank for the purchase at face value of dollar certificates of deposit issued by major United States banks, for a maturity comparable to such Interest Period and in the approximate amount of the CD Rate Loan to be made by such Reference Bank, at the time selected by such Reference Bank on the first day of such Interest Period. "Reserve Percentage" means, for any day of such Interest Period, ------------------ the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%), as determined by the Agent, in effect on such day (including any ordinary, marginal, emergency, supplemental, special and other reserve percentages), prescribed by the FRB for determining the maximum reserves to be maintained by member banks of the Federal Reserve System with deposits exceeding $1,000,000,000 for new non-personal time deposits for a period comparable to such Interest Period and in an amount of $100,000 or more. The CD Rate shall be adjusted, as to all CD Rate Loans then outstanding, automatically as of the effective date of any change in the Assessment Rate or the Reserve Percentage. "CD Rate Loan" means a Loan that bears interest based on the CD Rate. ------------ "Certificate of Deposit Rate" has the meaning specified in the --------------------------- definition of "CD Rate." ------- 7 "Change Day" has the meaning specified in the definition of ---------- "Applicable Rating Level." "Closing Date" means the date on which all conditions precedent set ------------ forth in Section 4.01 are satisfied or waived by all Banks (or, in the case of subsection 4.01(f), waived by the Person entitled to receive such payment). "Co-Agent" means Chemical Bank in its capacity as co-agent for the -------- Banks hereunder. "Code" means the Internal Revenue Code of 1986, and regulations ---- promulgated thereunder. "Collateral" means all property and interests in property and proceeds ---------- thereof now owned or hereafter acquired by the Company and its Subsidiaries that becomes subject to a Lien in favor of the Banks, or the Agent on behalf of the Banks, whether under this Agreement, the Pledge Agreement or any other Collateral Document; which Collateral shall not include any deposit in a Tranche B Canadian Bank. "Collateral Documents" means, collectively, (a) the Pledge Agreement, -------------------- the Custodial Agreement (other than provisions that do not relate to Collateral or any other Collateral Document), the Custodial Agreement Acknowledgement, and all other security agreements and other similar agreements between the Company and the Banks or the Agent for its benefit and the benefit of the Banks now or hereafter delivered to the Banks or the Agent pursuant to or in connection with the transactions contemplated hereby, and all financing statements (or comparable documents now or hereafter filed in accordance with the Uniform Commercial Code or comparable law) against the Company as debtor in favor of the Banks or the Agent for its benefit and the benefit of the Banks as secured party, and (b) any amendments, supplements, modifications, renewals, replacements, consolidations, substitutions and extensions of any of the foregoing. "Collateral Period" means (a) the period from the Closing Date to June ----------------- 30, 1995 and (b) any calendar quarter commencing thereafter. "Collateralize" means to pledge and deposit with or deliver to the ------------- Agent, for the benefit of the Agents and the Banks, Collateral pursuant to the Pledge Agreement. "Commitment" means, as of any date of determination as to each Bank, ---------- the aggregate amount of the Tranche A Commitment of such Bank and, if applicable, the Tranche B Commitment of such Bank in effect on such date, and 8 "Commitments" means the aggregate amount of the Commitments for each ----------- Bank in effect on such date. "Company" has the meaning specified in the introductory clause hereto. ------- "Compliance Certificate" means a certificate substantially in the form ---------------------- of Exhibit C. "Computation Date" has the meaning specified in subsection 2.15(a). ---------------- "Contingent Obligation" means, as to any Person, any direct or --------------------- indirect liability of that Person, whether or not contingent, with or without recourse, (a) with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety Instrument ------------------- issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments; (c) to purchase any materials, supplies or other property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other property is ever made or tendered, or such services are ever performed or tendered, or (d) in respect of any Swap Contract. The amount of any Contingent Obligation shall, in the case of Guaranty Obligations, be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof, and in the case of other Contingent Obligations, shall be equal to the maximum reasonably anticipated liability in respect thereof. 9 "Contractual Obligation" means, as to any Person, any provision of any ---------------------- security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "Conversion/Continuation Date" means any date on which, under Section ---------------------------- 2.04, (i) the Company or Medis, as the case may be, converts Loans of one Type to another Type, or (ii) the Company or Medis, as the case may be, continues as Loans of the same Type, but with a new Interest Period, Loans having Interest Periods expiring on such date. "Custodial Agreement" means the Custody Agreement dated as of November ------------------- 14, 1994 between the Company and BofA in its capacity as Custodian and any other custodial agreement with an Approved Custodian, substantially in the form of such Custody Agreement or in such other form as may be approved by Majority Banks, which may be in effect from time to time. "Custodial Agreement Acknowledgement" means a Custodial Agreement ----------------------------------- Acknowledgement substantially in the form of Exhibit J and any other custodial agreement acknowledgement among the Company, the Agent and the Custodian substantially in the form of Exhibit J or in such other form as may be approved by Majority Banks, which may be in effect from time to time. "Custodian" means BofA, in its capacity as the initial Custodian under --------- the Custodial Agreement and Custodial Agreement Acknowledgement and any other Approved Custodian under the Custodial Agreement and Custodial Agreement Acknowledgement (including any successor Custodial Agreement and Custodial Agreement Acknowledgement) appointed in accordance with the terms hereof and the Pledge Agreement. The parties hereto acknowledge that there may be more than one Custodian from time to time. "Default" means any event or circumstance which, with the giving of ------- notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "Dollar Equivalent" means, at any time, (a) as to any amount ----------------- denominated in Dollars, the amount thereof at such time, and (b) as to any amount denominated in Canadian Dollars, the equivalent amount in Dollars as determined by the Agent at such time on the basis of the Canadian Spot Rate for the purchase of Dollars with Canadian Dollars on the most recent Computation Date provided for in subsection 2.15(a). 10 "Dollars", "dollars" and "$" each mean lawful money of the United ------- ------- - States. "Draft" means, at any time, a blank bill of exchange, within the ----- meaning of the Bills of Exchange Act (Canada), in substantially the form of Exhibit H-1 annexed hereto, issued by Medis to be accepted by a Tranche B Canadian Bank (which upon such acceptance will be a Bankers' Acceptance) and bearing such distinguishing letters and numbers as such Tranche B Canadian Bank may determine, but which at such time, except as otherwise provided herein, has not been completed or accepted by a Tranche B Canadian Bank. "Drawing" means an acceptance of completed Drafts by a Tranche B Bank ------- or by any other Person pursuant to Section 2.17. "Drawing Date" means any Business Day fixed pursuant to subsection ------------ 2.17(b) for a Drawing. "Drawing Fee" means, with respect to the Drafts issued by Medis ----------- hereunder and accepted as provided herein on any Drawing Date, an amount equal to the Drawing Fee Rate multiplied by the aggregate Face Amount of such Drafts, calculated, in each case, on the basis of the term to maturity of such Draft and a year of 365 days (rounded to the nearest whole cent, with one-half of one cent being rounded up). "Drawing Fee Rate" means, in calculating the Drawing Fee for any ---------------- Draft, (i) with respect to any portion of the Face Amount of such Draft that is less than or equal to the Market Value of the Qualifying Collateral allocated to such Face Amount in accordance with the last sentence of Section 2.08(b), if any, a rate per annum equal to 0.1250% and (ii) with respect to any portion of the Face Amount of such Draft that exceeds the Market Value of the Qualifying Collateral allocated to such Face Amount in accordance with the last sentence of Section 2.08(b), if any, a rate per annum equal to the Applicable Margin. "Drawing Notice" has the meaning assigned to that term in subsection -------------- 2.17(b)(1). "Drawing Purchase Price" means, in respect of Drafts to be accepted by ---------------------- a Tranche B Canadian Bank or any other Person, the difference between (i) the result (rounded to the nearest whole cent, with one-half of one cent being rounded up) obtained by dividing the aggregate Face Amount of such Drafts by the sum of one plus the product of (x) the Effective Discount Rate multiplied by (y) a fraction the numerator of which is the term of maturity of such Drafts and the denominator of which is 365; and (ii) the applicable Drawing Fee. 11 "Duff & Phelps" means Duff & Phelps Credit Rating Co. and any ------------- successor thereto that is a nationally recognized rating agency. "Effective Discount Rate" means, in respect of any Bankers' ----------------------- Acceptances to be purchased by a Tranche B Canadian Bank or any other Person pursuant hereto, the discount rate at which the Canadian Administrative Agent would purchase, at 10:00 a.m. (Toronto time) on the relevant Drawing Date, its own Bankers' Acceptances having an aggregate Face Amount equal to and with a term to maturity the same as the Bankers' Acceptances to be acquired by such Tranche B Bank or other Person on such Drawing Date. "Eligible Assignee" means (i) a commercial bank organized under the ----------------- laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the OECD, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States or Canada; and (iii) a Person that is primarily engaged in the business of commercial banking and that is (A) a Subsidiary of a Bank, (B) a Subsidiary of a Person of which a Bank is a Subsidiary, or (C) a Person of which a Bank is a Subsidiary; provided that an Eligible Assignee in respect of the Tranche B Canadian Loans shall include only a Schedule I Bank, a Schedule II Bank or another Person who is a resident of Canada or otherwise not subject to withholding tax for purposes of the Income Tax Act (Canada) and the regulations promulgated thereunder. "Employee Benefit Plan" means any "employee benefit plan" as defined --------------------- in Section 3(3) of ERISA which is, or was at any time, maintained or contributed to by the Company or any of its ERISA Affiliates. "Environmental Laws" means all federal, state, provincial or local ------------------ laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters. "ERISA" means the Employee Retirement Income Security Act of 1974, and ----- regulations promulgated thereunder. "ERISA Affiliate", as applied to any Person, means (i) any corporation --------------- which is, or was at any time, a member of a controlled group of corporations within the meaning of 12 Section 414(b) of the Code of which that Person is, or was at any time, a member; (ii) any trade or business (whether or not incorporated) which is, or was at any time, a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Code of which that Person is, or was at any time, a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is, or was at any time, a member; provided that an ERISA Affiliate shall not include a Person that was a member, as referenced in clause (i), (ii) or (iii) above if the Company or any of its Subsidiaries would not have any liability in connection with an ERISA Event with respect to such Person. "ERISA Event" means (i) a "reportable event" within the meaning of ----------- Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Code) or the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by the Company or any of its ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on the Company or any of its ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal by the Company or any of its ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by the Company or any of its ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to 13 the imposition on the Company or any of its ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Code or under Section 409 or 502(c), (i) or (l) or 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against the Company or any of its ERISA Affiliates in connection with any such Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Code) to qualify under Section 401(a) of the Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Code or pursuant to ERISA with respect to any Pension Plan. "Eurodollar Reserve Percentage" has the meaning specified in the ----------------------------- definition of "Offshore Rate." "Event of Default" means any of the events or circumstances specified ---------------- in Section 8.01. "Exchange Act" means the Securities and Exchange Act of 1934, and ------------ regulations promulgated thereunder. "Exposure" means (a) (i) prior to the termination of the Tranche A -------- Commitment, such Bank's Tranche A Commitment and (ii) after the termination of the Tranche A Commitments, the aggregate outstanding principal amount of the Tranche A Loans made by such Bank plus (b) (i) prior to the termination of the Tranche B Commitment, such Bank's Tranche B Commitment and (ii) after the termination of the Tranche B Commitments, the Total Utilization of Tranche B Commitments for such Bank. "Face Amount" means, in respect of a Draft or a Bankers' Acceptance, ----------- as the case may be, the amount payable to the holder thereof on its maturity. "FDIC" means the Federal Deposit Insurance Corporation, and any ---- Governmental Authority succeeding to any of its principal functions. "Federal Funds Rate" means, for any day, the rate set forth in the ------------------ weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be 14 the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. "Fee Letter" has the meaning specified in subsection 2.09(a). ---------- "FRB" means the Board of Governors of the Federal Reserve System, and --- any Governmental Authority succeeding to any of its principal functions. "FX Trading Office" means the Foreign Exchange Trading Center #5193, ----------------- San Francisco, California, of BofA, or such other of BofA's offices as BofA may designate from time to time or, if BofA is no longer the Agent, the offices of Agent as Agent may designate from time to time. "GAAP" means generally accepted accounting principles set forth from ---- time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination; provided that with respect to Subsidiaries not organized in the United States, "GAAP" means generally accepted accounting principles in accordance with agencies with similar function of comparable stature and authority within the accounting profession in the relevant jurisdiction. "Governmental Authority" means any nation or government, any state or ---------------------- other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, 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. "Guaranty" means the Guaranty substantially in the form of Exhibit L. -------- "Guaranty Obligation" has the meaning specified in the definition of ------------------- "Contingent Obligation". "Indebtedness" of any Person means, without duplication, (a) all ------------ indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than 15 trade payables entered into in the ordinary course of business on ordinary terms); (c) all non-contingent reimbursement or payment obligations with respect to Surety Instruments; provided that this clause (c) shall not include up to $10,000,000 of non-contingent reimbursement or payment obligations with respect to Surety Instruments that do not support indebtedness for borrowed money to the extent that no default has occurred with respect to the payment thereof; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all obligations with respect to capital leases; (g) all net obligations with respect to Swap Contracts; and (h) all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. "Indemnified Liabilities" has the meaning specified in Section 10.05. ----------------------- "Indemnified Person" has the meaning specified in Section 10.05. ------------------ "Independent Auditor" has the meaning specified in subsection 6.01(a). ------------------- "Independent Auditor's Letter" means a letter substantially in the ---------------------------- form of Exhibit M. "Ineligible Securities" has the meaning specified in subsection --------------------- 7.03(b). "Insolvency Proceeding" means (a) any case, action or proceeding --------------------- before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. 16 "Interest Payment Date" means, as to any Loan other than a Base Rate --------------------- Loan or Canadian Prime Rate Loan, the last day of each Interest Period applicable to such Loan and, as to any Base Rate Loan or Canadian Prime Rate Loan, the last Business Day of each calendar quarter and each date such Loan is converted into another Type of Loan; provided, however, that -------- ------- if any Interest Period for a CD Rate Loan or Offshore Rate Loan exceeds 90 days or three months, respectively, the date that falls 90 days or three months (as the case may be) after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date. "Interest Period" means, (a) as to any Offshore Rate Loan, the period --------------- commencing on the Borrowing Date of such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Loan, and ending on the date one, two, three or six months thereafter as selected by the applicable Borrower in its Notice of Borrowing or Notice of Conversion/Continuation; and (b) as to any CD Rate Loan, the period commencing on the Borrowing Date of such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as a CD Rate Loan, and ending 30, 60, 90 or 180 days thereafter, as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation; provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (ii) any Interest Period pertaining to an Offshore 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 calendar month at the end of such Interest Period; and (iii) no Interest Period for any Loan shall extend beyond the Revolving Termination Date. "IRS" means the Internal Revenue Service, and any Governmental --- Authority succeeding to any of its principal functions under the Code. 17 "Lending Office" means, as to any Bank, the office or offices of such -------------- Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, on Schedule 10.02, or such -------------- other office or offices as such Bank may from time to time notify the Company and the Agents. "LIBOR" has the meaning specified in the definition of the "Offshore ----- Rate." "Lien" means any security interest, mortgage, deed of trust, pledge, ---- hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the Uniform Commercial Code or any comparable law) and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under an operating lease. "Loan" means an extension of credit by a Bank to a Borrower under ---- Article II, and may be a Base Rate Loan, Canadian Prime Rate Loan, CD Rate Loan or an Offshore Rate Loan (each, a "Type" of Loan) or a Tranche A Loan ---- or a Tranche B Loan. "Loan Documents" means this Agreement, any Notes, the Collateral -------------- Documents, the Guaranty, the Fee Letter, any Drafts, any Bankers' Acceptances and all other documents delivered to the Agent or any Bank in connection herewith. "Lowest Quarterly Market Value" means, for any calendar quarter, the ----------------------------- lowest Market Value reflected on the Valuation Summary delivered pursuant to the Pledge Agreement in respect of such quarter. "Majority Banks" means at any time Banks then holding more than 50% of -------------- the then aggregate unpaid principal amount of the Loans, or, if no such principal amount is then outstanding, Banks then having more than 50% of the Commitments. "Margin Stock" means "margin stock" as such term is defined in ------------ Regulation G, T, U or X of the FRB. "Market Value" has the meaning specified in the Pledge Agreement. ------------ 18 "Material Adverse Effect" means (a) a material adverse change in, or a ----------------------- material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole or any Material Subsidiary; (b) a material impairment of the ability of any Borrower to perform under any Loan Document and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Borrower of any Loan Document. "Material Subsidiary" means, at any time, (i) Medis and (ii) any other ------------------- Subsidiary having at such time 10% or more of Company's consolidated total (gross) revenues for the preceding four fiscal quarter period, as of the last day of the preceding fiscal quarter based upon the Company's most recent annual or quarterly financial statements delivered to the Agent under Section 6.01. "Medis" has the meaning specified in the introductory clause hereto. ----- "Moody's" means Moody's Investors Service, Inc. and any successor ------- thereto that is a nationally-recognized rating agency. "Multiemployer Plan" means a "multiemployer plan", as defined in ------------------ Section 3(37) of ERISA, to which the Company or any of its ERISA Affiliates is contributing, or ever has contributed, or to which the Company or any of its ERISA Affiliates has, or ever has had, an obligation to contribute. "Net Worth" means the sum of the capital stock and additional paid in --------- capital plus retained earnings (or minus accumulated deficits) of the Company and its Subsidiaries determined on a consolidated basis in conformity with GAAP on such date. "Note" means a promissory note executed by a Borrower in favor of a ---- Bank pursuant to subsection 2.02(b), substantially in the form of Exhibit F-1 in the case of the Company with respect to Tranche A Loans, substantially in the form of Exhibit F-2 in the case of the Company with respect to Tranche B Domestic Loans or substantially in the form of Exhibit F-3 in the case of Medis with respect to Tranche B Canadian Loans. "Notice of Borrowing" means a notice substantially in the form of ------------------- Exhibit A. "Notice of Conversion/Continuation" means a notice substantially in --------------------------------- the form of Exhibit B. 19 "Notice of Election of Projected Market Value" means a notice -------------------------------------------- substantially in the form of Exhibit K. "Obligations" means all advances, debts, liabilities, obligations, ----------- covenants and duties arising under any Loan Document owing by either of the Borrowers to any Bank, any Agent, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising. "OECD" means the Organization for Economic Cooperation and ---- Development. "Offshore Rate" means, for any Interest Period, with respect to ------------- Offshore Rate Loans comprising part of the same Borrowing, the rate of interest per annum (rounded upward to the next 1/100th of 1%) determined by the Agent as follows: Offshore Rate = LIBOR ------------------------------------ 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Reserve Percentage" means for any day for any ----------------------------- Interest Period (A) in the case of Tranche A Loans or Tranche B Domestic Loans, the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Tranche A Bank or Tranche B Domestic Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities") and (B) in the case of Tranche B Canadian Loans, the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Tranche B Canadian Bank) under any applicable regulations of the central bank or other relevant Governmental Authority in Canada; and "LIBOR" means the rate of interest per annum determined by the ----- Agent to be the arithmetic mean (rounded upward to the next 1/16th of 1%) of the rates of interest per annum notified to the Agent by each Reference Bank as the rate of interest at which deposits in the Applicable Currency in the approximate amount of the amount of the Loan to be made or continued as, or converted into, an Offshore Rate Loan by such Reference Bank and having a maturity 20 comparable to such Interest Period would be offered to major banks in the London interbank market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period. The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage. "Offshore Rate Loan" means a Loan that bears interest based on the ------------------ Offshore Rate and may be a Tranche A Loan, a Tranche B Domestic Loan or a Tranche B Canadian Loan. "Organization Documents" means, for any corporation, the certificate ---------------------- or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation. "Other Taxes" means any present or future stamp or documentary taxes ----------- or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents. "Overnight Canadian Rate" means, for any day, the rate of interest per ----------------------- annum at which overnight deposits in Canadian Dollars, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by Agent's London Branch to major banks in the London or other applicable offshore interbank market. "Participant" has the meaning specified in subsection 10.08(d). ----------- "PBGC" means the Pension Benefit Guaranty Corporation, or any ---- Governmental Authority succeeding to any of its principal functions under ERISA. "Pension Plan" means any Employee Benefit Plan, other than a ------------ Multiemployer Plan, which is subject to Section 412 of the Code or Section 302 of ERISA. "Permitted Liens" has the meaning specified in Section 7.01. --------------- "Person" means an individual, partnership, corporation, business ------ trust, limited liability company, 21 joint stock company, trust, unincorporated association, joint venture or other organization or Governmental Authority. "Pledge Agreement" means a Pledge and Security Agreement substantially ---------------- in the form of Exhibit I. "Projected Market Value" means the Market Value of the Collateral that ---------------------- the Company intends to pledge under the Pledge Agreement to secure the Commitments and the Loans (if any) for the succeeding calendar quarter as set forth in a Notice of Election of Projected Market Value. "Pro Rata Share" means, as to any Bank at any time, the percentage -------------- equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Bank's Commitment divided by the combined Commitments of all Banks. "Qualifying Collateral" means Collateral as to which a first priority --------------------- Lien, subject to no other Liens (except the lien in favor of the Custodian that secures the obligations of the Company to the Custodian under the Custodial Agreement that is equal and ratable with the Lien of the Agent and the Lien in favor of the Custodian that secures the obligations of the Company to the Custodian other than under the Custodial Agreement that is junior to the Lien of the Agent), exists in favor of the Agent for the benefit of the Agents and the Banks pursuant to the Collateral Documents, and of a type as to which the Company has furnished an opinion of counsel (which counsel shall be satisfactory to the Agent) addressed to the Agent and the Banks, in the form of Exhibit D-3 or otherwise satisfactory to the Agent and Majority Banks and opining that a perfected Lien exists or will exist in favor of the Agent for the benefit of the Banks, and consisting of (a) cash held in a segregated deposit account with the Agent or with the Custodian contemplated under the Custodial Agreement and the Custodial Agreement Acknowledgement, (b) securities issued by the United States Government or (c) securities directly and unconditionally guaranteed by the United States Government; provided, however, that if the Company proposes -------- ------- to pledge Collateral of the type described in clause (b) or (c) above, such Collateral shall not constitute Qualifying Collateral unless and until the Company has furnished to the Agent, with sufficient copies for each Bank, a certificate of the Company signed by a Responsible Officer to the effect that such Collateral constitutes Collateral of such type and such other evidence, certificates or opinions as the Agent may, at the request of any Bank, reasonably request; and provided, further, that if any Bank shall -------- ------- have notified the Agent that under any Capital Adequacy Regulation then in effect with respect to such Bank, assets secured by such 22 Collateral do not have a risk category with a risk weight of 20%, such Collateral shall not be Qualifying Collateral as to that Bank, and the provisions of subsection 3.03(c) shall apply to such Bank. "Rating Agency" means S&P, Moody's and, to the extent provided in the ------------- definition of Applicable Rating Level, Duff & Phelps. "Reference Banks" means BofA and Chemical Bank. --------------- "Relevant Calendar Quarter" has the meaning specified in subsection ------------------------- 2.09(b). "Requirement of Law" means, as to any Person, any law (statutory or ------------------ common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject, including but not limited to any Environmental Law. "Reserve Percentage" has the meaning specified in the definition of ------------------ "CD Rate." "Responsible Officer" means the chief executive officer, the president ------------------- or any vice president of the Company or Medis, as applicable; and, with respect to compliance with financial covenants, the chief financial officer or the treasurer of the Company. "Revolving Termination Date" means the earlier to occur of: -------------------------- (a) March 31, 2000; and (b) the date on which the Commitments terminate in accordance with the provisions of this Agreement. "S&P" means Standard & Poor's Ratings Group and any successor thereto --- that is a nationally-recognized rating agency. "Schedule I Bank" means any Tranche B Canadian Bank that is a bank --------------- referred to in Schedule I to the Bank Act (Canada), S.C. 1991, c.46, as amended. "Schedule II Bank" means any Tranche B Canadian Bank that is not a ---------------- Schedule I Bank. "SEC" means the Securities and Exchange Commission, or any --- Governmental Authority succeeding to any of its principal functions. 23 "Subsidiary" of a Person means any corporation, association, ---------- partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of the Company. "Surety Instruments" means all letters of credit (including standby ------------------ and commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments. "Swap Contract" means any agreement (including any master agreement ------------- and any agreement, whether or not in writing, relating to any single transaction) that is an interest rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, forward foreign exchange agreement, rate cap, collar or floor agreement, currency swap agreement, cross-currency rate swap agreement, swaption, currency option or any other, similar agreement (including any option to enter into any of the foregoing). "Taxes" means any and all present or future taxes, levies, imposts, ----- deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank, the Agent, the Canadian Administrative Agent and any other Person having at any time an interest in any Tranche B Canadian Loan or any Bankers' Acceptance, such taxes (including, without limitation, income taxes, capital taxes, minimum taxes, branch taxes, capital gains taxes or franchise taxes) (i) as are imposed on or measured by each Bank's (or other such Person's) net income or taxable capital by the jurisdiction (or any political subdivision thereof) under the laws of which such Bank (or such other Person) or the Agent, as the case may be, is organized or in respect of which it is a resident or within which it maintains the actual lending office or (ii) to the extent attributable to a permanent establishment or fixed base located in any jurisdiction (or any political subdivision thereof) identified in (i) hereof. "Total Capitalization", on any date, means the sum of (a) Total Debt -------------------- and (b) the Net Worth on such date. "Total Debt" means, on any date, all Indebtedness of the Company and ---------- its Subsidiaries determined on a consolidated basis on such date. 24 "Total Utilization of Tranche B Commitments" means, (i) as to the ------------------------------------------ Tranche B Banks at any date of determination, the sum of (A) the aggregate principal amount of all outstanding Tranche B Loans plus (B) the Acceptance ---- Usage, in each case valued in Dollar Equivalents and (ii) as to any Tranche B Bank at any date of determination, the sum of (x) the aggregate principal amount of all Tranche B Loans made by such Tranche B Bank or its Affiliate Bank plus (y) the Acceptance Usage of such Tranche B Bank or its Affiliate Bank, in each case valued in Dollar Equivalents. "Tranche A Bank" means a Bank having a Tranche A Commitment as set -------------- forth on Schedule 2.01 hereof and its successors and assigns. "Tranche A Commitment", as to each Tranche A Bank, has the meaning -------------------- specified in Section 2.01(a). "Tranche A Loan" means any Loan made to the Company pursuant to -------------- Section 2.01(a) which may be an Offshore Rate Loan, a Base Rate Loan or a CD Rate Loan. "Tranche A Pro Rata Share" means, as to any Tranche A Bank at any ------------------------ time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Tranche A Bank's Tranche A Commitment divided by the combined Tranche A Commitments of all Tranche A Banks. "Tranche B Bank" means a Bank having a Tranche B Commitment as set -------------- forth on Schedule 2.01 hereof and its successors and assigns. With respect to Tranche B Canadian Loans and the Bankers Acceptance Facility, Tranche B Banks shall be the Tranche B Canadian Banks and with respect to Tranche B Domestic Loans Tranche B Banks shall be the Tranche B Domestic Banks. "Tranche B Canadian Bank" means each Tranche B Bank acting in the ----------------------- capacity of a Canadian bank listed on Schedule 2.01 as a Tranche B Canadian Bank and its successors and assigns. "Tranche B Canadian Loan" means any Tranche B Loan made to Medis ----------------------- pursuant to Section 2.01(b) denominated in Canadian Dollars which shall be an Offshore Rate Loan or a Canadian Prime Rate Loan except to the extent required under Section 2.15. "Tranche B Commitment", as to each Bank, has the meaning specified in -------------------- Section 2.01(b). The Tranche B Commitment for any Tranche B Bank that has an Affiliate Bank is a single value for such Tranche B Bank and its Affiliate Bank taken together. 25 "Tranche B Domestic Bank" means each Tranche B Bank acting in the ----------------------- capacity of a domestic bank listed on Schedule 2.01 as a Tranche B Domestic Bank and its successors and assigns. "Tranche B Domestic Loan" means any Tranche B Loan made to the Company ----------------------- pursuant to Section 2.01(b) denominated in Dollars which may be an Offshore Rate Loan, a Base Rate Loan or a CD Rate Loan. "Tranche B Loan" means a Tranche B Domestic Loan or a Tranche B -------------- Canadian Loan. "Tranche B Pro Rata Share" means, as to any Tranche B Bank at any ------------------------ time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Tranche B Bank's Tranche B Commitment divided by the combined Tranche B Commitments of all Tranche B Banks. The Tranche B Pro Rata Share for any Tranche B Bank shall at all times be equal to the Tranche B Pro Rata Share of its Affiliate Bank. "Type" has the meaning specified in the definition of "Loan." ---- "Unfunded Pension Liability" means the excess of a Plan's benefit -------------------------- liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "United States" and "U.S." each means the United States of America. ------------- ---- "Valuation Summary" has the meaning specified in the Pledge Agreement. ----------------- "Wholly-Owned Subsidiary" means any corporation in which (other than ----------------------- directors' qualifying shares required by law) 100% of the capital stock of each class having ordinary voting power, and 100% of the capital stock of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by the Company, or by one or more of the other Wholly-Owned Subsidiaries, or both. 1.02 Other Interpretive Provisions . (a) The meanings of defined terms ------------------------------ are equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, 26 Schedule and Exhibit references are to this Agreement unless otherwise specified. (c)(i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." (d) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (f) This Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. (g) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agents, the Borrowers and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Banks or the Agents merely because of the Agents' or Banks' involvement in their preparation. 1.03 Accounting Principles. (a) Unless the context otherwise clearly ---------------------- requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. (b) If any changes in accounting principles from those used in the preparation of the financial statements referred to in Section 5.08 hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions 27 by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) result in a change in the method of calculation of financial covenants, standards or terms found in Articles I, VI and VII hereof, the parties hereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating the Company's financial condition shall be the same after such changes as if such changes had not been made. (c) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. 1.04 Canadian Currency Equivalents. For all purposes of the Loan ----------------------------- Documents (but not for purposes of the preparation of any financial statements delivered pursuant hereto), the equivalent in Canadian Dollars of an amount in Dollars, and the equivalent in Dollars of an amount in Canadian Dollars shall be determined at the Canadian Spot Rate. ARTICLE II THE CREDITS ----------- 2.01 Amounts and Terms of Commitments. (a) Each Tranche A Bank severally -------------------------------- agrees, on and subject to the terms and conditions set forth herein, to make Base Rate Loans, CD Rate Loans or Offshore Rate Loans denominated in Dollars to the Company from time to time as requested by the Company in accordance with Sections 2.03 and 10.02 on any Business Day during the period from the Closing Date to the Revolving Termination Date, in an aggregate amount not to exceed at any time outstanding the amount set forth opposite its name in the column under the heading "Tranche A Commitments" on Schedule 2.01 (such amount, as the same ------------- may be reduced under Section 2.05 or as a result of one or more assignments under Section 10.08, the Bank's "Tranche A Commitment"); provided, however, -------------------- -------- ------- that, after giving effect to any Borrowing, (i) the aggregate principal amount of all outstanding Tranche A Loans to the Company shall not at any time exceed the combined Tranche A Commitments and (ii) the sum of (A) the aggregate principal amount of all outstanding Tranche A Loans to the Company and (B) the Total Utilization of Tranche B Commitments shall not at any time exceed the Commitments. Within the limits of each Bank's Tranche A Commitment, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.01(a), prepay under Section 2.06 and reborrow under this Section 2.01(a); provided further that no Tranche A Loan to the Company shall be -------- ------- denominated in or payable in a currency other than Dollars. 28 (b) Each Tranche B Bank severally agrees, on and subject to the terms and conditions set forth herein, to make Tranche B Loans to the Company or Medis from time to time as requested by the Company or Medis and the Company in accordance with Sections 2.03 and 10.02 on any Business Day during the period from the Closing Date to the Revolving Termination Date, in an aggregate amount not to exceed at any time outstanding a Dollar Equivalent amount equal to the amount set forth opposite its name in the column under the heading "Tranche B Commitments" on Schedule 2.01 (such amount as the same may be reduced under ------------- Section 2.05 or as a result of one or more assignments under Section 10.08, the Bank's Tranche B Commitment); provided, however, that, (i) after giving effect - --------------------------- -------- ------- to any Borrowing, (A) the Total Utilization of Tranche B Commitments shall not at any time exceed the combined Tranche B Commitments and (B) in the case of Tranche B Canadian Loans, Medis shall be a wholly-owned Subsidiary of the Company and (C) the sum of (x) the aggregate principal amount of all outstanding Tranche A Loans to the Company and (y) the Total Utilization of Tranche B Commitments shall not at any time exceed the Commitments; (ii) the Total Utilization of Tranche B Commitments of any Tranche B Banks shall not exceed its Tranche B Commitment; (iii) all Tranche B Loans to Medis shall be made by the Tranche B Canadian Banks and shall be Offshore Rate Loans or Canadian Prime Rate Loans denominated and payable in Canadian Dollars and no other currency and shall not be CD Rate Loans or Base Rate Loans (except as provided in Section 2.15); and (iv) any Tranche B Loan to the Company shall be made by the Tranche B Domestic Banks and shall be denominated and payable in Dollars and no other currency. Within the limits of each Bank's Tranche B Commitment, and subject to the other terms and conditions hereof, the Company and/or Medis may borrow under this Section 2.01(b), prepay under Section 2.06 and reborrow under this Section 2.01(b). 2.02 Loan Accounts. (a) The Loans made by each Bank shall be evidenced ------------- by one or more loan accounts or records maintained by such Bank in the ordinary course of business. The loan accounts or records maintained by the Agent, the Canadian Administrative Agent and each Bank shall be conclusive absent manifest error of the amount of the Loans made by the Banks to each Borrower and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of each Borrower hereunder to pay any amount owing with respect to the Loans made to such Borrower. (b) Upon the request of any Bank made through the Agent, the Loans made by such Bank to either or both Borrowers may be evidenced by one or more Notes, instead of loan accounts. Each such Bank shall endorse on the schedules annexed to its Note(s) the date, amount and maturity of each Loan made by it and the amount and Applicable Currency of each payment of principal made by the applicable Borrower with respect thereto. 29 Each such Bank is irrevocably authorized by the Borrowers to endorse its Note(s) and each Bank's record shall be conclusive absent manifest error; provided, -------- however, that the failure of a Bank to make, or an error in making, a notation - ------- thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Borrowers hereunder or under any such Note to such Bank. 2.03 Procedure for Borrowing. (a) Each Borrowing of a Tranche A Loan or ----------------------- Tranche B Domestic Loan shall be made upon the Company's irrevocable written notice delivered to the Agent in the form of a Notice of Borrowing (which notice must be received by the Agent prior to 9:00 a.m. (San Francisco time) (A) in the case of Tranche A Loans (i) three Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans; (ii) two Business Days prior to the requested Borrowing Date, in the case of CD Rate Loans; and (iii) on the requested Borrowing Date, in the case of Base Rate Loans, and (B) in the case of Tranche B Domestic Loans, ten Business Days prior to the requested Borrowing. Each Borrowing of a Tranche B Canadian Loan shall be made upon the Company's and Medis' irrevocable written notice delivered to the Agent and the Canadian Administrative Agent in the form of a Notice of Borrowing (which notice must be received by the Canadian Administrative Agent and the Agent prior to 11:00 a.m. (Toronto time) (i) one Business Day prior to the requested Borrowing Date in the case of Canadian Prime Rate Loans and (ii) three Business Days prior to the requested Borrowing Date in the case of Offshore Rate Loans. Each Notice of Borrowing shall specify: (A) the amount of the Borrowing, which shall be, in the case of a Tranche A Loan or Tranche B Domestic Loan, in an aggregate minimum amount of $10,000,000 or any multiple of $1,000,000 in excess thereof, and, in the case of Tranche B Canadian Loans, in an aggregate minimum amount of Cdn.$5,000,000 or any multiple of Cdn.$1,000,000 in excess thereof; (B) the identity of the Borrower and the requested Borrowing Date, which shall be a Business Day; (C) whether the Loan is to be a Tranche A Loan or Tranche B Domestic Loan or Tranche B Canadian Loan and the Type of Loans comprising the Borrowing; (D) the duration of the Interest Period applicable to such Loans included in such notice. If the Notice of Borrowing fails to specify the duration of the Interest Period for any Borrowing comprised of CD Rate Loans or Offshore Rate Loans, such Interest Period shall be 90 days or three months, respectively; and (E) the Applicable Currency. 30 (b) The Agent will promptly notify (i) each Tranche A Bank of its receipt of any Notice of Borrowing requesting a Borrowing of a Tranche A Loan and the amount of such Bank's Tranche A Pro Rata Share of that Borrowing and (ii) each Tranche B Bank of its receipt of any Notice of Borrowing requesting a Borrowing of a Tranche B Domestic Loan and the amount of such Bank's Tranche B Pro Rata Share of that Borrowing, and the Canadian Administrative Agent will promptly notify each Tranche B Canadian Bank of its receipt of any Notice of Borrowing requesting a Borrowing of a Tranche B Canadian Loan and the amount of such Bank's Tranche B Pro Rata Share of that Borrowing. (c) The Dollar Equivalent amount of any Borrowing in Canadian Dollars will be determined by the Agent for such Borrowing on the Computation Date therefor in accordance with subsection 2.15(a). (d) Each Tranche A Bank or Tranche B Domestic Bank, as the case may be, will make the amount of its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of each Borrowing of a Tranche A Loan or Tranche B Domestic Loan, as the case may be, available to the Agent for the account of the Company at the Agent's Payment Office on the Borrowing Date requested by the Company in funds immediately available to the Agent and in Dollars, by 11:00 a.m. (San Francisco time). Each Tranche B Canadian Bank will make the amount of its Tranche B Pro Rata Share of each Borrowing of a Tranche B Canadian Loan available to the Canadian Administrative Agent for the account of Medis in Canadian Dollars at the Canadian Administrative Agent's Payment Office by 11:00 a.m. (Toronto time). The proceeds of all such Loans will then be made available to the applicable Borrower on the Borrowing Date by the Applicable Agent at such office by crediting the account of the applicable Borrower on the books of BofA or BofA Canada, as applicable, with the aggregate of the amounts made available to the Applicable Agent by the Banks and in like funds as received by the Applicable Agent. (e) After giving effect to any Borrowing, there may not be more than five different Interest Periods in effect. 2.04 Conversion and Continuation Elections. (a) The Company may in ------------------------------------- respect of its outstanding Loans, upon irrevocable written notice to the Agent in accordance with subsection 2.04(c): (i) elect, as of any Business Day, in the case of Base Rate Loans, or as of the last day of the applicable Interest Period, in the case of any other Type of Loans, to convert any such Loans (or any part thereof in an amount not less than $10,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into Loans of any other Type; or 31 (ii) elect, as of the last day of the applicable Interest Period, to continue any Loans having Interest Periods expiring on such day (or any part thereof in an amount not less than $10,000,000, or that is in an integral multiple of $1,000,000 in excess thereof); provided, that if at any time the aggregate amount of CD Rate Loans or Offshore - -------- Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than $10,000,000, such CD Rate Loans or Offshore Rate Loans shall automatically convert into Base Rate Loans, and on and after such date the right of the Company to continue such Loans as, and convert such Loans into, Offshore Rate Loans or CD Rate Loans, as the case may be, shall terminate; provided further, that the Company may not elect to convert a Tranche -------- ------- A Loan into a Tranche B Loan or convert a Tranche B Loan into a Tranche A Loan. (b) Medis may in respect of its outstanding Loans, upon irrevocable written notice to the Agent in accordance with subsection 2.04(c): (i) elect, as of any Business Day, in the case of Canadian Prime Rate Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Loans, to convert any such Loans (or any part thereof in an amount not less than Cdn.$5,000,000, or that is in an integral multiple of Cdn.$1,000,000 in excess thereof) into Loans of another Type (it being understood that any such Loan of another Type shall be either a Canadian Prime Rate Loan or an Offshore Rate Loan); or (ii) elect, as of the last day of the applicable Interest Period, to continue any Loans having Interest Periods expiring on such day (or any part thereof in an amount not less than Cdn.$5,000,000, or that is an integral multiple of Cdn.$1,000,000 in excess thereof); provided, that if at any time the aggregate amount of Offshore Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than Cdn.$5,000,000, such Offshore Rate Loans shall automatically convert into Canadian Prime Rate Loans, and on and after such date the right of Medis to continue such Loans, as, and convert such Loans into, Offshore Rate Loans, shall terminate. (c) The Company, in the case of a conversion or continuation of a Tranche A Loan or Tranche B Domestic Loan, shall deliver a Notice of Conversion/Continuation to be received by the Agent not later than 9:00 a.m. (San Francisco time) (i) three Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans denominated in Dollars; (ii) two Business Days in advance of the Conversion/Continuation 32 Date, if the Loans are to be converted into or continued as CD Rate Loans; and (iii) on the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans. The Company and Medis, in the case of a continuation of a Tranche B Canadian Loan, shall deliver a Notice of Conversion/Continuation to be received by the Canadian Administrative Agent and the Agent not later than 11:00 a.m. (Toronto time) (i) at least three Business Days in advance of the proposed Conversion/Continuation Date if the Loans are to be converted into or continued as Offshore Rate Loans and (ii) at least one Business Day in advance of the proposed Conversion/Continuation Date, if the Loans are to be converted into Canadian Prime Rate Loans. Each Notice of Conversion/Continuation shall specify: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Loans to be converted or renewed; (C) the Type of Loans resulting from the proposed conversion or continuation; and (D) other than in the case of conversions into Base Rate Loans or Canadian Prime Rate Loans, the duration of the requested Interest Period. (d) If upon the expiration of any Interest Period applicable to CD Rate Loans or Offshore Rate Loans denominated in Dollars, the Company has failed to select in a timely manner a new Interest Period to be applicable to such CD Rate Loans or Offshore Rate Loans, as the case may be, or if any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such CD Rate Loans or Offshore Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period. If Medis has failed to select in a timely manner a new Interest Period to be applicable to Offshore Rate Loans prior to 11:00 a.m. (Toronto time) at least three Business Days in advance of the expiration date of the current Interest Period applicable thereto as provided in subsection 2.04(c), or if any Default or Event of Default shall then exist, Medis shall be deemed to have elected to convert such Offshore Rate Loans into Canadian Prime Rate Loans effective as of the expiration date of such Interest Period. (e) The Applicable Agent will promptly notify each Tranche A Bank, Tranche B Domestic Bank or Tranche B Canadian Bank, as applicable, of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by a Borrower, the Applicable Agent will promptly notify each Tranche A Bank, Tranche B Domestic Bank or Tranche B Canadian Bank, as applicable, of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Tranche A Loans, Tranche B Domestic Loans or Tranche B Canadian Loans held 33 by each Tranche A Bank, Tranche B Domestic Bank or Tranche B Canadian Bank with respect to which the notice was given. (f) Unless the Majority Banks otherwise agree, during the existence of a Default or Event of Default, the Company may not elect to have a Tranche A Loan or Tranche B Domestic Loan converted into or continued as an Offshore Rate Loan or a CD Rate Loan, and Medis may not elect to have a Tranche B Canadian Loan continued as an Offshore Rate Loan. (g) After giving effect to any conversion or continuation of Loans, there may not be more than five different Interest Periods in effect. (h) The Dollar Equivalent amount for any conversion to or continuation of a Borrowing in Canadian Dollars will be determined by the Agent for such conversion or continuation on the Computation Date therefor in accordance with subsection 2.15(a). 2.05 Voluntary Termination or Reduction of Commitments. The Company may, ------------------------------------------------- upon not less than three Business Days' prior notice to the Agent and the Canadian Administrative Agent, terminate or permanently reduce the Commitments, provided that any such permanent reduction shall be in an aggregate minimum amount of $10,000,000 or any multiple of $1,000,000 in excess thereof; unless, ------ after giving effect thereto and to any prepayments of Loans made on the effective date thereof, the then-outstanding principal amount of the Tranche A Loans would exceed the amount of the combined Tranche A Commitments then in effect or the Total Utilization of Tranche B Commitments would exceed the amount of the combined Tranche B Commitments then in effect. Once reduced in accordance with this Section, the Tranche A Commitments and the Tranche B Commitments may not be increased. The Tranche A Commitments may be terminated only if the Tranche B Commitments are terminated simultaneously and the Tranche B Commitments may be terminated only if the Tranche A Commitments are terminated simultaneously. Any reduction of the Commitments shall be made ratably between the Tranche A Commitments and the Tranche B Commitments. Any reduction of the Tranche A Commitments shall be applied to each Tranche A Bank according to its Tranche A Pro Rata Share. Any reduction of the Tranche B Commitments shall be applied to each Tranche B Bank according to its Tranche B Pro Rata Share. All accrued commitment fees to, but not including, the effective date of any reduction or termination of Commitments shall be paid on the effective date of such reduction or termination. 2.06 Optional Prepayments . Subject to Section 3.04, the Company may, in --------------------- the case of Tranche A Loans or Tranche B Domestic Loans, at any time or from time to time, upon irrevocable notice to the Agent (i) of not less than three Business Days in the case of Offshore Rate Loans (ii) of not less than two Business Days in the case of CD Rate Loans; 34 (iii) by no later than 9:00 a.m. (San Francisco time) on the date specified for prepayment in the case of Base Rate Loans, ratably prepay Tranche A Loans in whole or in part, in minimum amounts of $10,000,000 or any multiple of $1,000,000 in excess thereof. Subject to Section 3.04, Medis, in the case of Tranche B Canadian Loans, may, at any time or from time to time, upon irrevocable notice to the Canadian Administrative Agent and the Agent of not less than three Business Days in the case of Tranche B Canadian Loans that are Offshore Rate Loans and by no later than 11:00 a.m. (Toronto time) on the date specified for prepayment in the case of Tranche B Canadian Loans that are Canadian Prime Rate Loans, ratably prepay Tranche B Canadian Loans in whole or in part, and if in part, in minimum amounts of Cdn.$5,000,000 or any integral multiple of Cdn.$1,000,000 in excess thereof. Any notice of prepayment shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and the Applicable Currency. The Applicable Agent will promptly notify each Tranche A Bank, Tranche B Domestic Bank or Tranche B Canadian Bank of its receipt of any such notice, and of such Bank's Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable of such prepayment. If such notice is given by a Borrower, such Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.04. 2.07 Repayment. Each Borrower shall repay to the Applicable Agent for --------- payment to the Tranche A Banks, Tranche B Domestic Banks or Tranche B Canadian Banks, as applicable, on the Revolving Termination Date the aggregate principal amount of Loans made to such Borrower and outstanding on such date. If on any date Medis ceases to be a wholly-owned Subsidiary of the Company, Medis shall repay to the Tranche B Canadian Banks (i) the aggregate principal amount of Tranche B Canadian Loans made to Medis and outstanding on such date and (ii) the Face Amount of all outstanding Bankers' Acceptances that have not been paid. 2.08 Interest. (a) Each Loan shall bear interest on the outstanding -------- principal amount thereof from the applicable Borrowing Date as follows: (i) if a Base Rate Loan, then at a rate per annum equal to the Base Rate; (ii) if a CD Rate Loan, then (A) with respect to the portion of the CD Rate Loan that is less than or equal to the Market Value of the Qualifying Collateral allocated to such CD Rate Loan in accordance with the last sentence of Section 2.08(b), if any, at a rate per annum equal to the CD Rate plus 0.2500% and (B) with respect to the portion of such CD Rate ---- Loan that exceeds the Market Value of the Qualifying Collateral allocated to such CD Rate Loan in accordance with the last sentence of Section 2.08(b), if 35 any, at a rate per annum equal to the CD Rate plus the Applicable Margin; ---- and (iii) if an Offshore Rate Loan, then (A) with respect to the portion of the Offshore Rate Loan that is less than or equal to the Market Value of the Qualifying Collateral allocated to such Offshore Rate Loan in accordance with the last sentence of Section 2.08(b), if any, at a rate per annum equal to the Offshore Rate plus 0.1250% and (B) with respect to the ---- portion of such Offshore Rate Loan that exceeds the Market Value of the Qualifying Collateral allocated to such Offshore Rate Loan in accordance with the last sentence of Section 2.08(b), if any, at a rate per annum equal to the Offshore Rate plus the Applicable Margin; and ---- (iv) if a Canadian Prime Rate Loan, then at a rate per annum equal to the Canadian Prime Rate. (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Loans under Section 2.06 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand of the Agent at the request or with the consent of the Majority Banks. For purposes of determining the amount of interest payable on any Interest Payment Date, the date of any prepayment or the date of any demand by the Agent and for determining any Drawing Fee, the Market Value of the Qualifying Collateral allocated to such Loan or the Face Amount in the case of a Bankers' Acceptance used in the determination shall be deemed to be greater than the aggregate principal amount of Loans or Face Amount, as the case may be, outstanding on each day during the relevant Interest Period or portion thereof, in the case of an Offshore Rate Loan or a CD Rate Loan, or during the applicable term to maturity in the case of a Bankers' Acceptance. On the fifth Business Day following the end of each Collateral Period, the portion of each Offshore Rate Loan or CD Rate Loan or Bankers' Acceptance that was less than, equal to or exceeded the Market Value of the Qualifying Collateral allocated to such Offshore Rate Loan, CD Rate Loan or Bankers' Acceptance during such Collateral Period shall be redetermined for each day during such Collateral Period on the basis of the Lowest Quarterly Market Value for such Collateral Period; provided, that if the Commitments shall have been terminated, such redetermination shall be made on the date of such termination on the basis of the Lowest Quarterly Market Value during the Collateral Period prior to the date of termination of the Commitments. If such redetermination shall indicate that the Company or Medis, as the case may be, paid less interest (or a lower Drawing Fee) in respect of any day during such Collateral Period than was due, the applicable Borrower, shall, within five Business Days after 36 such redetermination is made, pay to the Applicable Agent, for distribution to the Tranche A Banks, Tranche B Domestic Banks or Tranche B Canadian Banks, as applicable, additional interest on the Loans or additional Drawing Fees in the case of Bankers' Acceptances in an aggregate amount equal to the deficit. For purposes of all determinations made pursuant to this subsection 2.08(b), the Market Value of the Qualifying Collateral for any period shall be allocated to the Loans and Bankers Acceptances in the following order of priority: (i) first, to the aggregate principal amount of outstanding Offshore Rate Loans of the Borrowers and CD Rate Loans of the Company and Face Amount of Bankers' Acceptances outstanding on each day during such period on a pro rata basis, and (ii) second, to the aggregate principal amount of Base Rate Loans and Canadian Prime Rate Loans outstanding on each day during such period on a pro rata basis. (c) Notwithstanding subsection (a) of this Section, if any amount of principal of or interest on any Loan, or any other amount payable hereunder or under any other Loan Document is not paid in full when due (whether at stated maturity, by acceleration, demand or otherwise), the applicable Borrower agrees to pay interest on such unpaid principal or other amount, from the date such amount becomes due until the date such amount is paid in full, and after as well as before entry of judgment thereon to the extent permitted by law, payable on demand, at a fluctuating rate per annum equal to (i) the Canadian Prime Rate plus 1% in the case of Tranche B Canadian Loans redenominated in Canadian - ---- Dollars and Bankers' Acceptances and (ii) the Base Rate plus 1% in the case of ---- Tranche A Loans, Tranche B Domestic Loans and Tranche B Canadian Loans denominated in Dollars pursuant to Section 2.15 and any other Obligation. (d) Anything herein to the contrary notwithstanding, the obligations of each Borrower to any Bank hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Bank would be contrary to the provisions of any law applicable to such Bank limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Bank, and in such event the applicable Borrower shall pay such Bank interest at the highest rate permitted by applicable law. 2.09 Fees. (a) Arrangement, Agency Fees. The Company shall pay an ---- ------------------------ arrangement fee to the Arranger for the Arranger's own account, and shall pay an agency fee to the Agent for the Agent's own account, as required by the letter agreement ("Fee Letter") between the Company and the Arranger and Agent dated ---------- March 6, 1995. (b) Facility Fees. The Company shall pay to the Agent for the ------------- account of each Tranche A Bank and Tranche B Domestic Bank a facility fee computed on a quarterly basis in 37 arrears on the later of the fifth Business Day following the end of each calendar quarter or the fifth Business Day after the Company has received from the Agent a notice setting forth the amount of such fee equal to its Pro Rata Share of: (i) 0.0500% per annum with respect to the portion of the Commitments that is less than or equal to the Market Value of the Qualifying Collateral, if any; and (ii) the Applicable Facility Fee Margin with respect to the portion of the Commitments that exceeds the Market Value of the Qualifying Collateral, if any. Such facility fee shall accrue from the Closing Date to the Revolving Termination Date and shall be due and payable quarterly in arrears on the date specified above following the end of each calendar quarter through the Revolving Termination Date, with the final payment to be made on the Revolving Termination Date; provided that, in connection with any reduction or termination of -------- ---- Commitments under Section 2.05, the accrued facility fee calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the following quarterly payment being calculated on the basis of the period from such reduction or termination date to such quarterly payment date. The facility fee provided in this subsection shall accrue at all times after the Closing Date, including at any time during which one or more conditions in Article IV are not met. For purposes of determining the portion of the Commitments that is less than, equal to or exceeds the Market Value of the Qualifying Collateral in respect of any Collateral Period, the date of any reduction or termination of the Commitments or the Revolving Termination Date, the Market Value of the Qualifying Collateral used in the determination shall be equal to the Lowest Quarterly Market Value of the Qualifying Collateral for such Collateral Period and shall be allocated pro rata among the Commitments; provided, however, that in the event the date of any reduction or termination of - -------- ------- the Commitments or the Revolving Termination Date is not the last day of a Collateral Period, or occurs between the last day of a Collateral Period and the fifth Business Day of the immediately succeeding Collateral Period, the Market Value of the Qualifying Collateral used in the determination of the accrued facility fee payable on the date of such reduction or termination of the Commitments or such Revolving Termination Date shall be deemed to be equal to the Projected Market Value of the Qualifying Collateral for the Collateral Period in which such date occurs (the "Relevant Calendar Quarter") and shall be ------------------------- redetermined (x) in the case of a reduction of the Commitments, as of the fifth Business Day of the immediately succeeding Collateral Period on the basis of the Lowest Quarterly Market Value for the Relevant Calendar Quarter and (y) in the case of the termination of the Commitments, on the date of such termination on the basis of the Lowest Quarterly Market Value for the period during the Relevant 38 Calendar Quarter prior to the date of termination of the Commitments. If such redetermination shall indicate that the Company paid a lower accrued facility fee in respect of the date of such reduction or termination of the Commitments or such Revolving Termination Date than was due, the Company shall, within five Business Days after such redetermination is made, pay to the Agent, for distribution to the Banks, an additional amount equal to the deficit. If such redetermination shall indicate that the Company paid a higher accrued facility fee in respect of such date than was due, any such excess payment shall be credited to future facility fee payments payable to those Banks that received overpayments thereof or shall be refunded by the Banks to the Company in the case of an overpayment in respect of the Revolving Termination Date. 2.10 Computation of Fees and Interest. (a) All computations of interest -------------------------------- for Canadian Prime Rate Loans, Drafts and Bankers' Acceptances and for Base Rate Loans when the Base Rate is determined by BofA's "reference rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. (b) Each determination of an interest rate or a Dollar Equivalent by the Agent or the Canadian Administrative Agent shall be conclusive and binding on each Borrower and the Banks in the absence of manifest error. (c) If any Reference Bank's Commitment terminates (other than on termination of all the Commitments), or for any reason whatsoever the Reference Bank ceases to be a Bank hereunder, that Reference Bank shall thereupon cease to be a Reference Bank, and the Offshore Rate and CD Rate shall be determined on the basis of the rates as notified by the remaining Reference Banks. (d) Each Reference Bank shall use its best efforts to furnish quotations of rates to the Agent as contemplated hereby. If any of the Reference Banks fails to supply such rates to the Agent upon its request, the rate of interest shall be determined on the basis of the quotations of the remaining Reference Banks. (e) For purposes of disclosure pursuant to the Interest Act (Canada), the parties hereto acknowledge that: (i) The nominal yearly rate of interest to which any rate of interest based on the Offshore Rate or the Canadian Prime Rate is equivalent may be determined by multiplying the rate otherwise determined hereunder by a fraction, the 39 numerator of which is the number of days in the calendar year in which the period for which interest at such rate is payable under this Agreement and the denominator of which is 360; (ii) The nominal yearly discount rate to which the Effective Discount Rate is equivalent may be determined by multiplying the rate otherwise determined hereunder by a fraction, the numerator of which is the number of days in the calendar year in which the Average Effective Discount Rate is applied in respect of any Drafts or Bankers' Acceptances issued under this Agreement and the denominator of which is 365. All calculations of interest or discount hereunder shall be made on the basis of the nominal rates of interest or discount determined hereunder and the parties agree that the principle of deemed reinvestment shall not apply. The parties hereto acknowledge that there is a material distinction between nominal and effective rates of interest or discount and that they are capable of making the calculations necessary to calculate and compare such rates. The parties hereto further acknowledge that any rate expressed in the definitions of Offshore Rate and Canadian Prime Rate shall be deemed to be expressed therein as a nominal rate "per annum." 2.11 Payments by the Borrowers. (a) All payments to be made by each ------------------------- Borrower shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Company shall be made to the Agent for the account of the Tranche A Banks or the Tranche B Domestic Banks, as the case may be, at the Agent's Payment Office, and all payments by Medis shall be made to the Canadian Administrative Agent for the account of the Tranche B Canadian Banks at the Canadian Administrative Agent's Payment Office, and, with respect to principal of, interest on, and any other amounts relating to, any Tranche B Canadian Loan or the Bankers' Acceptance Facility, shall be made in Canadian Dollars, and, with respect to all other amounts payable hereunder, shall be made in Dollars. Such payments shall be made in immediately available funds, and (i) in the case of Tranche B Canadian Loan payments, no later than 12:00 noon (Toronto time) on the dates specified herein, and (ii) in the case of any Dollar payments, no later than 12:00 noon (San Francisco time) on the date specified herein. The Applicable Agent will promptly distribute to each Tranche A Bank, Tranche B Domestic Bank or Tranche B Canadian Bank, as applicable, its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Agent later than 12:00 noon (San Francisco time), or by the Canadian Administrative Agent later than 12:00 noon (Toronto time) shall 40 be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. (b) Subject to the provisions set forth in the definition of "Interest Period" herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. (c) Unless the Applicable Agent receives notice from a Borrower prior to the date on which any payment is due to the Banks that such Borrower will not make such payment in full as and when required, the Applicable Agent may assume that such Borrower has made such payment in full to the Applicable Agent on such date in immediately available funds and the Applicable Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent such Borrower has not made such payment in full to the Applicable Agent, each Bank shall repay to the Applicable Agent on demand such amount distributed to such Bank, together with interest thereon at the Federal Funds Rate or, in the case of a payment in Canadian Dollars, the Canadian Overnight Rate, for each day from the date such amount is distributed to such Bank until the date repaid. 2.12 Payments by the Banks to the Applicable Agent. (a) Unless the --------------------------------------------- Applicable Agent receives notice from a Bank at least one Business Day prior to the date of any Borrowing, that such Bank will not make available as and when required hereunder to the Applicable Agent for the account of the applicable Borrower the amount of that Bank's Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of the Borrowing, the Applicable Agent may assume that each Bank has made such amount available to the Applicable Agent in immediately available funds on the Borrowing Date and the Applicable Agent may (but shall not be so required), in reliance upon such assumption, make available to such Borrower on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Applicable Agent in immediately available funds and the Applicable Agent in such circumstances has made available to the applicable Borrower such amount, that Bank shall on the Business Day following such Borrowing Date make such amount available to the Applicable Agent, together with interest at the Federal Funds Rate or, in the case of any Borrowing consisting of Tranche B Canadian Loans or under the Bankers' Acceptance Facility, the Overnight Canadian Rate, for each day during such period. A notice of the Applicable Agent submitted to any Bank with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Applicable Agent shall constitute such Bank's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made 41 available to the Applicable Agent on the Business Day following the Borrowing Date, the Applicable Agent will notify the applicable Borrower of such failure to fund and, upon demand by the Applicable Agent, such Borrower shall pay such amount to the Applicable Agent for the Applicable Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing. (b) The failure of any Bank to make any Loan on any Borrowing Date shall not relieve any other Bank of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on any Borrowing Date. 2.13 Sharing of Payments, Etc. (a) If, other than as expressly provided ------------------------- elsewhere herein, any Tranche A Bank or Tranche B Bank, as the case may be, shall obtain on account of the Loans made by it to any Borrower or the Bankers' Acceptances Facility any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, such Bank shall immediately (a) notify the Applicable Agent of such fact, and (b) purchase from the other Tranche A Banks or Tranche B Banks such participations in the Loans made by them to such Borrower or Bankers' Acceptances as shall be necessary to cause such purchasing Bank to share the excess payment pro rata with each of them; provided, however, that if all or any portion of such excess payment is -------- ------- thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Tranche A Bank or Tranche B Bank, as applicable, shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank's ratable share (according to the proportion of (i) the amount of such paying Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered; provided further that, for purposes of this subsection 2.13(a), no Bank other than a Tranche B Canadian Bank may purchase any portion of or any interest in a Tranche B Canadian Loan or Bankers' Acceptances and no Bank other than a Tranche B Domestic Bank may purchase any portion of or any interest in a Tranche B Domestic Loan and no Bank other than a Tranche A Bank may purchase any portion of or any interest in a Tranche A Loan. Each Borrower agrees that any Bank so purchasing a participation from another Bank may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.10) with respect to such participation as fully as if such Bank were the direct creditor of such Borrower in the amount of such participation. The Applicable Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under 42 this Section and will in each case notify the Banks following any such purchases or repayments. For purposes of this Section 2.13(a), each Bank that has an Affiliate Bank and such Bank's Affiliate Bank shall be deemed to be a single Bank and such Bank shall not purchase a participation in the Loans made by its Affiliate Bank and such Bank's Affiliate Bank shall not purchase a participation in the Loans made by its Affiliate Bank. (b) (1) In the event that there has occurred and is continuing (i) any Event of Default under subsections 8.01(a), 8.01(f) or 8.01(g) or (ii) an acceleration of the maturity of any amounts owing to the Banks under this Agreement, a reallocation of the outstanding Loans (and accrued but unpaid interest thereon) and any outstanding Bankers' Acceptances that have not been paid, the Bankers' Acceptance Facility, the Tranche A Commitments and the Tranche B Commitments shall occur such that each Bank's Pro Rata Share of the aggregate amount of the outstanding Loans (and accrued but unpaid interest thereon), outstanding Bankers's Acceptances that have not been paid, Bankers' Acceptances Facility, Tranche A Commitments and Tranche B Commitments shall equal the percentage obtained by dividing (x) such Bank's Exposure as of the date of notification by (y) the sum of aggregate amount of Exposures of all Banks; (2) such reallocation of Loans (and interest), Bankers' Acceptances and Commitments shall be deemed to be an assignment of such Loans, Bankers' Acceptances and Commitments among the Banks pursuant to Section 10.08, and each Bank shall execute and deliver Assignments and Acceptances (as required) to give effect to such reallocation, and payments shall be made on any Loans or Bankers Acceptances deemed so assigned as contemplated by Section 4 of the applicable Assignment and Acceptance; provided that no consent of any Borrower or Agent shall be requested under Section 10.08 or otherwise in connection with such reallocation and that such reallocation shall be deemed to have accrued whether or not any Assignment and Acceptance is delivered; (3) each Bank shall identify its applicable lending office which will be deemed to have purchased the Loans, Bankers' Acceptances and Commitments reallocated and deemed assigned above; (4) for the purpose of minimizing any withholding taxes, such reallocation of Loans, Bankers' Acceptances and Commitments and any purchase of participations pursuant to paragraph 2.13(c) shall be made to avoid, to the maximum extent possible, (i) the reallocation of Tranche B Canadian Loans or Bankers' Acceptances to Tranche A Banks or Tranche B Domestic Banks, (ii) the reallocation of Tranche B Domestic Loans to Tranche A Banks or Tranche B Canadian Banks and (iii) the reallocation of Tranche A Loans to Tranche B Domestic Banks or Tranche B Canadian Banks; provided that if a reallocation referred to in clause (i), (ii) or (iii) shall be required in 43 accordance with this subsection 2.13(b), to the maximum extent possible, Tranche A Loans shall be allocated to Tranche B Domestic Banks before they are reallocated to Tranche B Canadian Banks and Tranche B Domestic Loans shall be reallocated to Tranche A Banks before they are reallocated to Tranche B Canadian Banks; and (5) for purposes of determining such reallocation, the Agent shall determine the Dollar Equivalent of all outstanding Loans and Banker's Acceptances denominated in Canadian Dollars. (c) In addition to the agreements set forth in paragraph (a) above, the Banks each agree among themselves that if the reallocation set forth in subsection 2.13(b) shall occur, if any of them shall, through the exercise of the right of counterclaim, set-off, banker's lien, collection or other remedy by Agent or otherwise, including the enforcement of rights under this Agreement, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal and interest then due with respect to the Loans, amounts payable in respect of such Bank's right to receive reimbursement from the Company or Medis in respect of amounts due under or in respect of the Bankers' Acceptance Facility (collectively, the "Aggregate Amounts Owing" to such Bank) which is greater than the proportionate reduction of the Aggregate Amounts Owing to any other Bank, then the Bank receiving such proportionately greater payment shall (y) notify each other Bank and the Agent of such receipt and (z) purchase participations (which it shall be deemed to have done simultaneously upon receipt of any such payment) in the Aggregate Amounts Owing to the other Banks as necessary to assure that all such recoveries and payments in respect of the Aggregate Amounts Owing shall be ratably shared by all of the Banks as reallocated pursuant to paragraph (b) above; provided, however, that if all or -------- ------- part of such proportionately greater payment received by such purchasing Bank is thereafter recovered from such Bank, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to that Bank to the extent of such recovery, but without interest. 2.14 Collateral Pledge. The Company shall have the right on the Closing ----------------- Date to Collateralize all or any portion of the Commitments or each Borrower's Obligations hereunder. 2.15 Utilization of Tranche B Commitments in Canadian Dollars. (a) The -------------------------------------------------------- Agent will determine the Dollar Equivalent amount with respect to any (i) Borrowing comprised of Tranche B Canadian Loans that are Offshore Rate Loans as of the date which is three Business Days prior to the requested Borrowing Date, (ii) Bankers' Acceptance or Borrowing comprised of Tranche B Canadian Loans that are Canadian Prime Rate Loans, one day prior to the requested Borrowing Date or date of acceptance, (iii) 44 outstanding Tranche B Canadian Loans or Bankers' Acceptances as of the last Business Day of each month, (iv) conversions to or continuation of Tranche B Canadian Loans as of the date the related Notice of Conversion/Continuation is received by the Canadian Administrative Agent, and (v) outstanding Tranche B Canadian Loans or Bankers' Acceptances as of any redenomination date pursuant to this Section 2.15 or Section 3.05 (each such date under clauses (i) through (v) a "Computation Date"). ---------------- (b) Notwithstanding anything herein to the contrary, during the existence of a Default or an Event of Default, upon the request of the Majority Banks, all or any part of any outstanding Tranche B Canadian Loans consisting of Offshore Rate Loans shall be converted into Canadian Prime Rate Loans with effect from the last day of the Interest Period with respect to any such Tranche B Canadian Loans. The Agent will promptly notify the Company and Medis of any such conversion request. 2.16 Currency Exchange Fluctuations. Subject to Section 3.04, if on any ------------------------------ Computation Date the Agent or the Canadian Administrative Agent shall have determined that the Total Utilization of Tranche B Commitments exceeds the combined Tranche B Commitments of the Tranche B Banks by more than $500,000, due to a change in applicable rates of exchange between Dollars and Canadian Dollars, then the Agent shall give notice to the Borrowers that a prepayment is ---- required under this Section, and the Borrowers agree thereupon to make prepayments of Loans such that, after giving effect to such prepayment the Total Utilization of Tranche B Commitments does not exceed the combined Tranche B Commitments. 2.17 Bankers' Acceptances for Medis ------------------------------ (a) Acceptance Commitment. (1) Each Tranche B Canadian Bank severally agrees, on and subject to the terms and conditions set forth herein: (i) in the case of a Tranche B Canadian Bank that is able to accept Drafts from Medis, to create acceptances (each, a "Bankers' Acceptance") by accepting Drafts from Medis and to purchase such Bankers' Acceptances in accordance with Section 2.17(d); and (ii) in the case of a Tranche B Canadian Bank that has participated all or any part of its interest in the Bankers' Acceptance Facilities to a participant which is able to accept Drafts from Medis, to arrange for the creation of Bankers' Acceptances by such participant and for the purchase of such Bankers' Acceptances by such participant, to the extent of such participation or assignment, in accordance with Section 2.17(d). The Total Utilization of Tranche B Commitments after any Drawing shall not exceed the combined Tranche B Commitments then in effect. (2) Each Drawing shall be in an aggregate Face Amount of not less than Cdn.$5,000,000 and in integral multiples of Cdn.$1,000,000 and shall consist of the creation and purchase of Bankers' Acceptances or the 45 purchase of Drafts on the same day, effected or arranged by the Tranche B Banks in accordance with Section 2.17(d), ratably according to their respective Tranche B Pro Rata Shares. (3) Anything contained in this Agreement to the contrary notwithstanding, the Bankers' Acceptance Facility and the Tranche B Loan Commitment shall be subject to the following limitations: (i) The amount otherwise available for Drawing under the Tranche B Commitment as of any time of determination shall be reduced by an amount equal to the sum of the outstanding Tranche B Loans as of such time of determination; and (ii) The Total Utilization of Tranche B Commitments shall not exceed the Tranche B Commitments then in effect. (b) Drawing Notice. (1) Each Drawing shall be made on two Business Days' prior written notice specified in relation to Bankers' Acceptances, given not later than 11:00 a.m. (Toronto time), by the Company and Medis to the Agent. Each such notice of a Drawing (a "Drawing Notice") shall be given in substantially the form of Exhibit G annexed hereto or by telephone confirmed promptly in writing, containing the same information as would be contained in a Drawing Notice, and shall specify therein (i) the Drawing Date; (ii) the aggregate Face Amount of Drafts to be accepted; and (iii) the maturity date for such Drafts. The Canadian Administrative Agent shall give each Tranche B Canadian Bank prompt notice of such Drawing Notice and of such Tranche B Canadian Bank's ratable portion of Drafts to be accepted under the Drawing. (2) Medis shall not request in a Drawing Notice a maturity date for Drafts which would be subsequent to the Revolving Termination Date. (3) Each Drawing Notice shall be irrevocable and binding on Medis and the Company. Medis and the Company shall indemnify each Tranche B Canadian Bank against any loss or expense incurred by such Tranche B Canadian Bank as a result of any failure by Medis to fulfill or honor before the date specified for any Drawing, the applicable conditions set forth in this Section 2.17 or Section 4.03, if the Drawing, as a result of such failure, is not made on such date. (4) Medis shall repay, and there shall become due and payable, on the Drawing Date the principal amount of any Tranche B Canadian Loans which Medis seeks to convert, if any, in whole or in part, to Bankers' Acceptances on such Drawing Date. 46 (5) None of the Canadian Administrative Agent, the Agent or the Tranche B Canadian Banks shall incur any liability to Medis or the Company in acting on the telephonic notice referred to above which the Canadian Administrative Agent, the Agent or any Tranche B Canadian Bank believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Medis or for otherwise acting in good faith under this Section 2.17 and upon the acceptance of Drafts or Bankers' Acceptances pursuant to any such telephonic notice, Medis shall be liable with respect thereto as provided herein. In the event of a conflict between the Canadian Administrative Agent's record of the applicable terms of any Drawing and such Drawing Notice, Canadian Administrative Agent's record shall prevail, absent manifest or demonstrable error. (c) Form of Bankers' Acceptances . (1) Each Draft presented by Medis shall (i) be in a minimum denomination of Cdn $150,000, (ii) be dated the date of the Drawing; (iii) mature and be payable by Medis (in common with all other Drafts presented in connection with such Drawing) on a Business Day which occurs approximately 30, 60, 90, 120 or 180 days after the date thereof; and (iv) be substantially in the form of Exhibit H-1 annexed hereto. The acceptance endorsed by a Tranche B Canadian Bank on any Draft shall be substantially in the form of Exhibit H-2 annexed hereto or such other form as may be agreed by Medis and such Tranche B Canadian Bank. (2) Medis hereby renounces, and shall not claim, any days of grace for the payment of any Bankers' Acceptances or Drafts. (d) Acceptance and Purchase of Drafts . (1) Not later than 11:00 a.m. (Toronto time) on an applicable Drawing Date, each Tranche B Canadian Bank shall, as the case may be, (i) complete one or more Drafts dated the date of such Drawing, with the maturity date specified by the Company and Medis in the Drawing Notice, accept such Drafts, and purchase the Bankers' Acceptances thereby created for the Drawing Purchase Price; and (ii) arrange for its participant to complete one or more Drafts dated the date of such Drawing, with the maturity date specified by Medis and the Company in the Drawing Notice, to accept such Drafts and to purchase the Bankers' Acceptances thereby created for the Drawing Purchase Price. (2) The failure of any Tranche B Canadian Bank to accept Drafts or purchase Bankers' Acceptances or Drafts as part of any Drawing shall not relieve such Tranche B Canadian Bank of its obligation, if any, to accept Drafts and purchase Bankers' Acceptances or Drafts hereunder, but a Tranche B Canadian Bank shall not be responsible for the failure of any other Tranche B Canadian Bank to accept 47 Drafts or purchase Bankers' Acceptance or Drafts on the Drawing Date for any Drawing. (e) Payment of Drawing Purchase Price. (1) Subject to Section 2.17(b)(4), each Tranche B Canadian Bank shall, before 12:00 noon (Toronto time) on the applicable Drawing Date, pay or cause to be paid, the Drawing Purchase Price in respect of any Bankers' Acceptances which such Tranche B Canadian Bank has purchased or arranged to have purchased pursuant to Section 2.17(d)(1) by depositing or causing to be deposited such amount to such account maintained by the Canadian Administrative Agent at BofA Canada as shall have been notified to such Tranche B Canadian Bank by the Canadian Administrative Agent, in Canadian Dollars in same day funds. Promptly upon receipt of such funds, the Canadian Administrative Agent shall make such funds available to Medis by debiting such account (or causing such account to be debited), and by crediting Medis' account, as to which Medis shall have notified the Canadian Administrative Agent prior thereto, maintained by the Canadian Administrative Agent at BofA Canada with like funds in the aggregate amount of such funds. (2) Bankers' Acceptances purchased by a Tranche B Canadian Bank or its participant hereunder may be held by such Tranche B Canadian Bank or such participant, as the case may be, for its own account until maturity or sold by it at any time prior thereto in any relevant market therefor in Canada, in such Tranche B Bank's or its participant's sole discretion. (f) Effective Discount Rate Determination. The Canadian Administrative Agent shall give prompt notice to the Company and Medis of the Effective Discount Rate and the Drawing Fee Rate determined by the Canadian Administrative Agent for an applicable Drawing Date. Promptly upon request of either Borrower, the Canadian Administrative Agent shall provide such Borrower an indicative Effective Discount Rate, which rate shall not be binding on the Canadian Administrative Agent, the Agent or the Banks for purposes of any Drawing or acceptance of Drafts. (g) Payment at Maturity. (1) Medis shall pay to the Canadian Administrative Agent, and there shall become due and payable, at 12:00 noon (Toronto time) on the maturity date for each Bankers' Acceptance or Draft an amount in Canadian Dollars in same day funds equal to the Face Amount of such Bankers' Acceptance or Draft. Medis shall make each payment hereunder in respect of Bankers' Acceptances or Drafts by deposit of the required funds to the Canadian Administrative Agent at the Canada Administrative Agent's Payment Office. Upon receipt of such payment, the Canadian Administrative Agent will promptly thereafter cause such payment to be distributed in like funds in payment of Bankers' Acceptances and Drafts ratably (based on the proportion that the aggregate Face Amount of Bankers' 48 Acceptances held by any Tranche B Canadian Bank or any participant thereof maturing on the relevant date bears to the aggregate Face Amount of Bankers' Acceptances accepted or held by all Tranche B Canadian Banks or any participants or assignees thereof maturing on such date) to Tranche B Canadian Banks for their account and for the account of any participant, to the extent of and in accordance with their participation. Such payment to the Canadian Administrative Agent shall satisfy Medis' obligations under any Bankers' Acceptances to which it relates and each Tranche B Canadian Bank that has accepted such Bankers' Acceptances shall thereafter be solely responsible for the payment of such Bankers' Acceptances. (2) If Medis fails to pay any Bankers' Acceptance when due, or to convert or renew the Face Amount of such Bankers' Acceptance pursuant to Section 2.17(i), the unpaid amount due and payable in respect thereof shall be converted as of such date, and without any necessity for Medis to give a Notice of Borrowing in accordance with Section 2.03, to, and thereafter be outstanding as, a Canadian Prime Rate Loan made by, Tranche B Canadian Banks and shall bear interest calculated and payable as provided in Section 2.08. (h) Presigned Draft Forms. To enable the Tranche B Banks to create Bankers' Acceptances or complete Drafts in the manner specified in this Section 2.17, Medis shall supply each Tranche B Canadian Bank with such number of Drafts as such Tranche B Canadian Bank may reasonably request, duly endorsed and executed on behalf of Medis by any one or more of its authorized officers. Each Tranche B Canadian Bank shall exercise such care in the custody and safekeeping of Drafts as it would exercise in the custody and safekeeping of similar property owned by it. Each Tranche B Canadian Bank will, upon request by Medis, promptly advise Medis of the number and designations, if any, of the uncompleted Drafts then held by it. The signatures of such officers may be mechanically reproduced in facsimile and Drafts and Bankers' Acceptances bearing such facsimile signatures shall be binding upon Medis as if they had been manually signed by such officers. Notwithstanding that any of the individuals whose manual or facsimile signature appears on any Draft or Bankers' Acceptance as one of such officers may no longer hold office at the date thereof or at the date of its acceptance by a Tranche B Canadian Bank or a participant hereunder or at any time thereafter, any Draft or Bankers' Acceptance so signed shall be valid and binding upon Medis. (i) Conversion or Renewal of Bankers' Acceptances . Upon the maturity of a Bankers' Acceptance, the Company and Medis may elect to (i) renew such Bankers' Acceptance, by giving a Drawing Notice in accordance with Section 2.17(b)(1); or (ii) have all or a portion of the Face Amount of such Bankers' Acceptance converted to an Offshore Rate Loan or Canadian Prime Rate Loan, by giving a Notice of Borrowing in accordance with 49 Section 2.03. If the Bankers' Acceptances to be converted cannot be converted into an Offshore Rate Loan or Canadian Prime Rate Loan in an aggregate amount which may be made as an Offshore Rate Loan or Canadian Prime Rate Loan, as the case may be, under this Agreement, then the amount which cannot be so converted shall be repaid to the Canadian Administrative Agent for distribution to the Tranche B Canadian Banks in accordance with Section 2.17(g) on the date of such conversion. (j) Circumstances Making Bankers' Acceptances Unavailable. (1) If the Canadian Administrative Agent determines in good faith, which determination shall be final, conclusive and binding upon Medis and the Company, and notifies Medis that, by reason of circumstances affecting the money market (i) there is no market for Bankers' Acceptances; or (ii) the demand for Bankers' Acceptances is insufficient to allow the sale or trading of the Bankers' Acceptances created and purchased hereunder; then, (i) the right of the Company and Medis to request a Drawing shall be suspended until the Canadian Administrative Agent determines that the circumstances causing such suspension no longer exist and the Canadian Administrative Agent so notifies Medis; and (ii) any Drawing Notice which is outstanding shall be cancelled and the Drawing requested therein shall not be made. (2) The Canadian Administrative Agent shall promptly notify Medis and the Agent of the suspension of Medis' right to request a Drawing and of the termination of any such suspension. (k) Prepayments. Except as required or permitted by Article VIII or Section 2.07, no repayment of a Bankers' Acceptance shall be made by Medis to a Tranche B Canadian Bank prior to the maturity date thereof. Any such repayment, made as required by Article VIII or Section 2.07, shall be made (unless such repayment has been rescinded or otherwise is required to be returned by such Tranche B Canadian Bank to Medis for any reason) in accordance with the provisions of Section 2.17(g)(1). Any such payment by Medis to the Canadian Administrative Agent shall satisfy Medis' obligations under the Bankers' Acceptance to which it relates and, in the case of a Bankers' Acceptance which has been accepted by a Tranche B Canadian Bank or its participant, such Tranche B Canadian Bank or such participant shall thereafter be solely responsible for the payment of such Bankers' Acceptance and shall indemnify and hold Medis harmless against any liabilities, costs or expenses incurred by Medis as 50 a result of any failure by such Tranche B Canadian Bank or such participant to pay such Bankers' Acceptance in accordance with its terms. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY -------------------------------------- 3.01 Taxes. (a) Any and all payments by each Borrower to each Bank or ----- the Applicable Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for any Taxes. In addition, Borrowers jointly and severally shall pay all Other Taxes. (b) Each Borrower agrees to indemnify and hold harmless each Bank and each of the Agents for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by the Bank or any of the Agents and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date the Bank or such of the Agents makes written demand therefor. (c) If any Borrower shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank or any of the Agents, then: (i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) such Bank or such of the Agents, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made; (ii) such Borrower shall make such deductions and withholdings; and (iii) such Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and (iv) such Borrower shall also pay to such Bank or Agent at the time the sum payable is paid, all additional amounts which the Bank or Agent specifies as necessary to preserve the after-tax yield the Bank or Agent would have received if such Taxes or Other Taxes had not been imposed. (d) Within 30 days after the date of any payment by a Borrower of Taxes or Other Taxes, such Borrower shall furnish 51 the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Agent. (e) If a Borrower is required to pay additional amounts to any Bank or any of the Agents pursuant to this Section 3.01, then such Bank shall use reasonable efforts (consistent with legal and regulatory restrictions) to take such actions as are necessary to minimize such Borrower's obligations under this Article III, including without limitation, changing the jurisdiction of its Lending Office so as to eliminate any such additional payment by such Borrower which may thereafter accrue, if such actions in the sole judgment of such Bank are not otherwise disadvantageous to such Bank. (f) Notwithstanding anything to the contrary in this Section 3.01, neither Borrower shall be required to compensate an Assignee or Participant of a Loan or Bankers' Acceptance for withholding taxes, if at the time of such assignment (i) the assigning Bank was not subject to withholding taxes in respect of any amount in respect of the Loans or Bankers' Acceptances and (ii) the Assignee or Participant was subject to withholding taxes at the time of such assignment in respect of such amount. In addition, notwithstanding anything to the contrary in this Section 3.01, in no event shall any Borrower be required to compensate a Bank or a participant of a Bankers' Acceptance as contemplated in subsection 2.17 for withholding taxes under this Section 3.01 if such withholding tax results from a participation as contemplated in subsection 2.17. (g) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 3.02 shall survive the payment in full of principal and interest hereunder and under any instrument delivered hereunder. 3.02 Illegality. (a) If any Bank determines that the introduction of any ---------- Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its applicable Lending Office to make Offshore Rate Loans (including Offshore Rate Loans in Canadian Dollars), then, on notice thereof by the Bank to the Borrowers through the Agent, any obligation of that Bank to make Offshore Rate Loans shall be suspended until the Bank notifies the Agent and the Borrowers that the circumstances giving rise to such determination no longer exist. (b) If a Bank determines that it is unlawful to maintain any Offshore Rate Loan, the applicable Borrower shall, upon its receipt of notice of such fact and demand from such Bank (with a copy to the Agent), either, (A)(i) in the case of the Company, convert in full such Offshore Rate Loans into Loans 52 of another Type and (ii) in the case of Tranche B Canadian Loans to Medis, convert in full such Offshore Rate Loans into Canadian Prime Rate Loans or (B) prepay in full such Offshore Rate Loans of that Bank then outstanding, together with interest accrued thereon (in the case of a prepayment) and amounts required under Section 3.04, either on the last day of the Interest Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain such Offshore Rate Loan. If the applicable Borrower prepays any Offshore Rate Loan as provided in the preceding sentence, then concurrently with such prepayment, such Borrower shall borrow from the affected Bank, in the amount of such repayment, (i) a Base Rate Loan in the case of the Company and (ii) a Canadian Prime Rate Loan, in the case of Medis. 3.03 Increased Costs and Reduction of Return. (a) If any Bank determines --------------------------------------- that, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the CD Rate or the Offshore Rate or in respect of the assessment rate payable by any Bank to the FDIC for insuring U.S. deposits or any change introduced prior to the Closing Date) or (ii) the compliance by that Bank with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) (other than any guideline or request introduced prior to the Closing Date), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any Offshore Rate Loans or CD Rate Loans, then the applicable Borrower shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Agent), pay to the Applicable Agent for the account of such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs; provided that -------- no Bank shall be entitled to obtain compensation with respect to any period prior to six (6) months prior to making such demand. (b) If the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements, in or in the interpretation of any law or regulation, or the compliance with any guideline or request imposed or made from any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having the force of law) any reserve (including, without limitation, any reserve requirement imposed under the Bank Act (Canada) or the Regulations thereunder), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Tranche B Canadian Bank's applicable lending office shall be imposed or deemed applicable or any other condition affecting Drafts or Bankers' Acceptances or such Tranche B Canadian Bank's obligation to accept Drafts shall be imposed on such Tranche B Canadian Bank or its 53 applicable lending office, in any such case after the Closing Date; and, as a result thereof, there shall be any increase in the cost to such Tranche B Canadian Bank of agreeing to accept or accepting, funding or maintaining Drafts or Bankers' Acceptances, or there shall be a reduction in the amount received or receivable by such Tranche B Canadian Bank or its applicable lending office, then Medis shall from time to time, upon written notice from and demand by such Tranche B Canadian Bank (with a copy of such notice to the Company, the Canadian Administrative Agent and the Agent), pay to the Canadian Administrative Agent, for the account of such Tranche B Canadian Bank, within five Business Days after the date specified in such notice and demand, additional amounts sufficient to indemnify such Tranche B Canadian Bank against such increased cost; provided, -------- however, that neither Borrower shall have any liability to a Tranche B Canadian - ------- Bank under this Subsection 3.03(b) with respect to the imposition of any withholding tax to the extent Borrowers are not required to make payments to such Tranche B Canadian Bank with respect to the imposition of such withholding tax under Section 3.01; provided further that a Tranche B Canadian Bank shall -------- ------- not be entitled to avail itself of the benefit of this Section 3.03(b) to the extent that any such increased cost or reduction was incurred more than six months prior to the time it gives notice to Medis. A certificate as to the amount of such increased cost submitted to Medis, the Company, the Canadian Administrative Agent and the Agent by a Tranche B Canadian Bank, shall, except for manifest or demonstrable error, be final, conclusive and binding for all purposes. (c) If any Bank shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Bank (or its Lending Office) or any corporation controlling the Bank with any Capital Adequacy Regulation, in any such case, after the Closing Date, affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, loans, credits or obligations under this Agreement, then, upon demand of such Bank to the applicable Borrower through the Applicable Agent, such Borrower shall pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank for such increase; provided no Bank shall be entitled to receive additional -------- amounts with respect to any period prior to six (6) months prior to making such demand. Without limiting the generality of the foregoing, each Borrower agrees that if any Bank shall have determined that (A) any of 54 the events listed in clauses (i) through (iv) of this subsection have the effect that assets secured by Collateral pledged from time to time hereunder do not have a risk category with a risk weight of 20% (where, prior to such determination, such Collateral constituted Qualifying Collateral) or (B) that the method provided in the Pledge Agreement for computing the Market Value of the Qualifying Collateral does not accurately reflect the current market value of the Qualifying Collateral under any Capital Adequacy Regulation applicable to such Bank, then, upon demand of such Bank to the Company through the Agent, the Company shall pay to the Bank, from time to time as specified by the Bank, and hereunder, as applicable, an amount equal to (1) the difference between (x) the facility fee set forth in subsection 2.09(b) determined in accordance with clause (i) of subsection 2.09(b), and (y) such fee determined in accordance with clause (ii) of subsection 2.09(b), or an amount equal to the difference between the facility fee set forth in subsection 2.09(b) computed based on the Market Value of the Qualifying Collateral as computed under the Pledge Agreement and such fee computed based on the current market value of the Qualifying Collateral as determined under any Capital Adequacy Regulation applicable to such Bank and (2) the difference between (x) the interest set forth in subsection 2.08(a) determined in accordance with clause (i)(A), (ii)(A) or (iii)(A), as applicable, and (y) such interest determined in accordance with clause (i)(B), (ii)(B) or (iii)(B), as applicable, of subsection 2.08(a) or an amount equal to the difference between the interest set forth in subsection 2.08(a) computed based on the Market Value of the Qualifying Collateral as computed under the Pledge Agreement and such interest computed based on the current market value of the Qualifying Collateral as determined under any Capital Adequacy Regulation applicable to such Bank. (d) If any Bank requests compensation from either Borrower under subsection 3.03(a), 3.03(b) or 3.03(c), the Company shall have the right, with the assistance of the Agent, to seek one or more Eligible Assignees (which may be one or more of the Banks) reasonably satisfactory to the Agent and the Company to purchase the Loans and Bankers' Acceptances and assume the Commitments of such Bank, and the Borrowers, the Agent, such Bank, and such Eligible Assignee(s) shall execute and deliver an appropriately completed Assignment and Acceptance pursuant to Section 10.08 hereof to effect the assignment of rights to and the assumption of obligations by such Eligible Assignee(s); provided that such requesting Bank shall be entitled to -------- compensation under Section 3.03 for any costs incurred by it prior to its replacement. 3.04 Funding Losses. Each Borrower shall reimburse each Bank and hold -------------- each Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of: 55 (a) the failure of such Borrower to make on a timely basis any payment of principal of any Offshore Rate Loan or CD Rate Loan; (b) the failure of such Borrower to borrow, continue or convert a Loan after the Company or the Company and Medis, as the case may be, has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation; (c) the failure of such Borrower to make any prepayment in accordance with any notice delivered under Section 2.06; (d) the prepayment or other payment (including after acceleration thereof) of an Offshore Rate Loan or a CD Rate Loan on a day that is not the last day of the relevant Interest Period; or (e) the automatic conversion under Section 2.04 of any Offshore Rate Loan or CD Rate Loan to a Base Rate Loan or Canadian Prime Rate Loan on a day that is not the last day of the relevant Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by such Bank to maintain its Offshore Rate Loans or CD Rate Loans or from fees payable by such Bank to terminate the deposits from which such funds were obtained or from charges relating to any Loans. For purposes of calculating amounts payable by the Company to the Banks under this Section and under subsection 3.03(a), (i) each Offshore Rate Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the LIBOR used in determining the Offshore Rate for such Offshore Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Offshore Rate Loan is in fact so funded, and (ii) each CD Rate Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the Certificate of Deposit Rate used in determining the CD Rate for such CD Rate Loan by the issuance of its certificate of deposit in a comparable amount and for a comparable period, whether or not such CD Rate Loan is in fact so funded. 3.05 Inability to Determine Rates . If the Agent determines that for any ----------------------------- reason adequate and reasonable means do not exist for determining the Offshore Rate or the CD Rate for any requested Interest Period with respect to a proposed Offshore Rate Loan or CD Rate Loan, or that the Offshore Rate or the CD Rate applicable pursuant to subsection 2.08(a) for any requested Interest Period with respect to a proposed Offshore Rate Loan or CD Rate Loan does not adequately and fairly reflect the cost to the Banks of funding such Loan, the Agent will promptly so notify the applicable Borrower and each Bank. 56 Thereafter, the obligation of the Banks to make or maintain CD Rate Loans or Offshore Rate Loans, as the case may be, hereunder shall be suspended until the Agent revokes such notice in writing. Upon receipt of such notice, the applicable Borrower may revoke any Notice of Borrowing or Notice of Conversion/Continuation previously submitted by such Borrower. If the applicable Borrower does not revoke such Notice, the Banks shall make, convert or continue the Loans, as proposed by such Borrower, in the amount specified in the applicable notice submitted by the such Borrower, but such Loans shall be made, converted or continued as (i) Base Rate Loans in the case of Tranche A Loans or Tranche B Domestic Loans and (ii) Canadian Prime Rate Loans in the case of Tranche B Canadian Loans instead of CD Rate Loans or Offshore Rate Loans, as the case may be. 3.06 Certificates of Banks. Any Bank claiming reimbursement or --------------------- compensation under this Article III shall deliver to the Company and the applicable Borrower (with a copy to the Agent) a certificate setting forth in reasonable detail the amount payable to the Bank hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error. 3.07 Survival. The agreements and obligations of the Borrowers in this -------- Article III shall survive the payment of all other Obligations. ARTICLE IV CONDITIONS PRECEDENT -------------------- 4.01 Conditions of Initial Loans. The obligation of each Bank to make its --------------------------- initial Loan hereunder is subject to the condition that the Agent have received on or before the Closing Date all of the following, in form and substance satisfactory to the Agent and each Bank, and in sufficient copies for each Bank: (a) Credit Agreement. This Agreement executed by each party hereto ---------------- and, if requested by any Bank, the Note(s) requested by such Bank executed by the applicable Borrower; (b) Collateral Documents and Guaranty. The Collateral Documents and --------------------------------- the Guaranty executed by each party thereto; (c) Resolutions; Incumbency. ----------------------- (i) Copies of the resolutions of the board of directors of the Company and the Unanimous Shareholder Declaration of Medis authorizing the transactions contemplated hereby, certified as of the Closing Date by the Secretary or an Assistant Secretary of such Borrower; and 57 (ii) A certificate of the Secretary or Assistant Secretary of each Borrower, certifying the names and true signatures of the officers of such Borrower authorized to execute, deliver and perform, as applicable, this Agreement, and all other Loan Documents to be delivered by it hereunder; (d) Organization Documents; Good Standing. Each of the following ------------------------------------- documents: (i) the articles or certificate of incorporation and the bylaws of each Borrower as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of such Borrower as of the Closing Date; (ii) a good standing and tax good standing certificate for the Company from the applicable Secretary of State (or similar, applicable Governmental Authority) of the States of Delaware and California, together with a bring-down certificate by facsimile, dated the Closing Date; and (iii) a certificate of status for Medis from the Ministry of Consumer and Commercial Relations (Ontario), dated the Closing Date. (e) Legal Opinions. -------------- (i) an opinion of Ivan D. Meyerson, Vice President and General Counsel of the Company, addressed to the Agent and the Banks, substantially in the form of Exhibit D-1; and (ii) an opinion of Blake, Cassels & Graydon, Canadian counsel to the Company and Medis, substantially in the form of Exhibit D-2. (iii) an opinion of Brobeck, Phleger & Harrison, counsel for the Company, and addressed to the Agent and Banks, substantially in the form of Exhibit D-3, with respect to the types of Qualifying Collateral initially pledged by the Company in favor of the Agent as of the Closing Date under the Pledge Agreement; (f) Payment of Fees. Evidence of payment by the Company of all --------------- accrued and unpaid fees, costs and expenses to the extent then due and payable on the Closing Date, together with Attorney Costs of BofA to the extent invoiced prior to or on the Closing Date, including any such costs, fees and expenses arising under or referenced in Sections 2.09 and 10.04; (g) Company Certificates. A certificate signed by a Responsible -------------------- Officer of Company, dated as of the Closing Date, stating that: 58 (i) the representations and warranties contained in Article V and the other Loan Documents are true and correct on and as of such date, as though made on and as of such date; (ii) no Default or Event of Default exists or would result from the initial Borrowing; (iii) there has occurred since March 31, 1994, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; and (iv) designating the Closing Date; (h) Medis Certificate. A certificate signed by a Responsible Officer ----------------- of Medis, dated as of the Closing Date, stating that: (i) the representations and warranties of Medis contained in Article V are true and correct on and as of the Closing Date, as though made on and as of such date; (ii) no Default or Event of Default with respect to Medis or any of its Subsidiaries exists or would result from the initial Borrowing; and (iii) there has occurred since March 31, 1994, no event or circumstance with respect to Medis or any of its Subsidiaries that has resulted or could reasonably be expected to result in a Material Adverse Effect; (i) Notice of Election. A Notice of Election of Projected Market ------------------ Value for the period from the Closing Date to June 30, 1995; (j) UCC Searches. Certified copies of Requests for Information or ------------ Copies, dated a date reasonably near the Closing Date, listing all effective financing statements in the State of California which name the Company as debtor, together with copies of such financing statements; (k) Independent Auditor's Letter. A copy of the Independent Auditor's ---------------------------- Letter duly executed by Deloitte & Touche; (l) Collateral Certificate. If the Company proposes to pledge ---------------------- Collateral of the type described in clause (b) or (c) of the definition of Qualifying Collateral, a certificate signed by a Responsible Officer of the Company to the effect that such Collateral constitutes Collateral of such type and such other evidence, certificates or opinions as the Agent may, at the request of any Bank, reasonably request; and 59 (m) Other Documents. Such other approvals, opinions, documents or --------------- materials as the Agent or any Bank may reasonably request. 4.02 Conditions to All Borrowings. The obligation of each Bank to make ---------------------------- any Loan to be made by it (including its initial Loan) or to continue or convert any Loan under Section 2.04 is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date or Conversion/Continuation Date: (a) Notice of Borrowing or Conversion/Continuation. The Applicable ---------------------------------------------- Agent shall have received (with, in the case of the initial Loan only, a copy for each Bank) a Notice of Borrowing or a Notice of Conversion/Continuation, as applicable; (b) Continuation of Representations and Warranties. The ---------------------------------------------- representations and warranties in Article V and the other Loan Documents shall be true and correct on and as of such Borrowing Date or Conversion/Continuation Date with the same effect as if made on and as of such Borrowing Date or Conversion/Continuation Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date); (c) No Existing Default. No Default or Event of Default shall exist ------------------- or shall result from such Borrowing or continuation or conversion; and (d) Medis Loans. In the case of any Loan to be made to Medis, Medis ----------- shall be a wholly-owned Subsidiary of the Company. Each Notice of Borrowing and Notice of Conversion/Continuation submitted by the Company or, in the case of a Canadian Loan, the Company and Medis hereunder shall constitute a representation and warranty by the Company or, in the case of a Canadian Loan, by the Company and Medis hereunder, as of the date of each such notice and as of each Borrowing Date or Conversion/Continuation Date, as applicable, that the conditions in Section 4.02 are satisfied. 4.03 Conditions to Bankers' Acceptance Facility. The obligation of ------------------------------------------ Tranche B Canadian Banks to accept and discount any Draft or Bankers' Acceptance is subject to prior or concurrent satisfaction of all of the following conditions: (a) On or before the date of acceptance and discounting of the initial Draft or Bankers' Acceptance, each of the conditions set forth in Section 4.01 shall have been satisfied. 60 (b) Each of the conditions to the acceptance and discounting of such Draft or Bankers' Acceptance set forth in Section 2.17 shall have been satisfied. (c) On the date of acceptance and discounting of such Draft or Bankers' Acceptance, all conditions precedent described in Section 4.02 (other than paragraph (a)) shall be satisfied to the same extent as though the acceptance and discounting of such Draft or Bankers' Acceptance were the making of a Loan. ARTICLE V REPRESENTATIONS AND WARRANTIES ------------------------------ Each Borrower represents and warrants (which representations and warranties in the case of Medis, shall be limited to Medis and its Subsidiaries and other facts and circumstances known to Medis and its Subsidiaries) to the Agent and each Bank that: 5.01 Corporate Existence and Power. The Company and each of its ----------------------------- Subsidiaries: (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation; (b) has the power and authority and all required governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents; (c) is duly qualified as a foreign corporation and is licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification or license; and (d) is in compliance with all Requirements of Law; except, with respect to Subsidiaries of the Company other than Material Subsidiaries, to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect, and, with respect to the Company and its Material Subsidiaries in each case referred to in clause (c) or clause (d), to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. 5.02 Corporate Authorization; No Contravention. The execution, delivery ----------------------------------------- and performance by each Borrower of this Agreement and each other Loan Document to which such Borrower is party, have been duly authorized by all necessary corporate action, and do not and will not: 61 (a) contravene the terms of any Borrower's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which any Borrower is a party or any order, injunction, writ or decree of any Governmental Authority to which any Borrower or its property is subject; or (c) violate any Requirement of Law. 5.03 Governmental Authorization. No approval, consent, exemption, -------------------------- authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Borrower of the Agreement or any other Loan Document. 5.04 Binding Effect. This Agreement and each other Loan Document to which -------------- each Borrower is a party constitute the legal, valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 5.05 Litigation. There are no actions, suits, proceedings, claims or ---------- disputes pending, or to the best knowledge of each Borrower, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company, or its Subsidiaries or any of their respective properties which: (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or (b) if determined adversely to the Company or its Subsidiaries, would reasonably be expected to have a Material Adverse Effect as of the Closing Date. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 5.06 No Default . No Default or Event of Default exists or would result ---------- from the incurring of any Obligations by the Company. As of the Closing Date, neither the Company nor any Subsidiary is in default under or with respect to any Contractual Obligation in any respect which, individually or 62 together with all such defaults, could reasonably be expected to have a Material Adverse Effect as of the Closing Date, or that would, if such default had occurred after the Closing Date, create an Event of Default under subsection 8.01(e). 5.07 Use of Proceeds; Margin Regulations. The proceeds of the Loans are ----------------------------------- to be used solely for the purposes set forth in Section 6.09. Neither the Company nor any Subsidiary is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock. 5.08 Financial Condition. (a) The (i) audited consolidated financial ------------------- statements of the Company and its Subsidiaries dated March 31, 1994, and the related consolidated statements of income or operations, shareholders' equity and cash flows for the fiscal year ended on that date and (ii) unaudited consolidated financial statements of the Company and its Subsidiaries dated December 31, 1994, and the related consolidated statements of income or operations, shareholders' equity and cash flows for the nine months ended on that date: (A) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, subject in the case of the unaudited statements to ordinary, good faith year end audit adjustments; (B) fairly present the financial condition of the Company and its Subsidiaries as of the date thereof and results of operations for the period covered thereby; and (C) show all material indebtedness and other liabilities, direct or contingent, of the Company and its consolidated Subsidiaries as of the date thereof required to be shown in accordance with GAAP. (b) As of the Closing Date, since March 31, 1994, there has been no Material Adverse Effect. 5.09 Regulated Entities. None of the Company, any Person controlling the ------------------ Company, or any Subsidiary, is an "Investment Company" within the meaning of the Investment Company Act of 1940. Neither Borrower is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal, state or other statute or regulation limiting its ability to incur Indebtedness. 5.10 No Burdensome Restrictions. Neither the Company nor any Subsidiary -------------------------- is a party to or bound by any Contractual Obligation, or subject to any restriction in any Organization Document, or any Requirement of Law, which could reasonably be expected to have a Material Adverse Effect. 63 5.11 Subsidiaries and Certain Liens As of the Closing Date. As of the ----------------------------------------------------- Closing Date, the Company has no corporate Subsidiaries other than those specifically disclosed in part (a) of Schedule 5.11 hereto. As of the Closing ------------- Date, part (b) of Schedule 5.11 describes all outstanding Indebtedness of the ------------- Company and its Subsidiaries for borrowed money in excess of $10,000,000 that is secured by a Lien existing on property of the Company or any of its Subsidiaries. 5.12 Collateral Documents. (a) The provisions of each of the Collateral -------------------- Documents are effective to create in favor of the Agent for its benefit and the benefit of the Banks, a legal, valid and enforceable first priority security interest in all right, title and interest of the Company in the Collateral described therein subject only to the equal and ratable Lien of the Custodian and the junior Lien of the Custodian under the Custodial Agreement; and financing statements have been filed in the offices in accordance with the Pledge Agreement. (b) All representations and warranties of the Company contained in the Collateral Documents are true and correct. ARTICLE VI AFFIRMATIVE COVENANTS --------------------- So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation (other than Obligations under Section 10.05 that remain contingent after termination of the Commitments and payment of all other Obligations) shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 6.01 Financial Statements. The Company shall deliver to the Agent, in -------------------- form and detail satisfactory to the Agent and the Majority Banks, with sufficient copies for each Bank: (a) as soon as available, but not later than 90 days after the end of each fiscal year (commencing with the fiscal year ended March 31, 1995), a copy of the audited consolidated balance sheet of the Company and its Subsidiaries as at the end of such year and the related consolidated statements of income or operations, shareholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of Deloitte & Touche or another nationally-recognized independent public accounting firm ("Independent Auditor") which report shall ------------------- state that such consolidated financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years. Such opinion shall not be qualified or limited because of a restricted or limited examination by the Independent 64 Auditor of any material portion of the Company's or any Subsidiary's records; and (b) as soon as available, but not later than 60 days after the end of each of the first three fiscal quarters of each fiscal year (commencing with the fiscal quarter ended June 30, 1995), a copy of the unaudited consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter and the related consolidated statements of income or operations, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by a Responsible Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good faith year-end audit adjustments), the financial position and the results of operations of the Company and the Subsidiaries (which certification may be part of the related Compliance Certificate delivered pursuant to Section 6.02(a)). 6.02 Certificates; Other Information. The Company shall furnish to the ------------------------------- Agent, with sufficient copies for each Bank: (a) concurrently with the delivery of the financial statements referred to in subsections 6.01(a) and (b), a Compliance Certificate executed by a Responsible Officer of the Company; (b) promptly, copies of all financial statements and reports that the Company sends to its shareholders, and copies of all financial statements and regular, periodical or special reports (including Forms 10K, 10Q and 8K) that the Company or any Subsidiary may make to, or file with, the SEC; (c) on the fifteenth Business Day prior to the end of each calendar quarter, a Notice of Election of Projected Market Value for the immediately succeeding calendar quarter; and (d) promptly, such additional information regarding the business, financial or corporate affairs of the Company or any Subsidiary, including Medis, as the Agent, at the request of any Bank, may from time to time reasonably request. 6.03 Notices. The Company and Medis shall notify the Agent and each Bank: ------- (a) promptly, upon such occurrence, of the occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that foreseeably will become a Default or Event of Default; (b) promptly, upon such occurrence, of any matter that has resulted or may result in a Material Adverse Effect; (c) promptly upon any Responsible Officer of Company obtaining knowledge thereof of (i) the institution of, or non- 65 frivolous threat of, any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation of arbitration against or affecting the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries (collectively "PROCEEDINGS") not previously disclosed in writing by the Company to Lenders or (ii) any material development in any Proceeding that, in the case of clause (i) or (ii) above, (1) if adversely determined, has a reasonable possibility of giving rise to a Material Adverse Effect; or (2) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby, together with such other information as may be reasonably available to Company that the Agent requests to enable the Agent and the Banks to evaluate such matters. (d) of any material change in accounting policies or financial reporting practices by the Company or any of its consolidated Subsidiaries, including but not limited to any change that has any effect on the calculation of any financial covenant in this Agreement. 6.04 Preservation of Corporate Existence, Etc. The Company and Medis ---------------------------------------- shall, and shall cause their respective Material Subsidiaries to: (a) preserve and maintain in full force and effect its corporate existence and good standing under the laws of their respective states or jurisdictions of incorporation except, in the case of any Material Subsidiary (other than Medis), in connection with transactions permitted by Section 7.02; and (b) preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary in the normal conduct of its business except in connection with transactions permitted by Section 7.02 or except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.05 Insurance. The Company and Medis shall maintain, and shall cause --------- each of their respective Material Subsidiaries to maintain, with financially sound and reputable insurers, insurance (including self-insurance) with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as the Company reasonably deems prudent from time to time. 6.06 Payment of Taxes. The Company and Medis shall, and shall cause each ---------------- of their respective Material Subsidiaries to, pay and discharge as the same shall become due and payable, all tax liabilities, assessments and governmental charges or levies 66 upon it or its properties or assets (other than obligations that a Responsible Officer is not aware of or are of a nominal amount), unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary. 6.07 Compliance with Laws. The Company and Medis shall comply, and shall -------------------- cause each of their respective Subsidiaries to comply, in all material respects with all material Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act), except such as may be contested in good faith or as to which a bona fide dispute may exist. 6.08 Inspection of Property and Books and Records. The Company and Medis -------------------------------------------- shall maintain and shall cause each of their respective Material Subsidiaries to maintain in all material respects proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company and such Subsidiary. The Company and Medis shall permit, and shall cause each of their respective Subsidiaries to permit, representatives and independent contractors of the Agent or any Bank to visit and inspect any of their respective properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants, at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; provided, -------- however, when an Event of Default exists the Agent or any Bank may do any of the - ------- foregoing at the reasonable expense of the Company at any time during normal business hours and without advance notice. 6.09 Use of Proceeds. The Company and Medis shall use the proceeds of --------------- the Loans for general corporate purposes not in contravention of any Requirement of Law or of any Loan Document. 6.10 Notice of Rating Change. The Company shall, no later than ten ----------------------- Business Days after a Responsible Officer obtains knowledge of any such change, give notice to the Agent (by telephone, followed promptly by written notice transmitted by facsimile with a hard copy sent promptly thereafter) of any change in rating by any Rating Agency in respect of the Company's long-term, senior unsecured debt, together with the details thereof, and of any announcement by any Rating Agency that its rating in respect of such senior unsecured long-term debt is "under review" or that any such debt rating has been placed on a "CreditWatch List"(R) or "watch list" or that any similar action has been taken by such Rating Agency. 67 ARTICLE VII NEGATIVE COVENANTS ------------------ So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation (other than Obligations under Section 10.05 that remain contingent after termination of the Commitments and payment of all other Obligations) shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 7.01 Limitation on Liens. The Company and Medis shall not, and shall not ------------------- suffer or permit any of their respective Subsidiaries to directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its property, whether now owned or hereafter acquired, other than the following ("Permitted Liens"): --------------- (a) any Lien existing on property of the Company or any Subsidiary on the Closing Date securing Indebtedness outstanding on such date; (b) any Lien created under any Loan Document; (c) Liens for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 6.07; (d) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty; (e) Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation; (f) Liens on the property of the Company or its Subsidiary securing (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, (ii) contingent obligations on surety and appeal bonds, and (iii) other non-delinquent obligations of a like nature; in each case, incurred in the ordinary course of business, provided all such Liens in the aggregate would not (even if enforced) cause a Material Adverse Effect; (g) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of the Company and its Subsidiaries; 68 (h) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a -------- dedicated cash collateral account and is not subject to restrictions against access by the Company in excess of those set forth by regulations promulgated by the FRB, and (ii) such deposit account is not intended by the Company or any Subsidiary to provide collateral to the depository institution; and (i) Any other Liens (other than any Lien imposed by ERISA or any Lien for taxes, fees, assessments or other governmental charges that is not expressly permitted under Section 7.01(c)); provided that the aggregate amount of all -------- Permitted Liens does not exceed at any time 25% of Net Worth. 7.02 Consolidations and Mergers. The Company shall not, and shall not -------------------------- suffer or permit any of its Material Subsidiaries to, directly or indirectly, merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except: (a) any Subsidiary may merge with the Company, provided that the Company shall be the continuing or surviving corporation, or with any one or more Subsidiaries, provided that if any transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be the continuing or surviving corporation; (b) any Subsidiary may sell all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Company or another Wholly-Owned Subsidiary; and (c) the Company may merge with another Person provided that the Company shall be the continuing or surviving corporation and no Default or Event of Default is in effect immediately prior to or on the date of or would result from such merger. 7.03 Use of Proceeds. (a) The Company and Medis shall not, and shall not --------------- suffer or permit any of their respective Subsidiaries to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act. (b) The Company and Medis shall not, directly or indirectly, use any portion of the Loan proceeds (i) knowingly 69 to purchase Ineligible Securities from the Arranger during any period in which the Arranger makes a market in such Ineligible Securities, (ii) knowingly to purchase during the underwriting or placement period Ineligible Securities being underwritten or privately placed by the Arranger, or (iii) to make payments of principal or interest on Ineligible Securities underwritten or privately placed by the Arranger and issued by or for the benefit of the Company or any Affiliate of the Company. The Arranger is a registered broker-dealer and permitted to underwrite and deal in certain Ineligible Securities; and "Ineligible ---------- Securities" means securities which may not be underwritten or dealt in by member - ---------- banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. (S) 24, Seventh), as amended. 7.04 Maximum Debt to Capitalization Ratio. The Company shall not permit ------------------------------------ the ratio of Total Debt to Total Capitalization as at the last day of any calendar month to exceed 0.565 to 1.00. ARTICLE VIII EVENTS OF DEFAULT ----------------- 8.01 Event of Default. Any of the following shall constitute an "Event ---------------- ----- of Default": - ---------- (a) Non-Payment. Either Borrower fails to pay, (i) when and as ----------- required to be paid herein, any amount of principal of any Loan made to such Borrower or the amount of any Draft or Bankers' Acceptance, or (ii) within 5 days after the same becomes due, any interest, fee or any other amount payable by such Borrower hereunder or under any other Loan Document; or (b) Representation or Warranty. Any representation or warranty by -------------------------- the Company or any Subsidiary made or deemed made herein, in any other Loan Document, or which is contained in any certificate, document or financial or other statement by the Company, any Subsidiary, or any Responsible Officer, furnished at any time under this Agreement, or in or under any other Loan Document, is incorrect in any material respect on or as of the date made or deemed made; or (c) Specific Defaults. The Company fails to perform or observe any ----------------- term, covenant or agreement contained in Section 6.04(a) or in Article VII; or (d) Other Defaults. Either Borrower fails to perform or observe any -------------- other term or covenant contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of 20 days after the earlier of (i) in the case of any provision in Article V or VI, the date upon which a Responsible Officer knew of such failure or 70 (ii) the date upon which written notice thereof is given to the Company by the Agent or any Bank; or (e) Cross-Default. The Company or any Subsidiary (i) fails to make ------------- any payment in respect of any Indebtedness or Contingent Obligation having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $10,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (ii) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any Indebtedness or Contingent Obligation having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $10,000,000, if the effect of such failure, event or condition is to cause such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or (f) Insolvency; Voluntary Proceedings. The Company or any Material --------------------------------- Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing; or (g) Involuntary Proceedings. (i) Any involuntary Insolvency ----------------------- Proceeding is commenced or filed against Company or any Material Subsidiary, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of Company's or any Material Subsidiary's properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) the Company or any Material Subsidiary admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company or any Material Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or 71 (h) ERISA. There shall occur one or more ERISA Events which ----- individually or in the aggregate results in or might reasonably be expected to result in liability of the Company or any of its Subsidiaries in excess of $25,000,000 during the term of this Agreement; or there shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), which exceeds 5% of Net Worth. 8.02 Remedies. If any Event of Default occurs, the Agent shall, at the -------- request of, or may, with the consent of, the Majority Banks, (a) declare the commitment of each Bank to make Loans or accept or discount Drafts or Bankers' Acceptances to be terminated, whereupon such commitments and the Banker's Acceptance Facility shall be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document (including an amount equal to the Face Amount of all unmatured Drafts and Bankers Acceptances) to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers; and (c) exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in subsection - -------- ------- (f) or (g) of Section 8.01 (in the case of clause (i) of subsection (g) upon the expiration of the 60-day period mentioned therein), the obligation of each Bank to make Loans or accept or discount Drafts or Bankers' Acceptances shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Agent or any Bank. 8.03 Rights Not Exclusive. The rights provided for in this Agreement and -------------------- the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. 72 ARTICLE IX THE AGENTS ---------- 9.01 Appointment and Authorization. Each Bank hereby irrevocably (subject ----------------------------- to Section 9.09) appoints, designates and authorizes each of the Agents to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, none of the Agents shall have any duties or responsibilities, except those expressly set forth herein, nor shall any of the Agents have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any of the Agents. 9.02 Delegation of Duties. Each of the Agents may execute any of its -------------------- duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact ("Delegate") and shall be entitled to advice of counsel concerning all matters pertaining to such duties; provided that, no Agent in its capacity as an Agent shall delegate its duty hereunder to make or receive payments unless the Delegate shall be a resident of the same jurisdiction as the Agent making such delegation. None of the Agents shall be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.03 Liability of Agent. None of the Agent-Related Persons shall (a) be ------------------ liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by any of the Agents under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or 73 records of the Company or any of the Company's Subsidiaries or Affiliates. 9.04 Reliance by the Agents. (a) Each of the Agents shall be entitled ---------------------- to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected with reasonable care by it. Each of the Agents shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each of the Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by any of the Agents to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Bank. 9.05 Notice of Default. None of the Agents shall be deemed to have ----------------- knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to it for the account of the Banks, unless it shall have received written notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". Each of the Agents will notify the Banks of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Majority Banks in accordance with Article VIII; provided, however, that unless and until the Agent has received -------- ------- any such request, the 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 or in the best interest of the Banks. 74 9.06 Credit Decision. Each Bank acknowledges that none of the Agent- --------------- Related Persons has made any representation or warranty to it, and that no act by any of the Agents hereinafter taken, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Bank. Each Bank represents to each of the Agents that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agents, none of the Agents shall have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of any of the Agent-Related Persons. 9.07 Indemnification of Agent. Whether or not the transactions ------------------------ contemplated hereby are consummated, the Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata, from and against any and all Indemnified Liabilities and any other liability, obligation, loss, damage, penalty, action, judgment, suit, cost, charge, expense or disbursement (including Attorney's Costs) that would be an Indemnified Liability but for the fact that it relates or arises out of a claim or threatened claim by a Borrower or other Person party to this Agreement, including under Section 6.02 of the Custodial Agreement and Section 7.01 of the Pledge Agreement; provided, however, that no Bank shall be liable for the -------- ------- payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse each of the Agents upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by it in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or 75 otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that it is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of any of the Agents. 9.08 Agents in Individual Capacity. Any of the Agents and any of their ----------------------------- Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company and its Subsidiaries and Affiliates as though such of the Agents was not one of the Agents hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, any of the Agents or any of their Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Subsidiary) and acknowledge that none of the Agents shall be under any obligation to provide such information to them. With respect to its Loans, each of the Agents shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not one of the Agents. The terms "Bank" and "Banks" include in its individual capacity. 9.09 Successor Agent. Any of the Agents may, and at the request of the ---------------- Majority Banks shall, resign as one of the Agents upon 30 days' notice to the Banks. If the Agent resigns under this Agreement, then the Co-Agent shall become the Agent. If the Co-Agent resigns as Agent, then the Majority Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by the Company. If no successor agent is appointed prior to the effective date of the resignation of the Agent or the Canadian Administrative Agent, the Agent may appoint, after consulting with the Banks and the Company, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent or Canadian Administrative Agent, as the case may be, and the terms "Agents", "Agent" or "Canadian Administrative Agent" shall mean such successor agent and the retiring agent's appointment, powers and duties as Agent or Canadian Administrative Agent, as the case may be, shall be terminated. After any retiring agent's resignation hereunder as Agent or Canadian Administrative Agent, as the case may be, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent or Canadian Administrative Agent, as the case may be, under this Agreement. If no successor agent has accepted appointment as Agent or Canadian Administrative Agent, as the case may be, by the date which is 30 days following a retiring agent's notice of resignation, the retiring 76 agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent or Canadian Administrative Agent, as the case may be, hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided for above. 9.10 Withholding Tax. (a) If any Tranche A Bank or Tranche B Domestic --------------- Bank is a "foreign corporation, partnership or trust" within the meaning of the Code and such Bank claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such Bank agrees with and in favor of the Agent, to deliver to the Agent: (i) if such Bank claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Forms 1001 and W-8 before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement; (ii) if such Bank claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Bank, two properly completed and executed copies of IRS Form 4224 before the payment of any interest is due in the first taxable year of such Bank and in each succeeding taxable year of such Bank during which interest may be paid under this Agreement, and IRS Form W-9; and (iii) such other form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Such Bank agrees to promptly notify the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (b) If any Tranche A Bank or Tranche B Domestic Bank claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form 1001 and such Bank sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to such Bank, such Bank agrees to notify the Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Company to such Bank. To the extent of such percentage amount, the Agent will treat such Bank's IRS Form 1001 as no longer valid. (c) If any Tranche A Bank or Tranche B Domestic Bank claiming exemption from United States withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a 77 participation in, or otherwise transfers all or part of the Obligations of the Company to such Bank, such Bank agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code. (d) If any Tranche A Bank or Tranche B Domestic Bank is entitled to a reduction in the applicable withholding tax, Agent may withhold from any interest payment to such Bank an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to the Agent, then the Agent may withhold from any interest payment to such Bank not providing such forms or other documentation an amount equivalent to the applicable withholding tax. (e) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Tranche A Bank or Tranche B Domestic Bank (because the appropriate form was not delivered, was not properly executed, or because such Bank failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Bank shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Tranche A Banks or Tranche B Banks under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent. (f) If any Tranche B Canadian Bank is not a resident of Canada for purposes of the Income Tax Act (Canada) and such Tranche B Canadian Bank claims exemptions from, or reduction of, Canadian withholding tax, such Tranche B Canadian Bank agrees with and in favor of the Agent and the Canadian Administrative Agent, to deliver to the Agent and the Canadian Administrative Agent all forms as may be required under the Income Tax Act (Canada) or other laws of Canada as a condition to exemption from, or reduction of, Canadian withholding tax. Such Tranche B Canadian Bank agrees to promptly notify the Agent and the Canadian Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction. If any Tranche B Canadian Bank claims exemption from, or reduction of, Canadian withholding tax and such Bank sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Medis to such Tranche B Canadian Bank, such Tranche B Canadian Bank agrees to notify the Agent and the Canadian Administrative Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of Medis to such Tranche B Canadian Bank. If any 78 Tranche B Canadian Bank is entitled to a reduction in the applicable Canadian withholding tax, the Canadian Administrative Agent may withhold from any interest payment to such Tranche B Canadian Bank an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by this subsection 9.10(f) are not delivered to the Agent or the Canadian Administrative Agent, then the Canadian Administrative Agent may withhold from any interest payment to such Tranche B Canadian Bank not providing such forms or other documentation an amount equivalent to the applicable withholding tax. If any Governmental Authority of Canada asserts a claim that the Canadian Administrative Agent or Medis did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form is not delivered, was not properly executed, or because such Tranche B Canadian Bank failed to notify the Canadian Administrative Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Tranche B Canadian Bank shall indemnify the Canadian Administrative Agent and Medis fully for all amounts paid, directly or indirectly, by the Canadian Administrative Agent or Medis as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Canadian Administrative Agent or Medis under this subsection 9.10(f), together with all costs and expenses (including Attorney Costs). The obligation of the Tranche B Canadian Bank under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Canadian Administrative Agent. 9.11 Collateral Matters. ------------------ (a) The Agent is authorized on behalf of all the Banks, without the necessity of any notice to or further consent from the Banks, from time to time to take any action with respect to any Collateral or the Collateral Documents which may be necessary to perfect and maintain perfected the security interest in and Liens upon the Collateral granted pursuant to the Collateral Documents. (b) The Banks irrevocably authorize the Agent, at its option and in its discretion, to release any Lien granted to or held by the Agent upon any Collateral (i) at the request of the Company in accordance with the terms of the Pledge Agreement at any time other than after the occurrence and during the existence of an Event of Default; (ii) upon termination of the Commitments and payment in full of all Loans and all other Obligations known to the Agent and payable under this Agreement or any other Loan Document; (iii) constituting property in which the Company or any Subsidiary owned no interest at the time the Lien thereon was granted or at any time thereafter (as to which the Agent may conclusively rely on a certificate of a Responsible Officer of the Company representing same); or (iv) if approved, authorized or ratified in writing by the 79 Majority Banks or all the Banks, as the case may be, as provided in subsection 10.01(f). Upon request by the Agent at any time, the Banks will confirm in writing the Agent's authority to release particular types or items of Collateral pursuant to this subsection 9.11(b). 9.12 Co-Agent. Except as set forth in the second sentence of Section -------- 9.09, the Co-Agent shall not have any duties or other obligations in its capacity as Co-Agent hereunder. ARTICLE X MISCELLANEOUS ------------- 10.01 Amendments and Waivers. No amendment or waiver of any provision of ---------------------- this Agreement or any other Loan Document, and no consent with respect to any departure by any Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks (or by the Agent at the written request of the Majority Banks) and the Company and acknowledged by the Agent and the Canadian Administrative Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, -------- ------- unless in writing and signed by all the Banks, the Company and, if such waiver, amendment or consent relates to Medis or rights or Obligations of Medis, Medis and acknowledged by the Agent and the Canadian Administrative Agent, do any of the following: (a) increase or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to Section 8.02)or increase or extend the obligation of any Bank to accept or discount Drafts or Bankers' Acceptances; (b) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any other Loan Document; (c) reduce the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (ii) below) any fees or other amounts payable hereunder or under any other Loan Document (including, without limitation, a decrease in any amount payable in respect of Drafts or Bankers' Acceptances); (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder; 80 (e) amend this Section, or Section 2.13, or any provision herein providing for consent or other action by all Banks; or (f) release all or substantially all of the Collateral after the occurrence and during the continuance of an Event of Default except as otherwise may be provided in the Collateral Documents or in subsection 9.11(b); and, provided, further, that (i) no amendment, waiver or consent shall, unless -------- ------- in writing and signed by the Agent or the Canadian Administrative Agent, as the case may be, in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Agent or the Canadian Administrative Agent under this Agreement or any other Loan Document, and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed by the parties thereto. 10.02 Notices. (a) All notices, requests and other communications ------- required or permitted hereunder shall be in writing, except as otherwise expressly set forth herein (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by either of the Borrowers by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on Schedule 10.02, and -------------- (ii) shall be followed promptly by delivery of a hard copy original thereof), and mailed, faxed or delivered, to the address or facsimile number specified for notices on Schedule 10.02; or, as directed to the Borrowers, the Agent or the -------------- Canadian Administrative Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Company and the Agents. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant to Article II or IX shall not be effective until actually received by the Agent and/or the Canadian Administrative Agent, as applicable. (c) Any agreement of the Agents and the Banks herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Borrowers. Any of the Agents and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by a Borrower to give such notice and the Agents and the Banks shall not have any liability to either Borrower or other Person on account of any action taken or not taken by the Agents or the Banks in reliance upon such telephonic or facsimile notice. The 81 obligation of Borrowers to repay the Loans made to it shall not be affected in any way or to any extent by any failure by the Agents and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agents and the Banks of a confirmation which is at variance with the terms understood by the Agents and the Banks to be contained in the telephonic or facsimile notice. 10.03 No Waiver; Cumulative Remedies. No failure to exercise and no ------------------------------ delay in exercising, on the part of the Agent, the Canadian Administrative Agent or any Bank, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies of the parties provided herein and in the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. 10.04 Costs and Expenses. The Company and Medis jointly and severally ------------------ shall: (a) whether or not the transactions contemplated hereby are consummated, pay or reimburse all Agent-Related Persons (including BofA in its capacity as Agent) within five Business Days after demand (subject to subsection 4.01(f)) for all reasonable costs and expenses incurred by such Agent-Related Persons (including BofA in its capacity as Agent) reasonably required in connection with the development, preparation, negotiation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby including reasonable Attorney Costs incurred by such Agent-Related Persons (including BofA in its capacity as Agent) with respect thereto; provided that any costs and expenses incurred under this subsection 10.04(a) prior to the Closing Date shall be limited to the out-of-pocket costs and expenses of the Agent, the Canadian Administrative Agent and the Arranger, including reasonable Attorneys Costs incurred by the Agent and the Canadian Administrative Agent; and (b) pay or reimburse all Agent-Related Persons and each Bank within five Business Days after demand (subject to subsection 4.01(f)) for all costs and expenses (including Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any "workout" or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding). 82 10.05 Borrower Indemnification. Whether or not the transactions ------------------------ contemplated hereby are consummated, Company and Medis jointly and severally shall indemnify and hold the Agent-Related Persons, and each Bank and each of its respective officers, directors, employees, counsel, agents and attorneys-in- fact (each, an "Indemnified Person") harmless from and against any and all ------------------ liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of any of the Agents or replacement of any Bank) be imposed on, incurred by or asserted against any such Person as a result of any claim or threatened claim by a Person not party to this Agreement or by a Borrower (except for claims by a Borrower or against any Agent or a Bank that are successful on the merits as determined by a court of competent jurisdiction), in any case in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, or related to any Canadian Dollar transactions entered into in connection herewith whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided that a Borrower shall have no obligation ----------------------- -------- hereunder to any Indemnified Person with respect to Indemnified Liabilities to the extent resulting from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations; provided further that this Section 10.05 shall not be construed to expand the obligations of a Borrower to make payments to the Banks in the circumstances required under subsections 3.01, 3.02, 3.03, 3.04 or 3.05, it being understood and agreed that such subsections shall govern the rights and obligations of the Borrowers and the Banks as to matters set forth therein, or to require a Borrower to compensate a Bank for any Indemnified Liability relating to its cost of funds for any Borrowing. 10.06 Payments Set Aside. To the extent that a Borrower makes a payment ------------------ to any of the Agents or the Banks, or any of the Agents or the Banks exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agents or such Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied 83 shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Bank severally agrees to pay to the Agents upon demand its pro rata share of any amount so recovered from or repaid by the Agents. 10.07 Successors and Assigns. The provisions of this Agreement shall be ---------------------- binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank. 10.08 Assignments, Participations, etc. (a) Any Bank may, with the --------------------------------- written consent of the Company at all times other than during the existence of an Event of Default and the Agent, which consent of the Agent shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Company or the Agent shall be required in connection with any assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee") all, -------- or any ratable part of all, of the Loans, Bankers' Acceptance Facility, the Commitments (including the Tranche B Commitments) and the other rights and obligations of such Bank hereunder, in a minimum amount of $10,000,000 or any multiple of $5,000,000 in excess thereof; provided, however, that the Borrowers -------- ------- and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered to the Company and the Agent an Assignment and Acceptance substantially in the form of Exhibit E ("Assignment and Acceptance") with such ------------------------- changes thereto as the Agent and the Company may approve together with any Note or Notes subject to such assignment and (iii) the assignor Bank or Assignee has paid to the Agent a processing fee in the amount of $3,500. Notwithstanding anything to the contrary in this subsection 10.08(a), no Tranche B Bank that has an Affiliate Bank shall make or grant any sale, assignment, transfer or negotiation with respect to any percentage of its Loans, Bankers Acceptance Facility, Bankers Acceptances, Commitments or any other Obligation to any other Person (other than to an Affiliate of such Bank) unless its Bank Affiliate shall simultaneously make or grant an assignment with respect to the same percentage of its Loans, Bankers Acceptances, Bankers Acceptance Facility, Commitments or other Obligations to such Person. (b) From and after the date that the Agent notifies the assignor Bank that it has received (and provided its consent and received the Company's consent with respect to) an executed Assignment and Acceptance and payment of the above-referenced 84 processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents. (c) If the assignor Bank had received any Notes, within five Business Days after its receipt of notice by the Agent that it has received an executed Assignment and Acceptance and payment of the processing fee, (and provided that the Company and the Agent have consented to such assignment in accordance with subsection 10.08(a)), each Borrower, as applicable, shall execute and deliver to the Agent, new Notes evidencing such Assignee's assigned Loans and, if the assignor Bank has retained a portion of its Loans, replacement Notes in the principal amount of the Loans retained by the assignor Bank (such Notes to be in exchange for, but not in payment of, the Notes held by such Bank). Immediately upon each Assignee's becoming a party to this Agreement in accordance with Section 10.08(b)(i), this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Tranche A Commitments and the Tranche B Commitments arising therefrom. The Tranche A Commitment or Tranche B Commitment allocated to each Assignee shall reduce the Tranche A Commitment or Tranche B Commitment of the assigning Bank pro tanto. --- ----- (d) Any Bank may, with the written consent of the Company at all times other than during the existence of an Event of Default and the Agent, which consent of the Agent shall not be unreasonably withheld, at any time sell to one or more Eligible Assignees (provided that no written consent of the Company or the Agent shall be required in connection with any participation by a Bank to an Eligible Assignee that is an Affiliate of such Bank) (a "Participant") participating interests in any Loans, Bankers' Acceptances, the ----------- Bankers' Acceptance Facility, the Tranche A Commitment or Tranche B Commitment of that Bank and the other interests of that Bank (the "originating Bank") hereunder and under the other Loan Documents; provided, however, that (i) the -------- ------- originating Bank's obligations under this Agreement shall remain unchanged, (ii) the originating Bank shall remain solely responsible for the performance of such obligations, (iii) the Borrowers and the Agent shall continue to deal solely and directly with the originating Bank in connection with the originating Bank's rights and obligations under this Agreement and the other Loan Documents, (iv) no Tranche B Bank which has an Affiliate Bank shall make or grant any participation with respect to any percentage of its Loans, Bankers' Acceptance Facility, Bankers' Acceptances, Tranche A Commitment or Tranche B Commitment or any 85 other Person (other than an Affiliate of such Bank) unless its Affiliate Bank shall simultaneously make or grant a participation with respect to the same percentage of its Loans, Bankers' Acceptances, Bankers' Acceptance Facility, Tranche A Commitments or Tranche B Commitments to such Person; and (v) no Bank shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Banks as described in the first proviso to Section 10.01. In the case of any such ----- ------- participation, the Participant shall not have any rights under this Agreement, or any of the other Loan Documents, and all amounts payable by the Borrowers hereunder shall be determined as if such Bank had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement. (e) Notwithstanding any other provision in this Agreement, any Bank may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and any Notes held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR (S)203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. (f) Notwithstanding this Section 10.08, no consent of the Company or Agent or other requirements in this Section 10.08 shall be required to be satisfied in connection with the purchase of a Bankers' Acceptance by a participant as contemplated by subsection 2.17. 10.09 Confidentiality. Each of the Agents and each Bank agrees to take --------------- and to cause its Affiliates (including the Agent-Related Persons) to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or "secret" by the Company and provided to it by the Company or any Subsidiary, or by any of the Agents on such Company's or Subsidiary's behalf, under this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents or in connection with other business now or hereafter existing or contemplated with the Company or any Subsidiary, except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by any of the Agents or such Bank, or (ii) was or 86 becomes available on a non-confidential basis from a source other than the Company, provided that such source is not bound by a confidentiality agreement with the Company known to the Agent or such Bank; provided, however, -------- ------- that any of the Agents and any Bank may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which any of the Agents or any Bank is subject or in connection with an examination of such Bank by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (E) to such Bank's independent auditors and other professional advisors and to any of the Agents or any other Bank; (F) to any Participant or Assignee, actual or potential, provided that such Person agrees in writing to keep such information confidential to the same extent required of the Banks hereunder; (G) as to any of the Agents or any Bank or its Affiliate, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Company or any Subsidiary is party or is deemed party with such Bank or such Affiliate; and (H) to its Affiliates; provided, -------- further, that to the extent permitted by applicable law or regulation, each of - ------- the Agents and each Bank agree to notify the Company prior to (if reasonably practicable) or concurrently with its disclosure of such information to any third party pursuant to clauses (B), (C), or (F). 10.10 Set-off. In addition to any rights and remedies of the Banks ------- provided by law, if an Event of Default exists or the Loans have been accelerated, each Bank is authorized at any time and from time to time, without prior notice to the Company or Medis, any such notice being waived by the Company and Medis to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Bank to or for the credit or the account of the Company or Medis against any and all Obligations owing to such Bank, now or hereafter existing, irrespective of whether or not any of the Agents or such Bank shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured and the Applicable Agent. Each Bank agrees promptly to notify the Company and the Agent and the Applicable Agent after any such set-off and application made by such Bank; provided, however, that the failure to give such -------- ------- notice shall not affect the validity of such set-off and application. 10.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall ----------------------------------------------- notify the Agent and the Applicable Agent in writing of any changes in the address to which notices to the Bank should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it 87 hereunder and of such other administrative information as the Agent and the Applicable Agent shall reasonably request. 10.12 Counterparts. This Agreement may be executed in any number of ------------ separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 10.13 Severability. The illegality or unenforceability of any provision ------------ of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.14 No Third Parties Benefited. This Agreement is made and entered -------------------------- into for the sole protection and legal benefit of the Borrowers, the Banks, the Agents and the Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. 10.15 Governing Law and Jurisdiction; Language. (a) THIS AGREEMENT AND ---------------------------------------- THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS. MATTERS PERTAINING TO BANKERS' ACCEPTANCES SHALL, TO THE EXTENT APPLICABLE, BE GOVERNED BY THE BILLS OF EXCHANGE ACT (CANADA). (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS, THE AGENTS AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON- EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWERS, THE AGENTS AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY -------------------- NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE BORROWERS, THE AGENTS AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. (c) The Borrowers expressly require that this document and all documents accessory hereto be drawn up in English and each Agent and each Bank, because of the customer's requirement and by making such documents available to the customer in the English language, expresses the same requirement. 88 Les Emprunteurs requierent expressement que ce document et tous les documents qui s'y rapportent soient rediges en langue anglaise et chaque Mondataire et chaque Banque, a cause de cette exigence du client, exprime la meme volonte en faisant en sorte que les documents en langue anglaise soient a la disposition du client. 10.16 Waiver of Jury Trial. THE BORROWERS, THE BANKS AND THE AGENTS EACH -------------------- WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWERS, THE BANKS AND THE AGENTS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 10.17 Judgment. If, for the purposes of obtaining judgment in any court, -------- it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of a Borrower in respect of any such sum due from it to the Agent hereunder or under the other Loan Documents shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the "Agreement Currency"), be discharged only to the extent that on the Business Day following receipt by the Agent of any sum adjudged to be so due in the Judgment Currency, the Agent may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Agent in the Agreement Currency, the Borrowers agree, as a separate obligation and notwithstanding any such judgment, to indemnify the Agent or the Person to whom such obligation was owing against such loss. If the amount of the Agreement currency so purchased is greater than the sum originally due to the Agent in such currency, the Agent agrees to return the amount of any excess to the applicable Borrower (or to any other Person who may be entitled thereto under applicable law). 89 10.18 Entire Agreement. This Agreement, together with the other Loan ---------------- Documents, embodies the entire agreement and understanding among the Borrowers, the Banks and the Agents, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. 90 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in San Francisco by their proper and duly authorized officers as of the day and year first above written. McKESSON CORPORATION By: ---------------------- Title: ------------------- Vice President Finance MEDIS HEALTH AND PHARMACEUTICAL SERVICES INC. By: ---------------------- Title: ------------------- Vice President Finance BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: ------------------------- Title: ---------------------- BANK OF AMERICA CANADA, as Canadian Administrator Agent By: ________________________ Title: _____________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: _________________________ Title: ______________________ S-1 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in San Francisco by their proper and duly authorized officers as of the day and year first above written. McKESSON CORPORATION By: ______________________ Title: ___________________ MEDIS HEALTH AND PHARMACEUTICAL SERVICES INC. By: ______________________ Title: ___________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: _________________________ Title: ______________________ BANK OF AMERICA CANADA as Canadian Administrator Agent By: ------------------------- Title: ---------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: _________________________ Title: ______________________ S-1 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in San Francisco by their proper and duly authorized officers as of the day and year first above written. McKESSON CORPORATION By: ______________________ Title: ___________________ MEDIS HEALTH AND PHARMACEUTICAL SERVICES INC. By: ______________________ Title: ___________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: ________________________ Title: _____________________ BANK OF AMERICA CANADA, as Canadian Administrator Agent By: ________________________ Title: _____________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: ------------------------- Title: ---------------------- S-1 BANK OF AMERICA CANADA, as a Bank By: ------------------------- Title: ---------------------- S-2 CHEMICAL BANK By: ------------------------- Title: ---------------------- S-3 CHEMICAL BANK OF CANADA By: ------------------------- Title: ---------------------- S-4 THE CHASE MANHATTAN BANK N.A. By: ------------------------- Title: ---------------------- S-5 THE CHASE MANHATTAN BANK OF CANADA By: ------------------------- Title: S-6 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: ------------------------- Title: ---------------------- S-7 MORGAN BANK OF CANADA By: ------------------------- Title: ---------------------- S-8 FIRST INTERSTATE BANK OF CALIFORNIA By: ------------------------- Title: ---------------------- By: ------------------------- Title: ---------------------- S-9 ABN AMRO BANK N.V. By: ------------------------- Title: ---------------------- By: ------------------------- Title: ---------------------- S-10 ABN AMRO BANK CANADA Montreal Branch By: ------------------------- Title: ---------------------- By: ------------------------- Title: ---------------------- S-11 THE FIRST NATIONAL BANK OF CHICAGO By: ------------------------- Title: ---------------------- S-12 TORONTO DOMINION (TEXAS), INC. By: ------------------------- Title: ---------------------- S-13 THE TORONTO-DOMINION BANK By: ------------------------- Title: ______________________ S-14 SCHEDULE 2.01 ------------- COMMITMENTS/PRO RATA SHARES/AFFILIATE BANKS ------------------------------------------- A. Tranche A Banks ---------------
Tranche A Tranche A Bank Commitment Pro Rata Share Commitment Pro Rata Share ---- ---------- -------------- ---------- -------------- Bank of America $ 50,000,000 20% $ 31,250,000 17.857142857% National Trust and Savings Association Chemical Bank $ 45,000,000 18% $ 28,125,000 16.071428571% The Chase $ 30,000,000 12% $ 18,750,000 10.714285714% Manhattan Bank N.A. Morgan Guaranty $ 25,000,000 10% $ 15,625,000 8.928571429% Trust Company of New York First Interstate $ 25,000,000 10% $ 25,000,000 14.285714286% Bank of California ABN AMRO Bank $ 25,000,000 10% $ 15,625,000 8.928571429% N.V. The First $ 25,000,000 10% $ 25,000,000 14.285714286% National Bank of Chicago Toronto Dominion $ 25,000,000 10% $ 15,625,000 8.928571429% (Texas), Inc. Total: $250,000,000 100% $175,000,000 100%
Schedule 2.01 B. Tranche B Banks ---------------
Tranche B Commitment of Bank and Affiliate Domestic Canadian Affiliate Bank Tranche B Pro Bank Bank Bank Bank Combined Rata Share ---- --------- -------- -------- -------------- ------------- Bank of Bank of Bank of Bank of $ 18,750,000 25% America America America America National Canada National Canada Trust & Trust & Savings Savings Association Association Chemical Bank Chemical Bank Chemical Bank Chemical Bank $ 16,875,000 22.50% of Canada of Canada The Chase The Chase The Chase The Chase $ 11,250,000 15% Manhattan Manhattan Manhattan Manhattan Bank N.A. Bank of Bank N.A. Bank of Canada Canada Morgan Morgan Bank Morgan Morgan Bank $ 9,375,000 12.50% Guaranty of Canada Guaranty of Canada Trust Company Trust Company of New York of New York ABN AMRO Bank ABN AMRO Bank ABN AMRO Bank ABN AMRO Bank $ 9,375,000 12.50% N.V. Canada N.V. Canada Toronto The Toronto- Toronto The Toronto- $ 9,375,000 12.50% Dominion Dominion Bank Dominion Dominion Bank Texas, (Inc.) Texas, (Inc.) Total: $ 75,000,000 100%
Schedule 2.01 Schedule 5.11 (a) As of the Closing Date, the listing below is a complete list of the corporate Subsidiaries of the Company. (b) As of the Closing Date, there is no outstanding Indebtedness of the Company and its Subsidiaries for borrowed money in excess of $10,000,000 that is secured by a Lien existing on property of the Company or any of its Subsidiaries. ================================ McKESSON CORPORATION (DELAWARE) ================================
================================================================================================================================= DOMESTIC/FOREIGN CORPORATIONS % OF STATE OF AND THEIR SUBSIDIARIES OWNERSHIP INCORPORATION ================================================================================================================================= Armor All Products Corporation 54.65 Delaware Armor All International (FSC), Inc. 100 U.S. Virgin Islands Armor All Products GmbH 100 West Germany Armor All Products of Canada, Inc. 100 Canada Armor All Products (U.K.) Limited 100 England Beldere Corporation 100 California S.K.U., Inc. 50 California California Golden State Finance Company 100 California Calox International, S.A. 100 Panama Calox Ecuatoriana, S.A. 100 Ecuador Calox Panamena, S.A. 50 Panama Vehiculos Italianos, S.A. 100 Panama Capitales Asociados, S.A. 86.80 Panama General Mills de Panama, S.A. 50 Panama Harinas y Cereales 100 Panama Industrial Tecnica Panamericana, S.A. 50 Panama Semolas de Panama, S.A. 50 Panama City Properties, S.A. 20 Panama Corporacion Bonima, S.A. DE C.V. 97.87 El Salvador Comercial Farmaceutica Interamericana, S.A. 100 Costa Rica Comercial Interamericana, S.A. 100 Dom. Republic Comercial Interamericana, S.A. 100 Guatemala Comercial Interamericana, S.A. de C.V. 100 Honduras Corporacion Farmaceutica Interamericana, S.A. 100 Nicaragua Distribuidores Especialidades, S.A. 100 Panama Corporation of America 100 California Crocker Plaza Company 100 Delaware First Aid, Inc. 100 California Zee Service, Inc. 100 California Flex-Master Technology Holdings, Inc. 100 California Foremost Iran Corporation 100 California Foremost-McKesson Property Company, Inc. 100 California DC Land Company 100 California DCAZ Land Company 100 Delaware Foremost Homes Hawaii, Ltd. 100 Hawaii HF Land Company 100 Delaware
1 ================================ McKESSON CORPORATION (DELAWARE) ================================
================================================================================================================================= DOMESTIC/FOREIGN CORPORATIONS % OF STATE OF AND THEIR SUBSIDIARIES OWNERSHIP INCORPORATION ================================================================================================================================= Foremost Shir, Inc. 100 California Foremost Tehran, Inc. 100 California Golden State Company, Ltd. 100 California Golden State Insurance Company Limited 100 Bermuda Golden State Milk Products Company 100 California Goodman Manufacturing Company 100 Pennsylvania Healthcare Delivery Systems, Inc. 100 Delaware Intercal, Inc. 15 Panama International Dairy Engineering Co. of Asia, Inc. 100 Nevada Macfor International Finance Company 100 Delaware La Vascongada, S.A.C. c I 10 Argentina McKesson Canada Inc. 100 Canada Medis Health and Pharmaceutical Services Inc. 100 Canada Good Neighbour Pharmacy Ltd. 100 Canada Smith's Drug Store (Digby) Limited 100 Canada McKesson (Cayman Islands) Inc. 100 Cayman Islands NADRO, S.A. de C.V. 22.67 Mexico McKesson International Investment Corp. 100 Delaware N.V. Medicopharma 100 The Netherlands McKesson Outcomes Research Corporation 100 Delaware McKesson Transportation Systems, Inc. 100 Delaware McKesson Water Products Company 100 California Hygeia Bottled Water, Inc. 100 Texas Millbrook Distribution Services Co. 100 Indiana Mohawk Liqueur Corporation 100 Michigan Penn-Chem Corporation 100 Pennsylvania Sunbelt Beverage Corporation 20.26 Delaware Very Important Products, Inc. 100 California West Wholesale Drug Co. 100 Delaware Zee Medical Canada, Inc. 100 Canada
2 SCHEDULE 10.02 -------------- AGENT'S PAYMENT OFFICE, CANADIAN AGENT'S PAYMENT OFFICE, -------------------------------------------------------- OFFSHORE AND DOMESTIC LENDING OFFICES, -------------------------------------- ADDRESSES FOR NOTICES --------------------- AGENT'S PAYMENT OFFICE - ---------------------- Bank of America National Trust and Savings Association ABA No. 1210-0035-8 Attention: Agency Management Services #5596 For credit to Bancontrol A/C No. 12333-15089 Ref: McKesson Corporation CANADIAN ADMINISTRATIVE AGENT'S PAYMENT OFFICE - ---------------------------------------------- Royal Bank of Canada Financial Institutions Client Service 180 Wellington Street West, 6th Floor Toronto, Ontario M5J 1J1 Cdn. Dollar A/C No. 000053-9 Transit No. 07172 or via Swift Account: BOFACATT BANK OF AMERICA NATIONAL TRUST - ------------------------------ AND SAVINGS ASSOCIATION, as Agent - ----------------------- Bank of America National Trust and Savings Association Agency Management Services #5596 1455 Market Street, 12th Floor San Francisco, California 94103 Attention: Ivo Bakovic, Vice President Telephone: (415) 622-1158 Facsimile: (415) 622-4894 Schedule 10.02 BANK OF AMERICA NATIONAL TRUST - ------------------------------ AND SAVINGS ASSOCIATION, as a Bank - ---------------------------------- Domestic and Offshore Lending Office: 1850 Gateway Boulevard, Fourth Floor Concord, California 94520-3281 Attention: Shireen Watson, Account Administrator Telephone: (510) 885-7080 Facsimile: (510) 675-7531, (510) 675-7532 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Bank of America National Trust and Savings Association Credit Products No. 3838 555 California Street, 41st Floor San Francisco, California 94104-1502 Attention: Maria Vickroy-Peralta, Vice President Telephone: (415) 622-7198 Facsimile: (415) 622-4585 BANK OF AMERICA CANADA, as a Bank - --------------------------------- Domestic and Offshore Lending Office: Bank of America Canada 4 King Street West, 18th Floor Toronto, Ontario M5H 1B6, Canada Attention: Lori Burek, Assistant Vice President Telephone: (416) 863-5346 Facsimile: (416) 863-4040 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Bank of America Canada 1250 Rene Levesque Blvd. West 43rd Floor Montreal, Quebec H3B 4W8, Canada Attention: Gilles De Montignyl, Vice President and General Manager Telephone: (514) 938-1600 Facsimile: (514) 938-1601 Schedule 10.02 CHEMICAL BANK - ------------- Domestic and Offshore Lending Office: 270 Park Avenue, 10th Floor New York, New York 10017 Attention: Thomas Brennan Telephone: (212) 270-4263 Facsimile: (212) 818-1456 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): 270 Park Avenue, 10th Floor New York, New York 10017 Attention: David Corcoran Telephone: (212) 270-5032 Facsimile: (212) 270-1403 CHEMICAL BANK OF CANADA - ----------------------- Domestic and Offshore Lending Office: Chemical Bank of Canada 100 Younge Street Suite 900 Toronto, Ontario, M5C2W1, Canada Attention: Martha Tamayo Telephone: (416) 594-2223 Facsimile: (416) 594-2240 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Chemical Bank of Canada 100 Younge Street Suite 900 Toronto, Ontario M5C2W1, Canada Attention: Martha Tamayo Telephone: (416) 594-2223 Facsimile: (416) 594-2240 Schedule 10.02 THE CHASE MANHATTAN BANK N.A. - ----------------------------- Domestic and Offshore Lending Office: Two Chase Manhattan Plaza New York, New York 10081 Attention: Rocky Chan, Administrative Assistant Telephone: (212) 552-2920 Facsimile: (212) 552-7375 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): One Chase Manhattan Plaza New York, New York 10081 Attention: Ellen Gertzog, Vice President Telephone: (212) 552-1721 Facsimile: (212) 552-7075 THE CHASE MANHATTAN BANK OF CANADA - ---------------------------------- Domestic and Offshore Lending Office: The Chase Manhattan Bank of Canada 150 King Street West Suite 1600, Box 68 Toronto, Ontario, M5H 1J9, Canada Attention: Amanda Staff Telephone: (416) 585-3324 Facsimile: (416) 586-3370 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): The Chase Manhattan Bank of Canada 150 King Street West Suite 1600, Box 68 Toronto, Ontario M5H 1J9, Canada Attention: Arun Bery Telephone: (416) 585-3321 Facsimile: (416) 586-3370 Schedule 10.02 MORGAN GUARANTY TRUST COMPANY OF NEW YORK - ----------------------------------------- Domestic Lending Office: c/o J.P. Morgan Services, Inc. 500 Stanton Christiana Road Newark, DE 19713-2107 Attention: Jeannie Mattson, Associate Telephone: (302) 632-1938 Facsimile: (302) 634-1092, (302) 634-1091 Offshore Lending Office: Morgan Guaranty Trust Company of New York Nasau Bahamas Office c/o J.P. Morgan Services, Inc. Euro-Loan Servicing Unit 902 Market Street Wilmington, Delaware 19801 Telex No./Answerback: 177425 MRDEL UT Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): 22/60 Wall Street New York, New York 10260-0060 Attention: David Ellis, Vice President Telephone: (212) 648-7638 Facsimile: (212) 648-5014 Telex No./Answerback: 177615 MGT UT or 620106 MGT UW MORGAN BANK OF CANADA - --------------------- Domestic and Offshore Lending Office: Royal Bank Plaza South Tower, 22nd Floor Toronto, Ontario, M5J 2J2, Canada Attention: Gerda Grasshoff Telephone: (416) 981-9173 Facsimile: (416) 981-9279 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Royal Bank Plaza South Tower, 22nd Floor Toronto, Ontario, M5J 2J2, Canada Attention: Inna Zalz Telephone: (416) 981-9245 Facsimile: (416) 981-9279 Schedule 10.02 FIRST INTERSTATE BANK OF CALIFORNIA - ----------------------------------- Domestic and Offshore Lending Office: 18700 N.W. Walker, Bldg. 92 Beaverton, OR 97006 Attention: Patrice Bishop, Supervisor Telephone: (503) 614-6374 Facsimile: (503) 614-5878 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation) 345 California Street, 23rd Floor San Francisco, CA 94104 Attention: Marianne Mitosinka, Vice President Telephone: (415) 773-7053 Facsimile: (415) 773-7062 ABN AMRO BANK N.V. - ------------------ Domestic and Offshore Lending Office: 101 California Street Suite 4550 San Francisco, California 94111-5812 Attention: Gloria Lee, Operations Officer Telephone: (415) 984-3720 Facsimile: (415) 362-3524 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): 101 California Street Suite 4550 San Francisco, California 94111-5812 Attention: Gina Brusatori, Vice President Telephone: (415) 984-3720 Facsimile: (415) 362-3524 Schedule 10.02 ABN AMRO BANK CANADA - -------------------- Montreal Branch - --------------- Domestic and Offshore Lending Office: 2000 Peel Street Suite 860 Montreal, Quebec, H3A 2W5, Canada Attention: Nathalie Patriarco Telephone: (514) 284-1133 Facsimile: (514) 284-2357 Attention: Nicole Richard Telephone: (514) 284-1133 Facsimile: (514) 284-2357 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): 2000 Peel Street Suite 860 Montreal, Quebec, H3A 2W5, Canada Attention: Enrico Pallotta, Vice President Telephone: (514) 284-1133 Facsimile: (514) 284-2357 Attention: Aernout De Willebois, Assistant Vice President Telephone: (514) 284-1133 Facsimile: (514) 284-2357 THE FIRST NATIONAL BANK OF CHICAGO - ---------------------------------- Domestic and Offshore Lending Office: One First National Plaza, 10th Floor Suite 0634 Chicago, Illinois 60670-0363 Attention: Marilyn E. Fisher, Customer Service Officer Telephone: (312) 732-7172 Facsimile: (312) 732-4840 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): 777 S. Figueroa Street, 4th Floor Los Angeles, CA 90017-5800 Attention: Michael P. Gage, Vice President Telephone: (213) 683-4976 Facsimile: (213) 683-4949 Schedule 10.02 TORONTO DOMINION (TEXAS), INC. - ------------------------------ Domestic and Offshore Lending Office: c/o The Toronto-Dominion Bank 909 Fannin, Suite 1700 Houston, Texas 77010 Attention: Diane Baily, Manager-Credit Administration Telephone: (713) 653-8250 Facsimile: (713) 951-9921 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): c/o The Toronto-Dominion Bank 909 Fannin Suite 1700 Houston, Texas 77010 Attention: John Geresi, Director, Corporate Accounts Telephone: (713) 653-8207 Facsimile: (713) 262-1926 THE TORONTO-DOMINION BANK - ------------------------- Domestic and Offshore Lending Office: The Toronto-Dominion Bank 500 St. James Street, 5th Floor Montreal, Quebec, H2Y 1S1, Canada Attention: Sylvie Lapointe Josiane Lauvigne Telephone: (514) 289-8339 Facsimile: (514) 289-0988 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): The Toronto-Dominion Bank 500 St. James Street, 5th Floor Montreal, Quebec, H2Y 1S1, Canada Attention: Jean Francois Gaudin Telephone: (514) 289-0102 Facsimile: (514) 289-0788 Schedule 10.02 EXHIBIT A NOTICE OF BORROWING ------------------- Date: ________________, ____ To: Bank of America National Trust and Savings Association as Agent [and Bank of America Canada, as Canadian Administrative Agent]1 for the Banks parties to the Credit Agreement dated as of March 31, 1995 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") among ---------------- McKesson Corporation, Medis Health and Pharmaceutical Services Inc., certain Banks which are signatories thereto, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent Ladies and Gentlemen: The undersigned, McKesson Corporation (the "Company") [and Medis Health and ------- Pharmaceutical Services Inc. ("Medis")]/1/, refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.03 of the Credit Agreement, of the Borrowing specified below. 1. The Business Day of the proposed Borrowing is ________________________, ____. 2. The Borrower is _________________________. 3. The aggregate amount of the proposed Borrowing is $_____________________. 4. The Borrowing is to be comprised of $___________ of [Tranche A] [Tranche B Domestic] [Tranche B Canadian] Loans and is to be a [Base Rate] [CD Rate] [Offshore Rate] [Canadian Prime Rate] Loan. 5. The duration of the Interest Period for the [CD Rate Loans] [Offshore Rate Loans] included in the Borrowing shall be [_____ days] [_____ months]. 6. The Applicable Currency is [Dollars] [Canadian Dollars]. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the __________________ /1/ Include bracket language only if Canadian Loans are requested. A-1 date of the proposed Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom: (a) the representations and warranties of the Borrowers contained in Article V of the Credit Agreement are true and correct as though made on and as of such date (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date); (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Borrowing; [and] (c) The proposed Borrowing will not cause the aggregate principal amount of all outstanding Tranche A Loans and the Total Utilization of Tranche B Commitments to exceed the combined Commitments [or the aggregate principal amount of all outstanding Tranche A Loans to exceed the combined Tranche A Commitments] [or the Total Utilization of Tranche B Commitments to exceed the Tranche B Commitments] of the Banks[.] [; and] [(d)/1/ Medis is a wholly-owned Subsidiary of the Company.] MCKESSON CORPORATION By: _________________________ Title: ______________________ [MEDIS HEALTH AND PHARMACEUTICAL SERVICES INC.]/1/ By: _________________________ Title: ______________________ __________________________ /1/ Include bracketed language only if Canadian Loans are requested. A-2 EXHIBIT B NOTICE OF CONVERSION/CONTINUATION --------------------------------- Date: ________________, ____ To: Bank of America National Trust and Savings Association, as Agent [and Bank of America Canada]/1/, as Canadian Administrative Agent, for the Banks parties to the Credit Agreement dated as of March 31, 1995 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") ---------------- among McKesson Corporation, Medis Health and Pharmaceutical Services, Inc., certain Banks which are signatories thereto, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent Ladies and Gentlemen: The undersigned, McKesson Corporation (the "Company") [and Medis Health ------- and Pharmaceutical Services Inc. ("Medis")]/1/, refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.04 of the Credit Agreement, of the [conversion] [continuation] of the Loans specified herein, that: 1. The Conversion/Continuation Date is ____________, ____. 2. The Borrower is ____________________. 3. The aggregate amount of the [Tranche A] [Tranche B Domestic] [Tranche B Canadian] Loans to be [converted] [continued] is $______________. 4. The Loans are to be [converted into] [continued as] [CD Rate] [Offshore Rate] [Base Rate] [Canadian Prime Rate] Loans. 5. [If applicable:] The duration of the Interest Period for the Loans included in the [conversion] [continuation] shall be [____ days] [____ months]. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the proposed Conversion/Continuation Date, before and after giving effect thereto and to the application of the proceeds therefrom: ______________________ /1/ Include bracket language only if Canadian Loans are the subject of this notice. B-1 (a) the representations and warranties of the Borrowers contained in Article V of the Credit Agreement are true and correct as though made on and as of such date (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date); (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed [conversion] [continuation]; [and] (c) the proposed [conversion][continuation] will not cause the aggregate principal amount of all outstanding Tranche A Loans and the Total Utilization of Tranche B Commitments to exceed the combined Commitments [or the aggregate principal amount of all outstanding Tranche A Loans to exceed the combined Tranche A Commitments] [or the Total Utilization of Tranche B Commitments to exceed the Tranche B Commitments] of the Banks[.] [; and] [(d) Medis is a wholly-owned Subsidiary of the Company.]/1/ MCKESSON CORPORATION By: _________________________ Title: ______________________ [MEDIS HEALTH AND PHARMACEUTICAL SERVICES INC.]/1/ By: _________________________ Title: ______________________ ______________________ /1/ Include bracketed language only if Canadian Loans are the subject of this notice. B-2 EXHIBIT C McKESSON CORPORATION -------------------- COMPLIANCE CERTIFICATE ---------------------- Financial Statement Date: ____________, ____ Reference is made to that certain Credit Agreement dated as of March 31, 1995 (as extended, renewed, amended or restated from time to time, the "Credit ------ Agreement") among McKesson Corporation, a Delaware corporation (the "Company"), - --------- ------- Medis Health and Pharmaceutical Services Inc. ("Medis"), the several financial institutions from time to time parties to this Credit Agreement (the "Banks"), ----- Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as agent for the Banks (in such capacity, the "Agent"). Unless otherwise defined herein, ----- capitalized terms used herein have the respective meanings assigned to them in the Credit Agreement. The undersigned Responsible Officer of Company hereby certifies as of the date hereof that he/she is the ______________ of the Company, and that, as such, he/she is authorized to execute and deliver this Certificate to the Banks and the Agent on the behalf of the Company and its consolidated Subsidiaries, and that: [Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsection 6.01(a) of the Credit Agreement.] 1. Attached as Schedule 1 hereto are (a) a true and correct copy of the ---------- audited consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of the fiscal year ended _______________, ____ and (b) the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year and accompanied by the opinion of Deloitte & Touche or another nationally-recognized certified independent public accounting firm (the "Independent Auditor") which report ------------------- shall state that such consolidated financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years. OR [Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsection 6.01(b) of the Credit Agreement.] C-1 1. Attached as Schedule 1 hereto are (a) a true and correct copy of the ---------- unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as of the end of the fiscal quarter ended __________, ____, and (b) the related unaudited consolidated statements of income, shareholders' equity, and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by a Responsible Officer that such financial statements were prepared in accordance with GAAP (subject only to ordinary, good faith year-end audit adjustments) and fairly present the financial position and the results of operations of the Company and its consolidated Subsidiaries. 2. The undersigned has reviewed and is familiar with the terms of the Credit Agreement and has made, or has caused to be made under their supervision, a detailed review of the transactions and conditions (financial or otherwise) of the Company during the accounting period covered by the attached financial statements. 3. To the best of the undersigned's knowledge, each Borrower, during such period, has observed, performed or satisfied all of their respective covenants and other agreements, and satisfied every condition in the Credit Agreement to be observed, performed or satisfied by each Borrower, and the undersigned has no knowledge of any Default or Event of Default. 4. The following financial covenant analyses and information set forth on Schedule 2 attached hereto are true and accurate on and as of the date of this - ---------- Certificate. IN WITNESS WHEREOF, the undersigned has executed this Certificate as of ___________________, ____. MCKESSON CORPORATION By: ______________________________ Title: ___________________________ C-2 Date: ______________, ____ For the fiscal quarter/year ended ______________, ____ SCHEDULE 2 ---------- to the Compliance Certificate ($ in 000's) Section 7.04 Maximum Total Debt to Capitalization Ratio -------------------- 1. Total Capitalization (a) Total Debt $__________ (b) Capital stock and additional paid-in-capital $__________ (c) Retained earnings (accumulated deficits) $__________ Sum of (a), (b) and (c): $__________ 2. Ratio of Total Debt (Item 1(a)) to Total Capitalization (Item 1(d)): _____:_____ 3. Maximum Ratio Permitted under Section 7.04: 0.565:1.00 C-3 EXHIBIT D-1 [FORM OF] LEGAL OPINION OF COMPANY'S COUNSEL -------------------------------------------- [Closing Date] Bank of America National Trust and Savings Association, as Agent and The Co-Agent, Canadian Administrative Agent and Banks Listed on Schedule A Hereto Re: Credit Agreement dated as of March 31, 1995 among McKesson Corporation, Medis Health and Pharmaceutical Services Inc., the financial institutions listed therein as Banks, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent Ladies and Gentlemen: I am a Vice President and the General Counsel of McKesson Corporation, a Delaware corporation (the "Company"), and have represented the Company and ------- Medis Health and Pharmaceutical Services Inc., an Ontario corporation ("Medis"), in connection with that certain Credit Agreement dated as of March 31, 1995 (the "Credit Agreement") among the Company, Medis, the financial institutions listed ---------------- therein as Banks ("Banks"), Chemical Bank, as Co-Agent, Bank of America Canada, ----- as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent ("Agent"). This opinion is rendered to you in compliance ----- with subsection 4.01(e)(i) of the Credit Agreement. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. In my capacity as such counsel, I have examined originals, or copies identified to our satisfaction as being true copies, of such records, documents or other instruments as in our judgment are necessary or appropriate to enable me to render the opinions expressed below. These records, documents and instruments included the following: (a) The Certificate of Incorporation of the Company, as amended to date, and the Articles of Incorporation of Medis, as amended to date; D-1-1 (b) The Bylaws of the Company and of Medis, as amended to date; (c) All records of proceedings and actions of the Board of Directors of the Company and Medis relating to the Credit Agreement and the other Loan Documents and the transactions contemplated thereby; (d) The Credit Agreement; (e) The Guaranty; (f) The Pledge Agreement; (g) The Custodial Agreement; and (h) The Notes. I have been furnished with, and with Banks' consent have relied upon, certificates of officers of the Company with respect to certain factual matters, copies of which have been delivered to Banks. In addition, I have obtained and relied upon such certificates and assurances from public officials as I have deemed necessary, copies of which have been delivered to Banks. In all such examinations, I have assumed the genuineness of all signatures on original and certified documents, and the conformity to original or certified documents of all documents submitted to me as conformed or photostatic copies. I have investigated such questions of law for the purpose of rendering this opinion as I have deemed necessary. I am opining herein as to the effect on the subject transactions of only United States Federal law, the General Corporation Law of the State of Delaware and the laws of the State of California. With respect to my opinion in paragraph 3 below with respect to Medis and to the extent governed by Canadian law, I have relied on the opinion of Blake, Cassels & Graydon, special Canadian counsel to Medis, a copy of which has been delivered to you. On the basis of the foregoing, and in reliance thereon, and subject to the limitations, qualifications and exceptions set forth below, I am of the opinion that: 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own and operate its properties and to carry on its business as now conducted. 2. The Company has all requisite corporate power and authority to execute, deliver and perform the Credit Agreement and the other Loan Documents to which it is a party, to issue the Notes issued by Company on the date hereof and to carry out the transactions contemplated thereby. D-1-2 3. The execution, delivery and performance of the Credit Agreement and the other Loan Documents and the issuance and payment of the Notes have been duly authorized by all necessary corporate action on the part of Company. The Credit Agreement, the other Loan Documents and the Notes that have been delivered on the date hereof have been duly executed and delivered by Company and Medis, as applicable, and constitute the legally valid and binding obligations of Company and Medis, respectively, enforceable against Company and Medis in accordance with their respective terms. 4. Neither the execution and delivery of the Credit Agreement and the other Loan Documents nor the issuance and payment of the Notes or Drafts nor the consummation of the transactions contemplated by the Credit Agreement and the other Loan Documents nor the compliance with the terms and conditions thereof by any Borrower (A) conflicts with, results in a breach or violation of, or constitutes a default under, any of the terms, conditions or provisions of (x) the Certificate of Incorporation or Bylaws or other organizational documents of the Company, McKesson Canada Inc. (which is a wholly-owned subsidiary of the Company and owns 100% of the capital stock of Medis) ("McKesson Canada") or Medis, (y) any term of any material agreement, instrument, order, writ, judgment or decree to which the Company, McKesson Canada Inc. or Medis is a party or by which any of its respective properties or assets are bound, or (z) any present federal or California statute, rule or regulation or provision of the General Corporation Law of the State of Delaware binding on the Company, McKesson Canada or Medis, or (B) results in the creation of any Lien upon any of the properties or assets of the Company, McKesson Canada or Medis under any agreement or order referred to in clause (y) above (other than Liens created pursuant to the Collateral Documents). 5. No consents or approvals of, authorizations by, or registrations, declarations or filings with, any federal, Delaware or California governmental authority are required by any Borrower in connection with the execution and delivery by Borrowers of the Credit Agreement or the other Loan Documents or the extensions of credit under the Credit Agreement or the issuance and payment of the Notes or the Drafts. 6. To the best of my knowledge after due inquiry, there are no actions, suits or proceedings pending or threatened against the Company or any of its Subsidiaries which have a significant likelihood of materially and adversely affecting either the ability of any Borrower to perform its obligations under any Loan Document or the financial condition or operations of Company and its Subsidiaries, taken as a whole. 7. The making of the Loans, the issuance of the Drafts and the application of the proceeds thereof as provided in the Credit Agreement do not violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. D-1-3 8. It is not necessary in connection with the execution and delivery of the Notes to Banks to register the Notes or the Loans under the Securities Act of 1933, as amended, or to qualify any indenture in respect thereof under the Trust Indenture Act of 1939, as amended. 9. The Company is not an "investment company" or a company "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. My opinions in paragraph 5 above and in clause (y) of paragraph 4 above are limited to laws and regulations normally applicable to transactions of the type contemplated in the Loan Documents and do not extend to licenses, permits and approvals necessary for the conduct of the Company's or Midis' business. In addition and without limiting the previous sentence, I express no opinion herein with respect to the effect of any land use, environmental or similar law, any state or federal antitrust law, state or federal securities laws, or any local law. The opinions set forth above are subject to the following qualifications, assumptions, limitations and exceptions: (a) The validity, binding nature and enforceability of the Company's and Medis' obligations under the Loan Documents are subject to the effect of (i) bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent transfer and other similar laws affecting the rights of creditors generally; (ii) the discretion of any court of competent jurisdiction in awarding equitable remedies, including, without limitation, specific performance or injunctive relief, and the effect of general principles of equity embodied in California statutes and common law; and (iii) the effect of California court decisions and statutes which indicate that provisions of the Loan Documents which permit the Agent, any of the Banks or any other Person to take action or make determinations may be subject to a requirement that such action be taken or such determinations be made on a reasonable basis in good faith or that it be shown that such action is reasonably necessary for the protection of the Agent, such Bank or such other Person. (b) I express no opinion as to: (1) the enforceability of provisions of the Loan Documents pursuant to which the Company or Medis agrees to make payments without set-off, defense or counterclaim; (2) provisions purporting to require the award or payment of attorneys' fees, expenses or costs, where such provisions do not satisfy, where applicable, the requirements of California Civil Code (S)1717 et seq, or in any -- --- action where the Agent or any Bank is not the prevailing party; D-1-4 (3) under certain circumstances, provisions to the effect that rights or remedies are not exclusive, that every right or remedy is cumulative and may be exercised in addition to or with any other right or remedy, that the election of some particular remedy or remedies does not preclude recourse to one or another remedy or that failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such right or remedy; (4) provisions prohibiting waivers of any terms of provisions of any of the Loan Documents other than in writing, or prohibiting oral modifications thereof or modification by course of dealing to the extent such provisions are inconsistent with applicable law; (5) the enforceability under certain circumstances or provisions indemnifying a party against, or requiring contributions toward, that party's liability for its own wrongful or negligent acts or where such indemnification or contribution is contrary to public policy or prohibited by law; (6) any provision providing for the exclusive jurisdiction of a particular court or purporting to waive rights to trial by jury, service of process or objections to the laying of venue or to forum on the basis of forum non conveniens, in connection with any litigation arising our of or pertaining - --- ---------- to the Loan Documents; (7) provisions providing for an increase in the rate of interest or imposing a late charge or penalty in the event of delinquency or default to the extent that such charge constitutes a penalty; (8) provisions purporting to waive statutory or common law rights, including the right to receive notice or to be allowed to cure, reinstate or redeem in the event of default, and provisions expressly or by implication waiving broadly or vaguely stated rights, unknown future rights and defenses to obligations, in each case to the extent such rights or defenses are not waivable under applicable law; (9) provisions purporting to waive any applicable statutes of limitation to the extent not waivable under applicable law; (10) provisions authorizing any Bank to set off and apply any deposits at any time held, and any other indebtedness at any time owing, by such Bank to or for the account of the Company; and (11) provisions purporting to permit foreclosure on collateral other than in compliance with Division 9 of the California Uniform Commercial Code. D-1-5 (c) My opinions are subject to the effect of judicial decisions which may permit the introduction of extrinsic evidence to interpret the terms of written contracts. (d) Insofar as this opinion letter concerns the law of the State of California limiting the rates of interest legally chargeable or collectible, I have relied upon my understanding that each of the Banks is (i) a subsidiary of a bank holding company or is a bank organized under the laws of the United States or any State hereof or (ii) a foreign (other nation) bank within the meaning of (S)1716 of the California Financial Code, and such Bank (A) has assets equal to at least $100,000,000, (B) is licensed to maintain an office in California, (C) is licensed or otherwise authorized by another state of the United States to maintain an agency or branch in such state, or (D) maintains a Federal agency or Federal branch in any state of the United States and, as a result thereof, is exempt from the restrictions of Sections 1 of Article XV of the Constitution of the State of California relating to rates of interest upon the loan of money. I further assume in this regard that all Loans have been and will be made by the Banks for their own account and without intent to circumvent otherwise applicable interest rate limitations under California law and that there is no present express or implied agreement or plan to sell participations or any other interest in the Loans or the Credit Agreement to any Person other than a Person that also qualifies for an exemption from the interest rate limitations of California law. (e) I wish to point out that the Banks, as holders of the Notes, may be required to prove the outstanding amount thereof. (f) I have assumed that each Bank has complied with any applicable requirements to file returns or pay California taxes as required by California Revenue and Taxation Code (S)23301 et seq. -- --- (g) For purposes of my opinion expressed in paragraph 8 above, I have assumed, with your consent, that each Bank is taking the Notes payable to it for its own account in the ordinary course of its commercial banking business and not with a view to or for sale in connection with any distribution of the Notes. To the extent that the obligations of Company or Medis may be dependent upon such matters, I have assumed for purposes of this opinion, other than with respect to Company or Medis, that each additional party to the agreements and contracts referred to herein is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that each such other party has the requisite corporate or other organizational power and authority to perform its obligations under such agreements and contracts, as applicable; and that such agreements and contracts have been duly authorized, executed and D-1-6 delivered by, and each of them constitutes the legally valid and binding obligation of, such other parties, as applicable, enforceable against such other parties in accordance with their respective terms. Except as expressly stated in this opinion, I am not expressing any opinion as to the effect of compliance by any Bank with any state or federal laws or regulations applicable to the transactions because of the nature of any of its businesses. This opinion is rendered only to Agent, Co-Agent, Canadian Administrative Agent and Banks and is solely for their benefit in connection with the above transactions. This opinion may not be relied upon by Agent, Co- Agent, Canadian Administrative Agent or Banks for any other purpose, or used by, disseminated, circulated or quoted to or relied upon by any other person, firm, corporation, or other entity for any purpose without my prior written consent. Any Bank listed on Schedule A hereto may, however, deliver a copy of this ---------- opinion to any Eligible Assignee that becomes a party to the Credit Agreement and any such Eligible Assignee may rely on this opinion as if it were addressed and has been delivered to it on the date hereof. Very truly yours, D-1-7 EXHIBIT D-2 [FORM OF] LEGAL OPINION OF CANADIAN COUNSEL ------------------------------------------- [Closing Date] Bank of America National Trust and Savings Association, as Agent and The Co-Agent, Canadian Administrative Agent and Banks Listed on Schedule A Hereto Re: Credit Agreement dated as of March 31, 1995 among McKesson Corporation, Medis Health and Pharmaceutical Services Inc., the financial institutions listed therein as Banks, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent Ladies and Gentlemen: We have acted as special Canadian counsel to McKesson Corporation, a Delaware corporation (the "Company"), and Medis Health and Pharmaceutical ------- Services Inc., a corporation incorporated under the laws of the Province of Ontario, Canada ("Medis"), in connection with that certain Credit Agreement dated as of March 31, 1995 (the "Credit Agreement") among the Company, Medis, ---------------- the financial institutions listed therein as Banks ("Banks"), Chemical Bank, as ----- Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent ("Agent"). This ----- opinion is rendered to you in compliance with subsection 4.01(e)(ii) of the Credit Agreement. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. In our capacity as such counsel, we have examined originals, or copies identified to our satisfaction as being true copies, of such records, documents or other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. These records, documents and instruments included the following: (a) The Articles of Incorporation of Medis, as amended to date; (b) The Bylaws of Medis, as amended to date; D-2-1 (c) All records of proceedings and actions of the Board of Directors of Medis relating to the Credit Agreement and the other Loan Documents and the transactions contemplated thereby; (d) The Credit Agreement; and (e) The form of Note (the "Note") and the form of Draft ("Draft") to be issued by Medis under the Credit Agreement. In addition, we have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary, copies of which have been delivered to Banks. In all such examinations, we have assumed the genuineness of all signatures on original and certified documents, and the conformity to original or certified documents of all documents submitted to me as conformed or photostatic copies. We have investigated such questions of law for the purpose of rendering this opinion as we have deemed necessary. We are opining herein as to the effect on the subject transactions of only the laws of the Province of Ontario and the laws of Canada applicable therein. On the basis of the foregoing, and in reliance thereon, and subject to the limitations, qualifications, assumptions and exceptions set forth below, we are of the opinion that: 1. Based solely on the certificate of status dated [____________] issued by the Ontario Ministry of Consumer and Commercial Relations with respect to Medis, it is a subsisting corporation under the laws of Ontario, being its jurisdiction of incorporation. Medis has all requisite corporate power and authority to own and operate its properties and to carry on its business as now conducted. 2. Medis has all requisite corporate power and authority to execute, deliver and perform its obligations under the Credit Agreement, and to issue the Notes and the Drafts and to carry out the transactions contemplated thereby. 3. The execution, delivery and performance of the Credit Agreement and the issuance and payment of the Notes and the Drafts have been duly authorized by all necessary corporate action on the part of Medis. The Credit Agreement and the Notes issued by Medis on the date hereof have been duly executed and delivered by Medis. 4. Neither the execution and delivery of the Credit Agreement nor the issuance and payment of the Notes or the Drafts nor the consummation of the transactions contemplated to be performed by Medis under the Credit Agreement and the other Loan Documents nor the compliance with the terms and conditions D-2-2 thereof by Medis conflicts with, results in a breach or violation of, or constitutes a default under, any of the terms, conditions or provisions of (x) the Articles of Incorporation or Bylaws of Medis or (y) any present Ontario or Canadian statute, rule or regulation binding on Medis or any of its Subsidiaries. 5. No consents or approvals of, authorizations by, or registrations, declarations or filings with, any Ontario or Canadian governmental authority are required by Medis in connection with the execution and delivery by Medis of the Credit Agreement or the extensions of credit to Medis under the Credit Agreement or the issuance and payment of the Notes or the Drafts. 6. The execution and delivery of the Notes and the Drafts to the Canadian Tranche B Banks, and any subsequent assignment by a Bank of any Note or Draft held by it, are exempt from the registration and prospectus requirements of the Securities Act (Ontario). The foregoing opinions are subject to the following limitations, qualifications, assumptions and exceptions: (i) The Credit Agreement and the Notes are governed by the laws of the State of California. We express no opinion as to the enforceability of the Credit Agreement or of any provision thereof. It should be noted that a judgment in money rendered by a court in the Province of Ontario must be awarded in Canadian currency and that any requirement that interest be paid at a higher rate after than before default may not be enforceable. (ii) Our opinions in paragraph 5 above as to compliance with certain statutes, rules and regulations and as to the lack of any required consents or approvals of, authorizations by, or registrations, declarations or filings with certain governmental authorities is based upon a review of those statutes, rules and regulations which, in our experience, are normally applicable to transactions of the type contemplated by the Credit Agreement and the other Loan Documents. (iii) For purposes of our opinion expressed in paragraph 6 above, we have assumed, with your consent, that each Tranche B Canadian Bank is taking the Notes payable to it and the Drafts for its own account in the ordinary course of its commercial banking business and not with a view to or for sale in connection with any distribution of the Notes or the Drafts. (iv) To the extent that the obligations of Medis may be dependent upon such matters, we have assumed for purposes of this opinion, other than with respect to Medis, that each additional party to the agreements and contracts referred to herein is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that each such other party has the requisite corporate or other organizational power and authority to perform its obligations under such agreements and D-2-3 contracts, as applicable; and that such agreements and contracts have been duly authorized, executed and delivered by, and each of them constitutes the legally valid and binding obligation of, such other parties, as applicable, enforceable against such other parties in accordance with their respective terms. Except as expressly stated in this opinion, we are not expressing any opinion as to the effect of compliance by any Bank with any Ontario provincial or Canadian federal laws or regulations applicable to the transactions because of the nature of any of its businesses. (v) It is assumed that each of the Banks is acquiring the Notes or Drafts as principal and that each of the Banks is a bank listed in Schedule I or II to the Bank Act (Canada). (vi) It is assumed that any Note or Draft that is assigned by a Bank is assigned to a person acquiring the Note or Draft as principal for its own account and not for the benefit of any other person; that the aggregate acquisition cost to an assignee of a Note or a Draft is at least Cdn. $150,000; and that any assignee of a Note or a Draft is a corporation which was not created solely to acquire securities or to permit the purchase of securities without a prospectus in reliance on exemptions from the prospectus requirements of the Securities Act (Ontario); that any assignment of a Note or a Draft is not accompanied by any advertisement in printed media of general and regular paid circulation, radio or television; that prior to the assignment of a Note or a Draft no unusual effort is made to prepare the market or to create a demand for the Note or the Draft and no extraordinary commission or consideration is paid in respect of the assignment of the Note or the Draft; and that at the time of assignment of a Note or a Draft by a Bank; such Bank is not a person or a combination persons holding either a sufficient number of any securities of Medis to affect materially the control of Medis or more than 20% of the outstanding voting securities of Medis. This opinion is rendered only to Agent, Co-Agent, Canadian Administrative Agent and Banks and is solely for their benefit in connection with the above transactions. This opinion may not be relied upon by Agent, Co- Agent, Canadian Administrative Agent or Banks for any other purpose, or quoted to or relied upon by any other person, firm or corporation for any purpose without our prior written consent. Any Bank listed on Schedule A hereto may, ---------- however, deliver a copy of this opinion to any Eligible Assignee that becomes a party to the Credit Agreement and any such Eligible Assignee may rely on this opinion as if it were addressed and has been delivered to it on the date hereof. Very truly yours, D-2-4 EXHIBIT D-3 [FORM OF] LEGAL OPINION RE COLLATERAL ------------------------------------- [Closing Date] Bank of America National Trust and Savings Association, as Agent and The Co-Agent, Canadian Administrative Agent and Banks Listed on Schedule A Hereto Re: Credit Agreement dated as of March 31, 1995 among McKesson Corporation, Medis Health and Pharmaceutical Services Inc., the financial institutions listed therein as Banks, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent Ladies and Gentlemen: We have acted as special counsel to McKesson Corporation, a Delaware corporation ("Company"), in connection with that certain Credit Agreement dated ------- as of March 31, 1995 (the "Credit Agreement") among Company, Medis Health and ---------------- Pharmaceutical Services Inc., the financial institutions listed therein as Banks ("Banks"), Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian ----- Administrative Agent, and Bank of America National Trust and Savings Association, as Agent ("Agent"). This opinion is rendered to you in compliance ----- with subsection 4.01(e)(iii) of the Credit Agreement. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. In our capacity as such counsel, we have examined originals, or copies identified to our satisfaction as being true copies, of such records, documents or other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. These records, documents and instruments included the following: (a) The Credit Agreement; (b) The Guaranty; (c) The Pledge Agreement; D-3-1 (d) The Custodial Agreement; (e) The Custodial Acknowledgment Agreement; and (f) The opinion dated of even date herewith from Ivan D. Meyerson, Vice President and General Counsel of the Company, delivered to you in compliance with subsection 4.01(e)(i) of the Credit Agreement (the "Meyerson Opinion"); In all such examinations, we have assumed the genuineness of all signatures on original and certified documents, and the conformity to original or certified documents of all documents submitted to us as conformed or photostatic copies. Based upon the Meyerson Opinion, we have assumed that the Credit Agreement, the Guaranty, the Pledge Agreement, the Custodial Acknowledgment Agreement and the Custodial Agreement have been duly authorized, executed and delivered by the Company, and are binding upon and enforceable against the Company. We further assume that neither the Agent nor the Banks know of any agreements, understandings or negotiations between the parties not set forth in the Loan Documents that would modify the terms or rights or obligations of the parties thereunder with respect to the Collateral under the Pledge Agreement. We have also assumed that the Company has rights in the Collateral and the Loan Documents are binding upon and enforceable against the Banks. We express no opinion as to the priority of any security interests except as expressly set forth below. We have investigated such questions of law for the purpose of rendering this opinion as we have deemed necessary. We are opining herein as to the effect on the subject transactions of Articles 8 and 9 of the Uniform Commercial Code as in effect in the States of California and New York (respectively the "CUCC" and the "NYUCC"). In the case of the NYUCC, we have relied upon the language of Articles 8 and 9 thereof published in what we believe are reliable compilations. We express no opinion as to the laws of any jurisdiction other than the law of California, the federal law of the United States and, with respect to the opinion expressed in paragraph 1 below, Articles 8 and 9 of the NYUCC. On the basis of the foregoing, and in reliance thereon, and subject to the limitations, qualifications and exceptions set forth below, we are of the opinion that: The Pledge Agreement and the Custodial Acknowledgment Agreement, together with the "transfer" (as described below) of the U.S. Government Book- Entry Securities (as defined below), to the Financial Intermediary (as defined below) in the State of D-3-2 California or the State of New York, create in favor of Agent a perfected security interest under the Uniform Commercial Code in the U.S. Government Book- Entry Securities. No action other than "transfer" of such securities to the Custodian is required to maintain perfection of such security interest. Assuming that the Custodian acquires its security interest in the U.S. Government Book- Entry Securities in good faith and without notice of any adverse claims, the security interest of Agent in the U.S. Government Book-Entry Securities will be prior to any other security interest in such securities which may be created under the CUCC and the NYUCC, other than liens on securities referred to in Section 8-321(2) of the CUCC and the NYUCC which may be perfected without possession for a period of 21 days (but only for so long as such interest remains perfected pursuant to Section 8-321(2) after a transfer pursuant to Section 8-313(1)(i) of the CUCC or the NYUCC without any further action). For purposes of this paragraph, (i) "U.S. Government Book-Entry Securities" means securities issued by the U.S. Treasury which are maintained in book-entry form on the records of the Federal Reserve Bank of New York and (ii) "transfer" means (A) the making and maintaining by the Federal Reserve Bank of New York of appropriate entries transferring the U.S. Government Book-Entry Securities on its books and records to the book-entry account of the Custodian at the Federal Reserve Bank of New York, (B) the sending of the confirmation (which may include permitting on-line access to the Custodian's records as to the Custodial Account in a manner which permits the accessing person to print out the contents of such records) by the Custodian to the Company or to Company's broker confirming the purchase by Company of such U.S. Government Book-Entry Securities, (C) the deposit and maintenance in the Restricted Collateral Account of such U.S. Government Book-Entry Securities pursuant to the instructions of the Company, (D) the maintenance of the Restricted Collateral Account at a location of Custodian in California or New York, and (E) the identification (and subsequent maintenance of such identification) by book entry by the Custodian of such U.S. Government Book-Entry Securities as belonging to the Company and subject to the security interest in favor of the Agent and to no other security interest. We have assumed that the Custodian has not and will not itself grant an interest in the U.S. Government Book-Entry Securities held in the Restricted Collateral Account and that the Custodian will at all times maintain a sufficient fungible bulk of U.S. Government Book-Entry Securities of the type deposited in the Restricted Collateral Account to cover the Custodian's obligations to its customers. D-3-3 This opinion is rendered only to Agent, Co-Agent, Canadian Administrative Agent and Banks and is solely for their benefit in connection with the above transactions. This opinion may not be relied upon by Agent, Co- Agent, Canadian Administrative Agent or Banks for any other purpose, or quoted to or relied upon by any other person, firm or corporation for any purpose without our prior written consent. Any Bank listed on Schedule A hereto may, ---------- however, deliver a copy of this opinion to any Eligible Assignee that becomes a party to the Credit Agreement and any such Eligible Assignee may rely on this opinion as if it were addressed and has been delivered to it on the date hereof. Very truly yours, D-3-4 EXHIBIT E [FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT --------------------------------------------- This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and -------------- Acceptance") dated as of __________, ____ is made between - ---------- ______________________________ (the "Assignor") and __________________________ -------- (the "Assignee"). -------- RECITALS -------- WHEREAS, the Assignor is party to that certain Credit Agreement dated as of March 31, 1995 (as amended, amended and restated, modified, supplemented or renewed, the "Credit Agreement") among McKesson Corporation, a Delaware ---------------- corporation (the "Company"), Medis Health and Pharmaceutical Services Inc., an ------- Ontario corporation ("Medis"), the several financial institutions from time to time party thereto (including the Assignor, the "Banks"), Chemical Bank, as Co- ----- Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as agent for the Banks (the "Agent"). Any terms defined in the Credit Agreement and not defined in this ----- Assignment and Acceptance are used herein as defined in the Credit Agreement; WHEREAS, as provided under the Credit Agreement, the Assignor is a [Tranche A Bank] [Tranche B Domestic Bank] [Tranche B Canadian Bank] and has committed to making [Tranche A Loans] [Tranche B Domestic Loans] [Tranche B Canadian Loans and extensions of credit under the Bankers' Acceptance Facility] to [the Company] [Medis] in an aggregate amount not to exceed $__________ (the "Commitment"); ---------- WHEREAS, Assignor has extended credit in respect of the Commitment as of the date hereof in the principal amount of $__________ which consists of [Tranche A Loans] [Tranche B Domestic Loans] [Tranche B Canadian Loans and extensions of credit under the Bankers Acceptance Facility] (together with any other extensions of credit on or prior to the Effective Date (as defined in Section 5 hereof), the "Committed Credit Extensions"); --------------------------- WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all] rights and obligations of the Assignor under the Credit Agreement in respect of its Commitment, [together with a corresponding portion of each of its outstanding Committed Credit Extensions,] in an amount equal to $__________ (the "Assigned Amount") on the terms and subject to the conditions set forth herein --------------- and the E-1 Assignee wishes to accept assignment of such rights and to assume such obligations from the Assignor on such terms and subject to such conditions and, after giving effect to such assignment, the Assignee will have all of the rights and obligations of a [Tranche A Bank] [Tranche B Domestic Bank] [Tranche B Canadian Bank]; [WHEREAS, the Assignor's Affiliate Bank, [Name of Affiliate Bank] ("Assignor's Affiliate"), is concurrently herewith entering into an Assignment Agreement dated as of the date hereof (the "Affiliated Assignment") with [name of Assignee's Affiliate Bank] ("Assignee's Affiliate") pursuant to which Assignor's Affiliate will assign [a portion of] its rights and obligations as a [Tranche B Domestic Bank] [Tranche B Canadian Bank] under the Credit Agreement to Assignee's Affiliate, which portion shall correspond to and equal the assignment of the Commitments hereunder (together with a corresponding portion of such Assignor's Affiliate's outstanding Committed Credit Extensions);] [ADD IF NECESSARY TO MAKE THE REPRESENTATION IN SECTION 8(d) TRUE] [WHEREAS, after giving effect to the assignment to be effected pursuant to this Assignment and Acceptance and the Affiliated Assignment (i) Assignor and Assignor's Affiliate will have the same Tranche B Pro Rata Share, (ii) Assignee and Assignee's Affiliate will have the same Tranche B Pro Rata Share and (iii) Assignee's Affiliate will be Assignee's Affiliate Bank for all purposes under the Credit Agreement.] [ADD IF PREVIOUS BRACKETED WHEREAS CLAUSE IS INCLUDED] NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: 1. Assignment and Acceptance. ------------------------- (a) Subject to the terms and conditions of this Assignment and Acceptance, (i) the Assignor hereby sells, transfers and assigns to the Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from the Assignor, without recourse and without representation or warranty (except as provided in this Assignment and Acceptance) __% (the "Assignee's Percentage --------------------- Share") of (A) the Commitment [and the Committed Credit Extensions] of the - ----- Assignor and (B) all related rights, benefits, obligations, liabilities and indemnities of the Assignor under and in connection with the Credit Agreement and the Loan Documents. [If appropriate, add paragraph specifying payment to Assignor by Assignee of outstanding principal of, accrued interest on, and fees with respect to, Committed Credit Extensions assigned.] E-2 (b) With effect on and after the Effective Date, the Assignee shall be a party to the Credit Agreement and succeed to all of the rights and be obligated to perform all of the obligations of a [Tranche A] [Tranche B Domestic] [Tranche B Canadian] Bank under the Credit Agreement, including the requirements concerning confidentiality and the payment of indemnification, with a Commitment in an amount equal to the Assigned Amount. The Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a [Tranche A] [Tranche B Domestic] [Tranche B Canadian] Bank. It is the intent of the parties hereto that the Commitment of the Assignor shall, as of the Effective Date, be reduced by an amount equal to the Assigned Amount and the Assignor shall relinquish its rights and be released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee; provided, however, the Assignor shall not relinquish its rights under -------- ------- Sections 10.04 and 10.05 of the Credit Agreement to the extent such rights relate to the time prior to the Effective Date. (c) After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignee's Commitment will be $__________. (d) After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignor's Commitment will be $__________. 2. Payments. -------- (a) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the Effective Date in immediately available funds an amount equal to $__________. (b) The [Assignor] [Assignee] further agrees to pay to the Agent a processing fee in the amount specified in Section 10.08(a) of the Credit Agreement. 3. Reallocation of Payments. ------------------------ Any interest, fees and other payments accrued to the Effective Date with respect to the Commitment and Assigned Amount shall be for the account of the Assignor. Any interest, fees and other payments accrued on and after the Effective Date with respect to the Commitment and Assigned Amount shall be for the account of the Assignee. Each of the Assignor and the Assignee agrees that it will hold in trust for the other party any interest, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the E-3 other party any such amounts which it may receive promptly upon receipt. 4. Independent Credit Decision. --------------------------- The Assignee (a) acknowledges that it has received a copy of the Credit Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements referred to in Section 6.01(a) of the Credit Agreement, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Assignment and Acceptance; and (b) agrees that it will, independently and without reliance upon the Assignor, any Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legal decisions in taking or not taking action under the Credit Agreement. 5. Effective Date; Notices. ----------------------- (a) The effective date for this Assignment and Acceptance shall be the date on which the Agent notifies Assignor that the Agent has received an executed copy of this Assignment and Acceptance pursuant to Section 10.08(b) of the Credit Agreement (the "Effective Date"); provided that the following -------------- conditions precedent have been satisfied on or before the Effective Date: (i) this Assignment and Acceptance shall be executed and delivered by the Assignor and the Assignee; (ii) the consent of the Company and the Agent required for an effective assignment of the Assigned Amount by the Assignor to the Assignee under Section 10.08(a) of the Credit Agreement shall have been duly obtained and shall be in full force and effect as of the Effective Date; (iii) the Assignee shall pay to the Assignor all amounts due to the Assignor under this Assignment and Acceptance; (iv) if Tranche B Commitments are being assigned pursuant hereto, and an Affiliated Assignment shall be required to make the representation set forth in Section 8(d) true, such Affiliated Assignment shall have been executed and delivered and shall be in full force and effect; (v) the processing fee referred to in Section 2(b) hereof and in Section 10.08(a) of the Credit Agreement shall have been paid to the Agent. E-4 (b) Promptly following the execution of this Assignment and Acceptance, the Assignor shall deliver to the Company and the Agent for acknowledgement by the Agent, a Notice of Assignment substantially in the form attached hereto as Schedule 1. ---------- [6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AN AGENT] ----- (a) The Assignee hereby appoints and authorizes the Assignor to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to Assignor in its capacity as an Agent by the Banks pursuant to the terms of the Credit Agreement. (b) The Assignee shall assume no duties or obligations held by the Assignor in its capacity as an Agent under the Credit Agreement.] 7. Withholding Tax. --------------- The Assignee (a) represents and warrants to the Bank, the Agent the Company and, if the Assigned Amount relates to Tranche B Canadian Loans or the Bankers' Acceptance Facility, Medis that as of the date hereof under applicable law and treaties no tax will be required to be withheld by the Bank or the Company or, if the Assigned Amount relates to Tranche B Canadian Loans or the Bankers' Acceptance Facility, Medis with respect to any payments to be made to the Assignee under the Credit Agreement or hereunder, (b) agrees to furnish (i) if Assignee is a Tranche A Bank or a Tranche B Domestic Bank and is organized under the laws of any jurisdiction other than the United States or any State thereof, to the Agent and the Company prior to the time that the Agent or Company is required to make any payment of principal, interest or fees hereunder, duplicate executed originals of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein the Assignee claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder) and agrees to provide new Forms 4224 or 1001 upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee and (ii) if Assignee is a Tranche B Canadian Bank and is organized under the laws of or a resident of any jurisdiction other than Canada or any province thereof, to Agent and the Company prior to the time that the Canadian Administrative Agent or Medis is required to make any payment of principal, interest or fees hereunder, duplicate originals of any forms as may be required under the Income Tax Act (Canada) or other laws of Canada with respect to Assignee's exemption from Canadian withholding tax, and E-5 (c) agrees to comply with all applicable laws and regulations with regard to such withholding tax exemption. 8. Representations and Warranties. ------------------------------ (a) The Assignor represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any Lien or other adverse claim; (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance and to fulfill its obligations hereunder; (iii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; and (iv) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignor, enforceable against the Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles. (b) The Assignor 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 the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto. The Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of any Borrower, or the performance or observance by any Borrower, of any of its respective obligations under the Credit Agreement or any other instrument or document furnished in connection therewith. (c) The Assignee represents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder; (ii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or E-6 obtained) for its due execution, delivery and performance of this Assignment and Acceptance; and apart from any agreements or undertakings or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; (iii) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignee, enforceable against the Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles; and (iv) it is an Eligible Assignee. (d) After giving effect to the assignment to be effected pursuant to this Assignment and Acceptance, and the related Affiliated Assignment, if any, any part of the Assigned Amount relating to Tranche B Commitments shall be an obligation of the Assignee or an Affiliate of the Assignee. 9. Further Assurances. ------------------ The Assignor and the Assignee each hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment and Acceptance, including the delivery of any notices or other documents or instruments to the Company or the Agent, which may be required in connection with the assignment and assumption contemplated hereby. 10. Miscellaneous. ------------- (a) Any amendment or waiver of any provision of this Assignment and Acceptance shall be in writing and signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Assignment and Acceptance shall be without prejudice to any rights with respect to any other or further breach thereof. (b) All payments made hereunder shall be made without any set-off or counterclaim. (c) The Assignor and the Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Assignment and Acceptance. (d) This Assignment and Acceptance may be executed in any number of counterparts and all of such E-7 counterparts taken together shall be deemed to constitute one and the same instrument. (e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. The Assignor and the Assignee each irrevocably submits to the non-exclusive jurisdiction of any State or Federal court sitting in California over any suit, action or proceeding arising out of or relating to this Assignment and Acceptance and irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such California State or Federal court. Each party to this Assignment and Acceptance hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. (f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN). [(g) The parties hereto acknowledge the provisions of 2.10(e) of the Credit Agreement relating to disclosure under the Interest Act (Canada) and agree that the provisions thereof shall apply to the disclosure and calculation of nominal and effective rates of interest payable hereunder, all as if such provisions were set forth herein.] [INSERT IF ASSIGNMENT CONSISTS OF TRANCHE B COMMITMENT] E-8 IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By:_________________________________ Title:______________________________ By:_________________________________ Title:______________________________ Address: [ASSIGNEE] By:_________________________________ Title:______________________________ By:_________________________________ Title:______________________________ Address: E-9 SCHEDULE 1 NOTICE OF ASSIGNMENT AND ACCEPTANCE ----------------------------------- _______________, ____ Bank of America National Trust and Savings Association, as Agent 1455 Market Street, 12th Floor San Francisco, CA 94103 Attn: Agency Management Services #5596 [Bank of America Canada Toronto Corporate Office No. 5651 4 Kings Street West, 18th Floor Toronto, Canada Attn: Robert Kizell] McKesson Corporation One Post Street San Francisco, CA 94104-5296 Attn: Alan Pearce Ladies and Gentlemen: We refer to the Credit Agreement dated as of March 31, 1995 (as amended, amended and restated, modified, supplemented or renewed from time to time the "Credit Agreement") among McKesson Corporation (the "Company"), Medis Health and ---------------- ------- Pharmaceutical Services Inc. ("Medis"), the Banks referred to therein, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as agent for the Banks (the "Agent"). Terms defined in the Credit Agreement are used herein as therein ----- defined. 1. We hereby give you notice of, and request the Agent's and the Company's consent to, the assignment by __________________ (the "Assignor") to -------- _______________ (the "Assignee") of the right, title and interest of the -------- Assignor in and to [Describe Commitment and Obligations assigned] pursuant to the Assignment and Acceptance Agreement attached hereto (the "Assignment and -------------- Acceptance"). - ---------- 2. The Assignee agrees that, upon receiving the consent of the Agent and the Company to such assignment, the Assignee will be bound by the terms of the Credit Agreement as fully and to the same extent as if the Assignee were the Bank originally holding such interest in the Credit Agreement. E-10 3. The following administrative details apply to the Assignee: (A) Notice Address: Assignee name: __________________________ Address: _______________________________ _______________________________ _______________________________ Attention: _____________________________ Telephone: (___) _______________________ Telecopier: (___) ______________________ Telex (Answerback): ____________________ (B) Payment Instructions: Account No.: ___________________________ At: ___________________________ ___________________________ ___________________________ Reference: ___________________________ Attention: ___________________________ 4. You are entitled to rely upon the representations, warranties and covenants of each of the Assignor and Assignee contained in the Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, [NAME OF ASSIGNOR] By:___________________________ Title:________________________ By:___________________________ Title:________________________ [NAME OF ASSIGNEE] By:___________________________ Title:________________________ E-11 By:___________________________ Title:________________________ ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO: MCKESSON CORPORATION By: _____________________________ Title: __________________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: ______________________________ Its: _____________________________ E-12 EXHIBIT F-1 ----------- [FORM OF] COMPANY PROMISSORY NOTE (Tranche A) -------------------------------------------- $____________ _____________, ____ FOR VALUE RECEIVED, the undersigned, McKesson Corporation, a Delaware corporation (the "Company"), hereby promises to pay to the order of ------- ___________________ (the "Bank") the aggregate unpaid principal amount of all ---- Tranche A Loans made by the Bank to the Company pursuant to the Credit Agreement, dated as of March 31, 1995 (such Credit Agreement, as it may be amended, restated, supplemented or otherwise modified from time to time, being hereinafter called the "Credit Agreement"), among the Company, Medis Health and ---------------- Pharmaceutical Services Inc., an Ontario corporation ("Medis"), the Bank, the other banks parties thereto, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent for the Banks, on the dates and in the amounts provided in the Credit Agreement. The Company further promises to pay interest on the unpaid principal amount of the Tranche A Loans evidenced hereby from time to time at the rates, on the dates, and otherwise as provided in the Credit Agreement. The Bank is authorized to endorse the amount and the date on which each Tranche A Loan is made, the maturity date therefor and each payment of principal with respect thereto on the schedules annexed hereto and made a part hereof, or on continuations thereof which shall be attached hereto and made a part hereof; provided that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect any obligation of the Company under the Credit Agreement and this Promissory Note (the "Note"). ---- This Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement, which Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Terms defined in the Credit Agreement are used herein with their defined meanings therein unless otherwise F-1-1 defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of California applicable to contracts made and to be performed entirely within such State. The Company promises to pay all reasonable costs and expenses, including reasonable fees and expenses of counsel, as provided in Section 10.04 of the Credit Agreement. The Company and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. IN WITNESS WHEREOF, the Company has caused this Note to be executed and delivered by its duly authorized officer, as of the day and year and the place first above written. MCKESSON CORPORATION By: _________________________ Title:________________________ F-1-2 Schedule A to Company Promissory Note (Tranche A) BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS ------------------------------------------------
(2) (3) (4) Amount Maturity Amount of of Date of Base (5) (1) Base Base Rate Loan Notation Date Rate Loan Rate Loan Repaid Made By - --------- --------- --------- --------- -------- _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________
F-1-3 Schedule B to Company Promissory Note (Tranche A) OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS --------------------------------------------------------
(2) (3) (4) Amount Maturity Amount of of Date of Offshore (5) (1) Offshore Offshore Rate Loan Notation Date Rate Loan Rate Loan Repaid Made By - --------- --------- --------- --------- ------- _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________
F-1-4 Schedule C to Company Promissory Note (Tranche A) CD RATE LOANS AND REPAYMENT OF CD RATE LOANS --------------------------------------------
(2) (3) (4) Amount Maturity Amount of (5) (1) of CD Date of CD CD Rate Notation Date Rate Loan Rate Loan Loan Repaid Made By - --------- --------- ---------- ----------- -------- _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________
F-1-5 EXHIBIT F-2 ----------- [FORM OF] COMPANY PROMISSORY NOTE (Tranche B) -------------------------------------------- $____________ _____________, ____ FOR VALUE RECEIVED, the undersigned, McKesson Corporation, a Delaware corporation (the "Company"), hereby promises to pay to the order of ------- ___________________ (the "Bank") the aggregate unpaid principal amount of all ---- Tranche B Loans made by the Bank to the Company pursuant to the Credit Agreement, dated as of March 31, 1995 (such Credit Agreement, as it may be amended, restated, supplemented or otherwise modified from time to time, being hereinafter called the "Credit Agreement"), among the Company, Medis Health and ---------------- Pharmaceutical Services Inc., the Bank, the other banks parties thereto, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent for the Banks, on the dates and in the amounts provided in the Credit Agreement. The Company further promises to pay interest on the unpaid principal amount of the Tranche B Loans evidenced hereby from time to time at the rates, on the dates, and otherwise as provided in the Credit Agreement. The Bank is authorized to endorse the amount and the date on which each Tranche B Loan is made, the maturity date therefor and each payment of principal with respect thereto on the schedules annexed hereto and made a part hereof, or on continuations thereof which shall be attached hereto and made a part hereof; provided that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect any obligation of the Company under the Credit Agreement and this Promissory Note (the "Note"). ---- This Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement, which Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Terms defined in the Credit Agreement are used herein with their defined meanings therein unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of F-2-1 California applicable to contracts made and to be performed entirely within such State. The Company promises to pay all reasonable costs and expenses, including reasonable fees and expenses of counsel, as provided in Section 10.04 of the Credit Agreement. The Company and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. MCKESSON CORPORATION By:___________________________ Title: _______________________ F-2-2 Schedule A to Company Promissory Note (Tranche B) BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS ------------------------------------------------
(2) (3) (4) Amount Maturity Amount of of Date of Base (5) (1) Base Base Rate Loan Notation Date Rate Loan Rate Loan Repaid Made By - --------- --------- --------- --------- -------- _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________
F-2-3 Schedule B to Company Promissory Note (Tranche B) OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS --------------------------------------------------------
(2) (3) (4) Amount Maturity Amount of of Date of Offshore (5) (1) Offshore Offshore Rate Loan Notation Date Rate Loan Rate Loan Repaid Made By - --------- --------- --------- --------- -------- _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________ _________ _________ _________ _________ ________
F-2-4 Schedule C to Company Promissory Note (Tranche B) CD RATE LOANS AND REPAYMENT OF CD RATE LOANS --------------------------------------------
(2) (3) (4) Amount Maturity Amount of (5) (1) of CD Date of CD CD Rate Notation Date Rate Loan Rate Loan Loan Repaid Made By - --------- --------- ---------- ----------- -------- _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________ _________ _________ __________ ___________ ________
F-2-5 EXHIBIT F-3 ----------- [FORM OF] MEDIS PROMISSORY NOTE (TRANCHE B) ------------------------------------------ U.S. $____________ _____________, ____ FOR VALUE RECEIVED, the undersigned, Medis Health and Pharmaceutical Services Inc. ("Medis"), hereby promises to pay to the order of ___________________ (the "Bank") the aggregate unpaid principal amount of all ---- Tranche B Loans made by the Bank to Medis pursuant to the Credit Agreement, dated as of March 31, 1995 (such Credit Agreement, as it may be amended, restated, supplemented or otherwise modified from time to time, being hereinafter called the "Credit Agreement"), among the McKesson Corporation (the ---------------- "Company"), Medis, the Bank, the other banks parties thereto, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent for the Banks, on the dates, in the amounts and in the currency provided in the Credit Agreement and whether or not any such amount is greater or less than or equal to the amount stated above. Medis further promises to pay interest on the unpaid principal amount of the Tranche B Loans evidenced hereby from time to time at the rates, on the dates, in the currency and otherwise as provided in the Credit Agreement. The Bank is authorized to endorse the amount and the date on which each Tranche B Loan is made, the maturity date therefor and each payment of principal with respect thereto on the schedules annexed hereto and made a part hereof, or on continuations thereof which shall be attached hereto and made a part hereof; provided that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect any obligation of Medis under the Credit Agreement and this Promissory Note (the "Note"). ---- This Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement, which Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Terms defined in the Credit Agreement are used herein with their defined meanings therein unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of F-3-1 California applicable to contracts made and to be performed entirely within such State. Medis waives presentment, notice of dishonor, protest and notice of protest. MEDIS HEALTH AND PHARMACEUTICAL SERVICES INC. By:___________________________ Title: _______________________ F-3-2 Schedule A to Medis Promissory Note (Tranche B) CANADIAN PRIME RATE LOANS AND ----------------------------- REPAYMENT OF CANADIAN PRIME RATE LOANS --------------------------------------
(2) (3) (4) Amount Maturity Amount of of Date of Canadian Canadian Canadian Prime (5) (1) Prime Prime Rate Loan Notation Date Rate Loan Rate Loan Repaid Made By - --------- --------- --------- --------- -------- _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________
F-3-3 Schedule B to Medis Promissory Note (Tranche B) OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS --------------------------------------------------------
(2) (3) (4) Amount Maturity Amount of of Date of Offshore (5) (1) Offshore Offshore Rate Notation Date Rate Loan Rate Loan Loan Repaid Made By - --------- ----------- ------------ ------------ --------- _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________ _________ ___________ ____________ ______________ __________
F-3-4 EXHIBIT G [FORM OF] DRAWING NOTICE Pursuant to that certain Credit Agreement dated as of March 31, 1995 among McKesson Corporation, a Delaware corporation (the "COMPANY"), Medis Health and Pharmaceutical Services Inc., an Ontario corporation ("MEDIS"), the financial institutions listed therein as Banks ("BANKS"), Chemical Bank, as Co- Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"; capitalized terms used herein without definition which are defined in the Credit Agreement shall have the meanings set forth in the Credit Agreement), this represents the Company's and Medis' notice pursuant to subsection 2.17(b) of the Credit Agreement that Medis hereby requests a Drawing under the Credit Agreement, and, in connection therewith, sets forth below the information relating to such Drawing as required by subsection 2.17(b) of the Credit Agreement: 1. The date of the Drawing, which is a Business Day, is ______________, ____; 2. The aggregate Face Amount of Drafts to be accepted is Cdn. $____________; 3. The maturity date for such Drafts is _________, ____, which represents a term to maturity of approximately [30/60/90/120/180] days. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom: (a) the representations and warranties of the Borrowers contained in Article V of the Credit Agreement are true and correct as though made on and as of such date (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date); (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Borrowing; [and] (c) The proposed Bankers' Acceptance to be made will not cause the Total Utilization of Tranche B Commitments to exceed the combined Tranche B Commitments of the Banks or the aggregate principal amount of all Tranche A Loans and G-1 the Total Utilization of Tranche B Commitments to exceed the combined Commitments of the Banks; and (d) Medis is a wholly-owned Subsidiary of the Company. Dated: ___________________ MCKESSON CORPORATION By _______________________ Title: ___________________ MEDIS HEALTH AND PHARMACEUTICAL SERVICES INC. By _______________________ Title: ___________________ G-2 EXHIBIT H-1 [FORM OF DRAFT] BANKERS' ACCEPTANCE Due _________________, ____ ACCEPTATION BANCAIRE Echeant le NO. B.A. IL.0000 _____________________, Canada _____________________, ____ On/Le ___________________, ____ without grace, for value received, pay to the order of the undersigned drawer the sum of/sans jours de grace et contra valeur, payez a l'ordre du tireur soussigne la somme de/________________ dollars ($__________) To/A - [Name of Tranche B Canadian Bank] _______________, Canada MEDIS HEALTH AND PHARMACEUTICAL SERVICES INC. Per: par: ______________________ Authorized Signature Signature Autorisee H-1-1 EXHIBIT H-2 [FORM OF ACCEPTANCE] ACCEPTED/ACCEPTE date/le ________________________________________________19__ Payable at [INSERT LOCATION]/payable a _____________ ----------------- [Name of Tranche B Canadian Bank] Per: par: _________________________ Authorized Signature Signature Autorisee Per: par: _________________________ Authorized Signature Signature Autorisee H-2-1 EXHIBIT I [FORM OF] PLEDGE AGREEMENT -------------------------- This PLEDGE AND SECURITY AGREEMENT (this "Agreement") is entered into --------- as of March 31, 1995 among McKesson Corporation, a Delaware corporation (the "Pledgor"), and Bank of America National Trust and Savings Association, as agent - -------- (in such capacity, the "Agent") for the several financial institutions (the ----- "Banks") from time to time party to the Credit Agreement (as hereinafter - ------ defined). RECITALS -------- A. The Agent, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and the Banks have entered into a Credit Agreement dated as of March 31, 1995 (the "Credit Agreement") with the Pledgor ---------------- and Medis Health and Pharmaceutical Services Inc. ("Medis") pursuant to which the Banks have made certain commitments, subject to the terms and conditions set forth in the Credit Agreement, to extend certain credit facilities to the Pledgor and to Medis. B. Pledgor may, from time to time, but is not required to, pledge Collateral (as hereinafter defined) pursuant to the terms of this Agreement. C. It is a condition precedent to the initial extensions of credit by the Banks under the Credit Agreement that the Pledgor shall have executed and delivered to the Agent and the Banks this Agreement. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS AND REFERENCES -------------------------- 1.01 General Definitions. All capitalized terms used in this Agreement ------------------- (including in the recitals hereof) and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement. As used in this Agreement, the following terms shall have the following meanings: "Applicable CFR Sections" has the meaning specified in Section 6.04(b). ----------------------- "Approved Custodian" has the meaning specified in the Credit Agreement. ------------------ I-1 "Business Day" means any day other than a Saturday, Sunday or other day on ------------ which commercial banks in New York City or San Francisco are authorized or required by law to close. "CFR" means the United States Code of Federal Regulations, as from time to --- time amended. "Collateral" means (a) the Collateral Accounts, (b) all amounts on deposit ---------- from time to time in the Collateral Accounts, (c) all Investments, including all securities (whether certificated or uncertificated), instruments, accounts, general intangibles and deposits representing or evidencing any Investments, (d) all interest, dividends, cash, instruments, securities and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Collateral (other than such interest, dividends, cash, instruments, securities and other property deposited into an account designated by the Pledgor that is not a Collateral Account in accordance with Section 3.03(c)), (e) all of the Pledgor's right, title and interest in, to and under the Custodial Agreement (as, and only to the extent it refers or applies to the Collateral Accounts), and (f) to the extent not covered by clauses (a) through (e) above, all Proceeds of any or all of the foregoing Collateral. "Collateral Accounts" means the Restricted Custodial Account and any other ------------------- accounts in which Investments may be held or registered. "Collateral Period" means (a) the period from the Closing Date to June 30, ----------------- 1995 and (b) any calendar quarter commencing thereafter. "Custodial Agreement" means the Custody Agreement dated November 21, 1994 ------------------- between BofA in its capacity as Custodian and the Pledgor and any successor or other Custodial Agreement permitted under the terms of this Agreement and the Credit Agreement. "Custodial Agreement Acknowledgment" means the Custodial Agreement ---------------------------------- Acknowledgment among the Pledgor, the Custodian and Agent substantially in the form of Exhibit J annexed to the Credit Agreement and any other Custodial Agreement Acknowledgment approved by Majority Banks. "Custodian" means BofA in its capacity as custodian under the Custodial --------- Agreement and any successor custodian or custodians under a Custodial Agreement permitted under the terms of this Agreement and the Credit Agreement. "Designated Collateral" has the meaning specified in Section 3.05. --------------------- I-2 "Eligible Collateral" means, as of any Valuation Day, cash and Eligible ------------------- Investments on deposit in the Restricted Custodial Account as of such day. "Eligible Investments" means U.S. Government Securities. -------------------- "Investments" means those investments, if any, made by the Custodian upon ----------- direction from the Pledgor or Agent, as the case may be, with amounts on deposit in the Restricted Custodial Account pursuant to Article III of the Custodial Agreement Acknowledgment. "Lowest Quarterly Market Value" has the meaning specified in Section ----------------------------- 3.04(c). "Market Value" means, with respect to the Eligible Collateral on any ------------ Valuation Day, a dollar value determined as follows: (a) cash shall be valued at its face amount on such Valuation Day; and (b) an Eligible Investment shall be valued pursuant to the Custodian's standard and customary pricing sources for such Eligible Investment which it believes to be reliable. "Proceeds" means whatever is receivable or received from or upon the sale, -------- lease, license, collection, use, exchange or other disposition, whether voluntary or involuntary, of any Collateral, including "proceeds" as defined at UCC Section 9306, any and all proceeds of any insurance, indemnity, warranty or guaranty payable to or for the account of the Pledgor from time to time with respect to any of the Collateral, any and all payments (in any form whatsoever) made or due and payable to the Pledgor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of Governmental Authority), any and all other amounts from time to time paid or payable under or in connection with any of the Collateral or for or on account of any damage or injury to or conversion of any Collateral by any Person, any and all other tangible or intangible property received upon the sale or disposition of Collateral, and all proceeds of proceeds. "Restricted Custodial Account" means account No. 197427321 (Ref: ---------------------------- McKesson Corporation) established and maintained with the Custodian pursuant to the Custodial Agreement that is pledged to Agent on behalf of Banks pursuant to the terms hereof. "Secured Obligations" means all obligations and liabilities of every nature ------------------- of the Pledgor now or hereafter existing under or arising out of or in connection with the Credit Agreement, the Guaranty and the other Loan Documents and all extensions or renewals thereof, whether for principal, interest (including I-3 interest that, but for the filing of a petition in bankruptcy with respect to the Pledgor, would accrue on such obligations), fees, expenses, indemnities or otherwise, whether voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from the Agent or any Bank as a preference, fraudulent transfer or otherwise, and all obligations of every nature of the Pledgor now or hereafter existing under this Agreement. "UCC" means the Uniform Commercial Code as the same may, from time to time, --- be in effect in the State of California; provided, however, in the event that, -------- ------- by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of California, the term "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions. "U.S. Government Securities" means securities issued or directly and -------------------------- unconditionally guaranteed as to interest and principal by the United States Government or its agencies identified specifically by type on Schedule A to the ---------- Custodial Agreement Acknowledgment, as supplemented from time to time in accordance with the Custodial Agreement Acknowledgment. "Valuation Day" has the meaning specified in subsection 3.04(a) . ------------- "Valuation Report" has the meaning specified in subsection 3.04(b). ---------------- "Valuation Summary" has the meaning specified in subsection 3.04(c). ----------------- 1.02 Other Interpretive Provisions. (a) The meanings of defined terms are ----------------------------- equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. I-4 (ii) The term "including" is not limiting and means "including without limitation." (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including. " (d) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (f) This Agreement is the result of negotiations among and have been reviewed by counsel to the Agent, the Customer and the Custodian and is the product of all parties. Accordingly, it shall not be construed against the Banks or the Agent merely because of the Agent's or Banks' involvement in its preparation. ARTICLE II PLEDGE OF SECURITY FOR SECURED OBLIGATIONS ------------------------------------------ 2.01 Grant of Security Interest. The Pledgor hereby pledges and -------------------------- assigns to the Agent, and hereby grants to the Agent (for itself and on behalf of and for the Canadian Administrative Agent and the ratable benefit of the Banks) a security interest in, all of the Pledgor's right, title and interest in and to the Collateral as collateral security for the prompt payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. 362(a)), of all Secured Obligations. 2.02 Financing Statements, Etc. The Pledgor shall execute and ------------------------- deliver to the Agent, at any time and from time to time, all financing statements for filing in California and such other jurisdictions as may be designated by the Agent, continuation statements, termination statements, notices, and all other documents and instruments (the "Financing Statements") -------------------- which the Agent may reasonably request, in form satisfactory to I-5 the Agent, and the Pledgor hereby agrees to, and authorizes the Agent to, take such other steps as shall be requested by the Agent to perfect and continue perfected, maintain the priority of or provide notice of the pledge of and security interest in the Collateral and to accomplish the purposes of this Agreement. 2.03 Delivery of Payments and Other Distributions. Upon the -------------------------------------------- occurrence and during the continuation of an Event of Default, if the Pledgor shall become entitled to receive or shall receive in connection with the Collateral any payment or other distribution, the Pledgor shall accept such payment or distribution as the agent for the Agent, shall hold it in trust for the benefit of the Agent, shall segregate it from other property or funds of the Pledgor, and shall deliver all such payments and distributions, in the exact form received, forthwith to or for the account of the Agent, at the address and to the Person or Persons to be designated by the Agent, with any necessary endorsements and other instruments of transfer or assignment, all in form and substance satisfactory to the Agent, as the Agent shall request, to be held by the Agent subject to the terms hereof, as part of the Collateral. 2.04 Continuing Security Interest. The Pledgor agrees that this ---------------------------- Agreement shall create a continuing security interest in and pledge of the Collateral which shall remain in effect until terminated in accordance with Article VIII. ARTICLE III ESTABLISHMENT AND OPERATION OF COLLATERAL ACCOUNTS; --------------------------------------------------- VALUATION AND RELEASE OF COLLATERAL ----------------------------------- 3.01 Restricted Custodial Account. The Pledgor has established with ---------------------------- the Custodian the Restricted Custodial Account and from time to time may deposit Collateral therein all of which is and will be held and applied in accordance with this Agreement, the Custodial Agreement and the Custodial Agreement Acknowledgment. 3.02 Operation of Collateral Accounts. -------------------------------- (a) The Restricted Custodial Account shall be operated, and all Investments shall be purchased and registered or held (as applicable), in accordance with the terms of the Custodial Agreement and the Custodial Agreement Acknowledgment. (b) The Agent shall be fully protected and shall suffer no liability in acting in accordance with any instructions reasonably believed by it to have been given by the Pledgor with respect to any aspect of the operation of the Collateral Accounts (including any such instructions relating to any Investments of any amounts on deposit therein). I-6 (c) Anything contained herein to the contrary notwithstanding, the Collateral Accounts shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. 3.03 Investment of Amounts In the Collateral Accounts. ------------------------------------------------ (a) Cash held by the Custodian in the Restricted Custodial Account shall not be invested or reinvested except as provided in this Article III and in the Custodial Agreement Acknowledgement. (b) So long as no Event of Default shall have occurred and be continuing, Pledgor may direct the purchase and sale of Investments on deposit in the Restricted Custodial Account in accordance with Article III of the Custodial Agreement Acknowledgement. At any time after the occurrence and during the continuance of an Event of Default, Agent may provide written notice to the Custodian suspending the Pledgor's right to direct the investment of funds on deposit in the Restricted Custodial Account; provided that, if the Agent has so notified the Custodian and such Event of Default shall no longer be continuing, then, upon request of the Pledgor, the Agent shall provide written notice to the Custodian revoking such suspension. (c) Subject to the Agent's rights under clause (d), any interest, cash dividends or other cash distributions received by the Custodian in respect of any Investments (other than proceeds from the sale of Investments) shall be transferred in accordance with Section 4 of the Custodial Agreement or to any other account designated by the Pledgor. Any distribution of property other than cash in respect of any Investment shall be held in the Restricted Custodial Account and the net proceeds of any sale or payment of any Investments shall be held in a Collateral Account pending investment. (d) The Pledgor agrees that the Agent may sell or cause the sale of any Investment and, if appropriate, instruct the Custodian to transfer the proceeds of such sale or any other cash on deposit in the Restricted Custodial Account to an account designated by the Agent, in either case (i) if such sale or transfer is necessary to permit the Agent to perform its duties under this Agreement or the Credit Agreement and (ii) as otherwise provided in Section 6.04. 3.04 Valuation of Collateral. ----------------------- (a) On or prior to the fifth Business Day after (1) the last Business Day of each calendar month, (2) the next Business Day after any day on which Collateral is released from the Custodial Account pursuant to Section 3.05 hereof and (3) the Business Day immediately preceding any day on which I-7 Collateral is added to the Custodial Account pursuant to Section 3.06 hereof, the Pledgor shall cause the Custodian to, as provided in the Custodial Agreement Acknowledgment: (i) determine the Market Value of all Eligible Collateral which was held in the Restricted Custodial Account as of the close of business on such (1) last Business Day of the calendar month, (2) next Business Day after the day on which Collateral is released or (3) Business Day immediately preceding the day on which Collateral is added, as the case may be, (each such day, a "Valuation Day"); and ------------- (ii) prepare a valuation report stating the Market Value of the Eligible Collateral and any cash held in the Restricted Custodial Account as of the close of business on each such Valuation Day ("Valuation Report"). ---------------- (b) On or prior to the fifth Business Day after each Valuation Day referred to in subsection 3.04(a)(i)(1), the Pledgor shall cause the Custodian to deliver by facsimile transmission to the Agent and the Pledgor the Valuation Report, and, for any other Valuation Day, upon request of the Agent, the Pledger shall cause the Custodian to deliver by facsimile transmission to the Agent the related Valuation Report. (c) The Agent may conclusively rely on each Valuation Report. The Agent shall deliver to each Bank as soon as available, but on or before the tenth day of each calendar quarter, and to the Pledgor along with each statement of fees and interest due under the Credit Agreement, a quarterly statement ("Valuation Summary") showing the lowest Market Value of the Eligible Collateral on a Valuation Day during such quarter or, in the case of a quarter in which the Closing Date occurs or the Commitments have been terminated, showing the lowest Market Value of the Eligible Collateral on a Valuation Day during such calendar quarter during which the Commitments were in effect ("Lowest Quarterly Market ----------------------- Value"), and the Market Value of the Eligible Collateral on each such Valuation - ----- Day during such calendar quarter. The Lowest Quarterly Market Value so determined by the Agent shall be final, conclusive and binding on all parties in the absence of manifest error. 3.05 Release of Collateral. (a) The Pledgor may, at any time and from --------------------- time to time (x) if any Loans or Bankers' Acceptances are outstanding, on one Business Day prior written notice to the Custodian and the Agent and (y) if no Loans or Bankers' Acceptances are outstanding, upon written notice to the Custodian and the Agent, request that the Custodian release Collateral as designated by the Pledgor from the Restricted Custodial Account ("Designated ---------- Collateral") (which notice shall describe the Designated Collateral in detail); - ---------- provided that there shall not have occurred and be continuing a Default or an Event of Default on the date that the Pledgor requests a release I-8 of Designated Collateral, or on the date that all or any portion of the Designated Collateral is released; and (b) Provided that the foregoing conditions shall have been satisfied, the Pledgor shall be entitled to a release of the Designated Collateral. At any time after the occurrence and during the continuance of a Default or an Event of Default (or if a Default or Event of Default would occur on the date that the Designated Collateral is to be released) the Agent may provide written notice to the Custodian suspending the Pledgor's right to release Collateral from the Restricted Custodial Account; provided that, if the Agent has so notified the Custodian and such Default or Event of Default shall no longer be continuing, then, upon request of the Pledgor, the Agent shall provide written notice to the Custodian rescinding such suspension. 3.06 Additions of Collateral. The Pledgor may at any time and from time to ----------------------- time pledge additional Collateral pursuant hereto by depositing cash or other Collateral in the Restricted Custodial Account and in the event Pledgor deposits any additional Collateral, Pledgor shall notify the Agent in writing (which notice shall describe the additional Collateral in detail) and cause the Custodian to prepare and deliver a Valuation Report as of the related Valuation Day as contemplated pursuant to Section 3.04(a)(3). ARTICLE IV REPRESENTATIONS AND WARRANTIES ------------------------------ The Pledgor represents and warrants as follows: (a) The Pledgor is (or at the time of transfer thereof to the Agent or the Custodian will be) the legal and beneficial owner of the Collateral from time to time transferred by the Pledgor to the Agent or to the Custodian, as agent for the Agent, free and clear of any Lien except for the security interest created by this Agreement and the security interest created by the Custodial Agreement. No dispute, right of set-off, recoupment, counterclaim or defense exists with respect to all or any part of the Collateral and no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office except such as may have been filed in favor of the Agent relating to this Agreement. (b) No approval, consent, exemption, authorization or other action by, or no notice to, or filing with, any governmental authority or regulatory body is necessary or required in connection with (i) the grant by the Pledgor of the security interest granted hereby, or (ii) the perfection of or the exercise by the Agent or the Custodian of its rights and I-9 remedies hereunder or under the Custodial Agreement (except as may have been taken by or at the direction of the Pledgor). (c) The pledge and assignment of the Collateral pursuant to this Agreement and the Custodial Agreement creates a valid and perfected first priority security interest in the Collateral, securing the payment of the Secured Obligations. (d) Unless otherwise notified by the Pledgor pursuant to Section 5.04, Pledgor's chief executive office and principal place of business, and all books and records concerning the Collateral are located at One Post Street, San Francisco, California. (e) All information heretofore, herein or hereafter supplied to the Agent or the Custodian by or on behalf of the Pledgor with respect to the Collateral is accurate and complete in all material respects. ARTICLE V COVENANTS OF PLEDGOR -------------------- 5.01 Delivery of Collateral. All documents, certificates, ---------------------- instruments and writings, if any, evidencing any Collateral pledged concurrently herewith shall be delivered to the Agent or the Custodian on or prior to the execution and delivery of this Agreement. All other documents, certificates, instruments and writings, if any, hereafter evidencing Collateral or constituting Collateral shall be delivered to the Agent or the Custodian promptly upon the pledge thereof by the Pledgor. All such documents, certificates, instruments and writings, if any, shall be held by Custodian on behalf of the Agent pursuant to the terms of the Custodial Agreement. The Pledgor will not cause or permit any document, instrument, or certificate constituting or evidencing Collateral to at any time be in the actual or constructive possession or control of any Person other than the Agent or a bailee selected by the Agent (including Custodian) who is holding such Collateral for the benefit of Agent. 5.02 Further Assurances. The Pledgor agrees that from time to time, ------------------ at the expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce its rights and remedies hereunder or under the other Collateral Documents with respect to any Collateral. Without limiting the generality of the foregoing, the Pledgor will: (i) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Agent may reasonably I-10 request, in order to perfect and preserve the security interest granted or purported to be granted hereby and (ii) at the Agent's reasonable request, appear in and defend any action or proceeding that may adversely affect the Pledgor's title to or the Agent's security interest in all or any part of the Collateral constituting cash or Eligible Investments; provided that Pledgor shall not be obligated to make such appearance or defense relating to actions or proceedings challenging security interests junior to the security interest of the Agent or to the extent the Pledgor shall provide evidence satisfactory to the Agent that the Pledgor does not intend for such Collateral to constitute Qualifying Collateral (as defined in the Credit Agreement). 5.03 Transfers and other Liens. Subject to Sections 3.03(d) and ------------------------- 3.05, the Pledgor agrees that it will not (a) sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral or (b) create or suffer to exist any Lien upon or with respect to any of the Collateral, or file or record any financing statement with respect to the Collateral or otherwise identify the Collateral as being subject to a pledge or security interest, except for the security interest under this Agreement and the Custodial Agreement. 5.04 Chief Executive Office. The Pledgor will (a) keep all books and ---------------------- records pertaining to the Collateral at the location set forth in Article IV (or such other location as to which Pledgor shall notify Agent pursuant to subsection 5.04(b)(ii)) and (b) within 30 days after such change) give written notice to the Agent of any changes in (i) the Pledgor's corporate name, any tradenames or trade styles or any fictitious business names, or (ii) any such location where books and records pertaining to the Collateral are kept, or the location of the Pledgor's chief executive office and principal place of business. 5.05 Impairment of Security Interest. Subject to the terms of this ------------------------------- Agreement and the Custodial Agreement Acknowledgement, including Sections 3.03 and 3.05, the Pledgor will not take or fail to take any action which would impair the enforceability of the Agent's security interest in any Collateral. 5.06 Voting. Subject to the terms of this Agreement and the ------ Custodial Agreement Acknowledgement, including Sections 3.03 and 3.05, the Pledgor will not cast any vote, give or grant any consent, waiver or ratification or take any action with respect to the Collateral which would have the effect of impairing the position or interest of the Agent or the Banks in respect of the Collateral or would be inconsistent with or violate any provision of this Agreement or any other Loan Documents. I-11 5.07 Inspection of Collateral and Information. The Pledgor will keep ---------------------------------------- adequate records concerning the Collateral and will permit the Agent, any Bank and their respective representatives to inspect the Pledgor's books and records concerning the Collateral on the same terms and conditions as set forth in Section 6.08 of the Credit Agreement. The Pledgor will furnish to the Agent any information which the Agent may from time to time request at the request of any Bank concerning any covenant, provision or representation contained herein or any other matter in connection with the Collateral. ARTICLE VI REMEDIES, POWERS AND AUTHORIZATIONS ----------------------------------- 6.01. Agent Appointed Attorney-in-Fact. The Pledgor hereby -------------------------------- irrevocably appoints the Agent (and any of the Agent's officers, employees or agents designated by the Agent) as the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor, the Agent or otherwise, from time to time in the Agent's discretion upon the occurrence and during the continuation of an Event of Default during any period when Collateral shall have been pledged to Agent hereunder to take any action and to execute any instrument that the Agent may deem necessary or advisable to accomplish the purposes of this Agreement or the Custodial Agreement, including (a) to file one or more financing or continuation statements, or amendments thereto, relative to all or any part of the Collateral without the signature of the Pledgor and (b) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (c) to receive, endorse and collect any instruments or other Investments made payable to the Pledgor representing any dividend, principal or interest payment or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same and (d) to file any claims or take any action or institute any proceedings the Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Agent with respect to any of the Collateral. 6.02. Agent May Perform. If the Pledgor fails to perform any ----------------- agreement contained herein, the Agent may (but shall have no obligation to) itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by the Pledgor in accordance with Section 7.02. 6.03. Standard of Care. The powers conferred on the Agent hereunder ---------------- are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the I-12 custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Agent, acting in its capacity as Agent, shall have no duty as to any Collateral, it being understood that the Agent shall have no responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Agent has or is deemed to have knowledge of such matters, (b) taking any necessary steps (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Collateral) to preserve rights against any parties with respect to any Collateral, (c) taking any necessary steps to collect or realize upon the Secured Obligations or any guarantee therefor, or any part thereof, or any of the Collateral, (d) initiating any action to protect the Collateral against the possibility of a decline in market value, (e) any loss resulting from Investments made, held or sold pursuant to Article III, except for a loss resulting from the Agent's gross negligence or willful misconduct in complying with Article III, or (f) determining (i) the correctness of any statement or calculation made by the Pledgor in any written or telex (tested or otherwise) instructions or (ii) whether any deposit in the Collateral Accounts is proper. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Agent accords its own property of like kind. In addition to the foregoing and without limiting the generality thereof, the Agent shall not be responsible for any actions or omissions of the Custodian. 6.04. Remedies. -------- (a) If any Event of Default shall have occurred and be continuing, the Agent may (i) sell any of the Collateral, (ii) transfer any or all of the Collateral constituting cash to an account designated by the Agent or transfer any or all of the Collateral to an account established in the Agent's name (whether at the Agent or the Custodian or otherwise), or (iii) register title to any Collateral in the name of the Agent or one of its nominees or agents, without reference to any interest of the Pledgor. (b) If any Event of Default shall have occurred and be continuing, the Agent may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether or not the ---- Code applies to the affected Collateral), under 31 CFR (S)(S) 306.115 through 306.122 (herein called the "Applicable CFR Sections"), and the Agent may also in its sole discretion sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or broker's board or at any of the Agent's offices or elsewhere, I-13 for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Agent may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Collateral. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Pledgor hereby waives any claims against the Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if (in the case of U.S. Government Securities) the Agent accepts the first offer received and does not offer such Collateral to more than one offeree. (c) The Pledgor hereby agrees that the Collateral is of a type customarily sold on recognized markets and, accordingly, that no notice to any Person is required prior to any sale of any of the Collateral pursuant to the terms of this Agreement; provided that, without prejudice to the foregoing, the Pledgor agrees that, to the extent notice of any such sale shall be required by law, at least five days' notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. (d) If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, the Pledgor shall be liable for the deficiency and the fees of any attorneys employed by the Agent to collect such deficiency. 6.05. Application of Proceeds. If any Event of Default shall have ----------------------- occurred and be continuing, all cash held by the Agent as Collateral and all proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Agent, be held by the Agent as Collateral for, and/or then, or at any other time thereafter, applied in full or in part by the Agent against, the Secured Obligations in the following order of priority: I-14 FIRST: To the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to the Agent and its agents and counsel, and all other expenses, liabilities and advances made or incurred by the Agent in connection therewith, and all amounts for which the Agent is entitled to indemnification hereunder and all advances made by the Agent hereunder for the account of the Pledgor, and to the payment of all costs and expenses paid or incurred by the Agent in connection with the exercise of any right or remedy hereunder, all in accordance with Section 7.02; SECOND: To the payment of all other Secured Obligations (for the ratable benefit of the holders thereof) in such order as the Agent shall elect; and THIRD: To the payment to or upon the order of the Pledgor, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. ARTICLE VII INDEMNIFICATION AND EXPENSES ---------------------------- 7.01 Indemnification. The Pledgor agrees to indemnify the Agent and --------------- each Bank from and against any and all claims, losses and liabilities of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against the Agent or a Bank as a result of any claim or threatened claim by a Person not a party to this Agreement or by the Company (except for claims by the Company against the Agent or a Bank that are successful on the merits as determined by a court of competent jurisdiction) in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including enforcement of this Agreement), except to the extent such claims, losses or liabilities result from the Agent's or such Bank's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. 7.02 Expenses. The Pledgor shall pay to the Agent upon demand the -------- amount of any and all costs and expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that the Agent may incur in connection with (a) the administration of this Agreement, (b) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (c) the exercise or enforcement of any of the rights of the Agent hereunder, (d) the failure by the Pledgor to perform or observe any of the provisions hereof. I-15 ARTICLE VIII CONTINUING SECURITY INTEREST; TRANSFER OF SECURED OBLIGATIONS ------------------------------------------------------------- This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the indefeasible payment in full of the Secured Obligations and the cancellation or termination of the Commitments, (b) be binding upon the Pledgor, its successors and assigns, and (c) inure, together with the rights and remedies of the Agent hereunder, to the benefit of the Agent and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), but subject to the provisions of Section 10.08 of the Credit Agreement, any Bank may assign or otherwise transfer any Secured Obligations held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Banks herein or otherwise. Upon the indefeasible payment in full of all Secured Obligations and the cancellation or termination of the Commitments, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Pledgor. Upon any such termination the Agent will, at the Pledgor's expense, execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence such termination (including the notice described in Article VIII of the Custodial Agreement Acknowledgment) and the Pledgor shall be entitled to the return, upon its request and at its expense, against receipt and without recourse to the Agent, of such of the Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof. Notwithstanding anything to the contrary contained in this Agreement, it is agreed and understood that under the terms and provisions of the Credit Agreement, the Pledgor is not required to pledge any Collateral to Agent; provided that if the Pledgor pledges Collateral to Agent the Pledgor and the Collateral shall be subject to this Agreement. This Article VIII shall not limit the rights of the Pledgor under Section 3.03(d) or Section 3.06. ARTICLE IX AGENT AS AGENT -------------- 9.01 The Agent has been appointed to act as the Agent hereunder by the Banks. The Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including the release or substitution of Collateral), solely in accordance with this Agreement and the Credit Agreement. I-16 9.02 The Agent shall at all times be the same Person that is the Agent under the Credit Agreement. Written notice of resignation by the Agent pursuant to Section 9.09 of the Credit Agreement shall also constitute notice of resignation as the Agent under this Agreement; removal of the Agent pursuant to Section 9.09 of the Credit Agreement shall also constitute removal as the Agent under this Agreement; and appointment of a successor Agent pursuant to Section 9.09 of the Credit Agreement shall also constitute appointment of a successor Agent under this Agreement. Upon the acceptance of any appointment as the Agent under Section 9.09 of the Credit Agreement by a successor Agent, that successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent under this Agreement, and the retiring or removed Agent under this Agreement shall promptly (i) transfer to such successor Agent all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Agent under this Agreement, and (ii) execute and deliver to such successor Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Agent of the security interests created hereunder, whereupon such retiring or removed Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Agent's resignation or removal hereunder as the Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Agent hereunder. 9.03 In connection with the release of any Collateral under this Agreement, the Custodial Agreement Acknowledgement or the Custodial Agreement, the Agent may conclusively assume that no Default or Event of Default has occurred and continues unless it has received written notice from the Pledgor or any Bank to the contrary. The Agent may conclusively rely on each Valuation Report and the Market Value of the Collateral contained therein, and shall have no duty or obligation to verify the contents of any Valuation Report (including the Market Values contained therein) or to independently determine the Market Value of any Collateral. ARTICLE X MISCELLANEOUS ------------- 10.01 Amendments. No amendment or waiver of any provision of this ---------- Agreement and no consent with respect to any departure by the Pledgor therefrom, shall be effective unless the same shall be in writing and signed by the Agent and the Pledgor, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. I-17 10.02 Successors and Assigns. The provisions of this Agreement shall be ---------------------- binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Pledgor may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent. 10.03 Governing Law and Jurisdiction. ------------------------------ (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND TO THE EXTENT THE VALIDITY OR PERFECTION OF THE LIENS HEREUNDER IN RESPECT OF ANY COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN CALIFORNIA. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PLEDGOR, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PLEDGOR AND THE AGENT FOR AND ON BEHALF OF ITSELF AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER -------------------- HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE PLEDGOR AND THE AGENT FOR AND ON BEHALF OF ITSELF AND THE BANKS EACH WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. 10.04 Waiver of Jury Trial. THE PLEDGOR AND THE AGENT FOR AND ON BEHALF -------------------- OF ITSELF AND THE BANKS EACH WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE PLEDGOR AND THE AGENT FOR AND ON BEHALF OF ITSELF AND THE BANKS EACH AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. I-18 10.05 Notices; Written Instructions. ----------------------------- (a) All written instructions, notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by facsimile shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices below; or to such other address as shall be designated by any party in a written notice to the other parties. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery. Address of the Agent: -------------------- Bank of America National Trust and Savings Association 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Ivo Bakovic Vice President Agency Management Services #5596 Facsimile Number: (415) 622-4894 Address of the Pledgor: ---------------------- McKesson Corporation One Post Street San Francisco, CA 94104 Attention: Alan Pearce Facsimile: (415) 983-8464 10.06 Counterparts. This Agreement may be executed in any number of ------------ separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 10.07 No Waiver; Cumulative Remedies. No failure to exercise and no delay ------------------------------ in exercising, on the part of the Agent, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies of the parties provided herein are cumulative and are in addition I-19 to, and not exclusive of, any rights or remedies provided by law. 10.08 Severability. The illegality or unenforceability of any provision ------------ of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.09 No Third Parties Benefited. This Agreement is made and entered into -------------------------- for the sole protection and legal benefit of the Agent, the Pledgor and the Banks for which the Agent acts as agent, and their permitted successors and assigns, and no other person shall be a direct or indirect beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement. 10.10 Entire Agreement. This Agreement embodies the entire agreement and ---------------- understanding among the Pledgor and the Agent and supersedes all prior or contemporaneous agreements and understandings of such parties, verbal or written, relating to the subject matter hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the day and year first written above. MCKESSON CORPORATION By:________________________________ Its:_______________________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By:________________________________ Its:_______________________________ I-20 EXHIBIT J [FORM OF] CUSTODIAL AGREEMENT ACKNOWLEDGMENT -------------------------------------------- This CUSTODIAL AGREEMENT ACKNOWLEDGMENT (this "Agreement") is entered --------- into as of March 31, 1995 among McKesson Corporation, a Delaware corporation (the "Company"), Bank of America National Trust and Savings Association, a ------- national banking association (the "Custodian") in its capacity as Custodian --------- under the Custodial Agreement (as hereinafter defined), and Bank of America National Trust and Savings Association, as agent (in such capacity, the "Agent") ----- for the several financial institutions (the "Banks") from time to time party to ----- the Credit Agreement (as hereinafter defined). RECITALS -------- A. The Company and the Custodian have entered into a Custody Agreement dated as of November 21, 1994 (the "Custodial Agreement") pursuant to which, among other things, the Custodian has established the Restricted Custodial Account (as hereinafter defined) on behalf of the Company to hold and maintain certain securities, distributions with respect thereto and other property. B. The Agent and the Banks have entered into a Credit Agreement dated as of March 31, 1995 (the "Credit Agreement") with the Company, Medis ---------------- Health and Pharmaceutical Services Inc. ("Medis"), Chemical Bank, as Co-Agent, and Bank of America Canada, as Canadian Administrative Agent, pursuant to which the Banks have made certain commitments, subject to the terms and conditions set forth in the Credit Agreement, to extend certain credit facilities to the Company and Medis. C. The Company has entered into a Guaranty dated as of March 31, 1995 (the "Guaranty") pursuant to which the Company has guarantied the loans and other obligations of Medis under the Credit Agreement and other loan documents. D. Pursuant to the terms of the Credit Agreement and the Guaranty, the Company and the Agent have entered into a Pledge and Security Agreement dated as of March 31, 1995 (the "Pledge Agreement") pursuant to which the ---------------- Company has granted a security interest in favor of the Agent in the Collateral (as defined in the Pledge Agreement), including, without limitation, the Restricted Custodial Account and the securities and other property therein. E. The Agent has required that the Company and the Custodian enter into this Agreement to, among other things, set forth the terms on which the Custodian shall operate the Restricted Custodial Account and hold the Collateral. J-1 NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS AND REFERENCES -------------------------- 1.01 General Definitions. All capitalized terms used in this Agreement ------------------- (including in the recitals hereof) and not otherwise defined herein shall have the meanings assigned to them in the Pledge Agreement. As used in this Agreement, the following terms shall have the following meanings: "Business Day" means any day other than a Saturday, Sunday or other day on ------------ which commercial banks in New York City or San Francisco are authorized or required by law to close. "CFR" means the United States Code of Federal Regulations, as from time to --- time amended. "Investments" means those investments, if any, made by the Custodian upon ----------- direction from the Company or the Agent, as the case may be, with amounts on deposit in the Restricted Custodial Account pursuant to Article III. "Person" means an individual, partnership, corporation, business trust, ------ joint stock company, trust, unincorporated association, or governmental authority. "U.S. Government Securities" means securities issued or directly and -------------------------- unconditionally guaranteed as to interest and principal by the United States Government or its agencies identified specifically by type on Schedule A, as ---------- supplemented from time to time in accordance with subsection 3.01(f). 1.02 Other Interpretive Provisions. (a) The meanings of defined terms are ----------------------------- equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means J-2 "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." (d) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (f) This Agreement is the result of negotiations among and have been reviewed by counsel to the Agent, the Company and the Custodian and is the product of all parties. Accordingly, it shall not be construed against the Banks or the Agent merely because of the Agent's or Banks' involvement in its preparation. ARTICLE II OPERATION OF RESTRICTED CUSTODIAL ACCOUNT ----------------------------------------- 2.01 Restricted Custodial Account. The Company hereby authorizes and ---------------------------- directs the Custodian to maintain at its office at 1455 Market Street, San Francisco, California 94103, as a restricted account in the name of the Company but pledged to and under the dominion and control of the Agent as provided herein, an investment account designated as Account No. 197427321 (Ref: "McKesson Corporation") (the "Restricted Custodial Account"). 2.02 Operation of Restricted Custodial Account. (a) The Restricted ----------------------------------------- Custodial Account shall be operated, and all Investments shall be purchased and registered or held (as applicable), in accordance with the terms of the Custodial Agreement except as specifically set forth in this Agreement. (b) Anything contained herein to the contrary notwithstanding, the Restricted Custodial Account shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. (c) The Custodian shall send the Agent and the Company written account statements with respect to the Restricted Custodial Account upon the written request of the Agent. J-3 (d) The obligations and liabilities of the Company and the Custodian with respect to the Restricted Custodial Account shall be governed by the Custodial Agreement, except as specifically provided otherwise in this Agreement. ARTICLE III PERMITTED INVESTMENTS OF AMOUNTS IN THE RESTRICTED CUSTODIAL ACCOUNT ----------------------------------- 3.01 Permitted Investments. (a) Cash held by the Custodian in the --------------------- Restricted Custodial Account shall not be (i) invested or reinvested or (ii) transferred from the Restricted Custodial Account, in either case except as provided in this Article III. (b) So long as the Custodian shall not have received written notice from the Agent suspending the Company's right to direct the investment of funds on deposit in the Restricted Custodial Account, the Custodian shall, in accordance with the Company's instructions with respect to the purchase and sale of Investments, given to the Custodian from time to time in accordance with the Custodial Agreement, make such purchase or sale of Investments, in the Custodian's name and as custodian under this Agreement and the Custodial Agreement. If the Custodian has received notice from the Agent suspending the Company's right to direct such investments under this subsection 3.01(b), such suspension of the Company's rights may be reversed by a subsequent written notice by the Agent to the Custodian to that effect. (c) Promptly upon the purchase of any Investment, the Custodian shall take all steps that it customarily takes in the ordinary course of its business to ensure that such Investment is transferred on its books to the Company, subject to a first priority security interest in favor of the Agent, and to ensure that such Investment is held in the Restricted Custodial Account. Without limiting the generality of the foregoing, the Custodian shall promptly identify in its records, by book entry or otherwise, that the Restricted Custodial Account and any Investments therein belong to the Company, subject to a first priority security interest in favor of the Agent. (d) Anything contained herein or in the Custodial Agreement to the contrary notwithstanding, the Custodian shall, if and as directed in writing by the Agent, (i) transfer any or all of the Collateral constituting cash to an account designated by the Agent or transfer any or all of the Collateral to an account established in the Agent's name (whether at the Agent or the Custodian or otherwise), (ii) otherwise deal with the Collateral as directed by the Agent in writing; provided, that, as between the Agent and the Company, the terms of the Pledge Agreement shall control such directions of the Agent. J-4 (e) Subject to Section 3.01(d), any interest, cash dividends or other cash distributions received in respect of any Investments (other than proceeds from the sale of an Investment) shall be promptly transferred in accordance with the provisions of the Custodial Agreement or to an account designated by the Company. Any distribution of property other than cash in respect of any Investment shall be held in the Restricted Custodial Account and the net proceeds of any sale or payment of any Investments shall be held in the Restricted Custodial Account pending investment subject to the Company's rights under Section 3.06 of the Pledge Agreement. (f) The Company and the Agent may, from time to time, supplement Schedule A by written instructions signed by both of them. The Agent may - ---------- condition its execution of such written instructions upon receiving such opinions of counsel with respect to perfection of its security interest in investments named in such supplement as it may require. (g) Custodian shall hold all Investments in U.S. Government Securities directly or through a Federal Reserve Bank of the United States. 3.02 Transfer of Collateral. In the event that the Company delivers a ---------------------- notice to release Designated Collateral pursuant to Section 3.05 of the Pledge Agreement and the Custodian shall not have received a notice from the Agent suspending the Company's right to release Collateral as provided in Section 3.05(b) of the Pledge Agreement by 9:00 a.m. (San Francisco time) on the date specified for the release of the Designated Collateral in the Company's notice, the Custodian shall be entitled to transfer Collateral designated by the Company from the Restricted Custodial Account in accordance with the Company's written instructions. ARTICLE IV VALUATION OF COLLATERAL; REPORTS BY THE CUSTODIAN ------------------------------------------------- 4.01 Valuation of Collateral. The Custodian shall determine the Market ----------------------- Value of all Eligible Collateral and deliver Valuation Reports to the Agent as provided in Section 3.04 of the Pledge Agreement. The Company and the Agent each acknowledge that the Custodian employs one or more nationally recognized pricing services, financial periodicals and publications to ascribe market values to some or all of the Collateral. The Company and the Agent each acknowledge that these ascribed values may not equal the actual market value of the Collateral and that neither the Custodian nor any vendor from whom the Custodian receives pricing information, guarantees their accuracy. J-5 ARTICLE V ACKNOWLEDGEMENT OF SECURITY INTEREST IN FAVOR OF AGENT; WAIVER OF SET-OFF ------------------------------------ (a) The Custodian hereby confirms that it has received a copy of the Pledge Agreement and acknowledges the security interest granted by the Company in favor of the Agent in the Collateral. (b) The Custodian hereby further acknowledges that it holds the Restricted Custodial Account, and all other Collateral registered to or held therein, for the benefit of, and subject to such security interest in favor of, the Agent. The Custodian shall, by book entry or otherwise, identify the Restricted Custodial Account, and all other Collateral registered to or held therein, as being subject to such security interest in favor of the Agent. (c) The Company, the Custodian and the Agent hereby agree that in the event any dispute arises with respect to the payment, ownership or right to possession of the Restricted Custodial Account or any other Collateral registered to or held therein, the Custodian shall take such actions and shall refrain from taking such actions with respect thereto as may be directed by the Agent, regardless of the rights of the Company under the Custodial Agreement. This paragraph (c) shall not affect or limit the Company's rights or remedies against the Agent if the Agent directs the Custodian to take any action which the Agent is not entitled to direct or take under the Credit Agreement or the other Loan Documents. (d) The Custodian shall not exercise any right of set-off, banker's lien, counterclaim or similar right against any of the Collateral; provided that -------- the Custodian may deduct, from (i) the Collateral, or otherwise from the Restricted Custodial Account, any amount necessary to settle any security transaction related thereto, in accordance with the Custodial Agreement, and (ii) any payments or cash distributions on or with respect to any Investments, any usual and ordinary transaction and administration fees payable in connection with the administration and operation of the Restricted Custodial Account. Notwithstanding anything herein, in the Credit Agreement, in the Pledge Agreement or any related documents to the contrary, the Agent and the Company hereby agree that the continuing lien and pledge on, and security interest in, the Collateral granted to the Custodian by the Company pursuant to the Custodial Agreement shall be equal to the security interest of the Agent but only to the extent that such lien, pledge and security interest of the Custodian secures the obligations of the Company to the Custodian under the Custodial Agreement and that such lien, pledge and security interest of the Custodian shall be junior to the security interest of the Agent to the extent such lien, pledge and security interest secures J-6 obligations of the Company to the Custodian other than those arising under the Custodial Agreement. ARTICLE VI EXCULPATION AND INDEMNIFICATION OF CUSTODIAN -------------------------------------------- 6.01 Custodian's Duties. The Custodian's duties hereunder are only those ------------------ specifically provided herein and no implied duties shall be read into this Agreement, and the Custodian shall incur no liability whatsoever for any actions or omissions hereunder except for any such liability arising out of or in connection with the Custodian's gross negligence or willful misconduct. The Custodian shall be fully protected and shall suffer no liability in acting in accordance with any written instructions reasonably believed by it to have been given (a) by the Agent with respect to any aspect of the operation of the Restricted Custodial Account (including any such instructions relating to any investments of any amounts on deposit therein) or (b) by the Company, to the extent provided in Section 3.01, with respect to any investments of any amounts on deposit in the Restricted Custodial Account or in Section 3.02, with respect to the transfer of Collateral. The Custodian shall have no obligation to determine whether or not an Event of Default under the Credit Agreement shall have occurred. The Custodian shall not be liable or deemed to be in default hereunder for any failure or delay in performance of any duty in whole or in part arising out of or caused by circumstances beyond its control including, without limitation, acts of God, interruption, delay in, or loss (partial or complete) of electrical power or of computer (hardware or software) or communication services; act of civil or military authority; sabotage, war or other government action; civil disturbance or riot; strike or other industrial dispute; national emergency; epidemic; flood, earthquake, fire, or other catastrophe; government, judicial, or self-regulatory organization order, rule, or regulation; energy or natural resource difficulty or shortage; and inability to obtain or timely to obtain materials, equipment, or transportation. 6.02 Indemnification. The Company agrees to indemnify the Custodian from --------------- and against any and all claims, losses, liabilities and expenses (including reasonable attorneys' fees and expenses and the reasonable allocated charges of internal counsel) in any way relating to, growing out of or resulting from this Agreement or the performance of its obligations hereunder, except to the extent arising out of or in connection with the Custodian's gross negligence or willful misconduct. The Custodian agrees to indemnify the Company, the Agent and the Banks from and against any and all claims, losses, liabilities and expenses (including reasonable attorneys' fees and expenses and the reasonable allocated charges of internal counsel) in any way relating to, growing out of or resulting from any actions J-7 taken by the Custodian under this Agreement amounting to gross negligence or willful misconduct of the Custodian or its officers or employees, except for consequential damages caused thereby. The Agent, for itself and on behalf of the Banks, agrees to indemnify the Custodian from and against any and all claims, losses, liabilities and expenses (including reasonable attorneys' fees and expenses and the reasonable allocated charges of internal counsel) in any way relating to, growing out of or resulting from any actions taken by the Agent or its officers or employees under this Agreement or the Pledge Agreement amounting to negligence or willful misconduct, except for consequential damages caused thereby. The Company agrees to release, indemnify and defend against, and each of the Company and the Agent, for itself and on behalf of the Banks, agrees to hold the Custodian harmless against, any risk, loss, claim, liability, demand, damage or expense resulting from and/or related to the ascribed market value of the Collateral, including without limitation, claims made against the Company or the Agent by any third party. The provisions of this Article shall survive termination of this Agreement. ARTICLE VII REPRESENTATIONS AND WARRANTIES BY THE CUSTODIAN ----------------------------------------------- The Custodian hereby represents and warrants to the Company and the Agent as follows: (a) The Custodian has all necessary corporate power and authority to enter into and perform this Agreement. (b) The execution, delivery and performance of this Agreement by the Custodian have been duly authorized by all necessary corporate action on the part of the Custodian. This Agreement constitutes the valid, legal and binding agreement of the Custodian, enforceable in accordance with its terms. (c) The Custodian is (i) a national banking association and (ii) eligible to maintain custodial book entry accounts with a Federal Reserve Bank under Sections 306.115 through 306.122 of Title 31 of the CFR. In the ordinary course of its business, the Custodian accepts for deposit items similar to the Eligible Investments as a service for its customers, and maintains securities accounts in the names of such customers reflecting ownership of or interests in such items. The Custodian is a "financial intermediary" (as that term is defined in Section 8-313 of the Uniform Commercial Code as in effect in the State of California) and is acting in such capacity for purposes of this Agreement. (d) At the time any Collateral is valued in any Valuation Report, the Custodian's Custody Unit located at the address set forth in Section 10.05(b) will not have received, acknowledged or accepted any notice, order, registration or J-8 other document which purports to constitute any pledge, claim, security interest, lien, encumbrance or adverse claim of any kind with respect to such Collateral, other than the pledge and security interest in favor of the Agent pursuant to the Pledge Agreement, or been served with legal process with respect to such Collateral. The Custodian has not sold, transferred, assigned, pledged or granted, and after the date hereof the Custodian will not, except as specified in Article III, paragraph (d) of Article V or subsection 9.03(d), sell, transfer, assign, pledge or grant a security interest in, the Collateral, or any part thereof, to any Person, including the Federal Reserve Bank of New York, any other Federal Reserve Bank, the United States Treasury or any other transferee or pledgee eligible to maintain a book-entry account in its name with a Federal Reserve Bank. ARTICLE VIII TERMINATION ----------- This Agreement shall terminate, and all rights to the Restricted Custodial Account and all other Collateral registered to or held therein shall revert to the Company, upon the Custodian's receipt of written notice, signed by an authorized officer of the Agent, that the Pledge Agreement has terminated. ARTICLE IX RESIGNATION AND REMOVAL OF THE CUSTODIAN ---------------------------------------- 9.01 Removal. The Custodian may be removed at any time by written notice ------- given by the Agent to the Custodian and the Company, but such removal shall not become effective until a successor Custodian shall have been appointed in accordance with Section 9.03 and shall have accepted such appointment in writing. 9.02 Resignation. The Custodian may resign at any time by giving not less ----------- than thirty days' written notice to the Agent and the Company, but such resignation shall not become effective until a successor Custodian shall have been appointed in accordance with Section 9.03 and shall have accepted such appointment in writing. If an instrument of acceptance by a successor Custodian shall not have been delivered to the resigning Custodian within thirty days after the giving of any such notice of resignation, the resigning Custodian may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Custodian. 9.03 Successor Custodian. (a) If the Custodian resigns or is removed ------------------- hereunder or becomes incapable of acting or is adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Custodian, or of its property, shall be J-9 appointed, or if any public officer shall take charge or control of the Custodian, or of its property or affairs, the Company may appoint an Approved Custodian as successor hereunder or, with the consent of the Agent and Majority Banks, may appoint another entity complying with Section 9.03(b) as successor hereunder. (b) Any Custodian appointed under the provisions of Section 9.03(a) in succession to the Custodian shall be either (i) an Approved Custodian or (ii) a bank or trust company or banking association in good standing having capital stock and surplus aggregating at least $1,000,000,000, which, in the case of either (i) or (ii), shall be authorized by law to perform all the duties imposed upon it by this Agreement and able to make the representations contained in subsections (a), (b) and (c) of Article VII. (c) Any company into which the Custodian may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party, or any company to which the Custodian may sell or transfer all or substantially all of its custody business shall be the successor to the Custodian hereunder without the execution or filing of any paper or the performance of any further act, if and only if such company shall be either (i) an Approved Custodian or (ii) a bank or trust company or banking association in good standing having capital stock and surplus aggregating at least $1,000,000,000, which, in the case of either (i) or (ii), shall be authorized by law to perform all the duties imposed upon it by this Agreement and able to make the representations contained in clauses (a), (b) and (c) of Article VII. (d) Upon the appointment of a successor Custodian and its acceptance of such appointment and upon payment of all Obligations (as defined in the Custodial Agreement) and all fees and expenses owed to the Custodian hereunder, the resigning or removed Custodian shall transfer all items of Collateral held by it to such successor (which items of Collateral shall be deposited in a new Restricted Custodial Account established and maintained by such successor) and the original Custodian shall deliver a certificate in the form of Exhibit A with --------- respect to all Collateral so transferred. Following such appointment all references herein to the Custodian shall be deemed a reference to such successor; provided that the provisions of Article VI hereof and of Section 8 of -------- the Custodial Agreement shall continue to inure to the benefit of the resigning or removed Custodian with respect to any actions taken or omitted to be taken by it under this Agreement while it was the Custodian hereunder. J-10 ARTICLE X MISCELLANEOUS ------------- 10.01 Amendments; Conflicts With Custodial Agreement. No amendment or ---------------------------------------------- waiver of any provision of this Agreement or the Custodial Agreement and no consent with respect to any departure by the Company or the Custodian therefrom, shall be effective unless the same shall be in writing and signed by the Agent, the Company, and the Custodian, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. In the event of a conflict between the terms of this Agreement and the terms of the Custodial Agreement, the terms of this Agreement shall prevail. 10.02 Successors and Assigns. The provisions of this Agreement shall be ---------------------- binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither the Company nor the Custodian (except as provided in Section 9.03(c)) may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each of the other parties hereto. 10.03 Governing Law. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND TO THE EXTENT THE VALIDITY OR PERFECTION OF THE LIENS HEREUNDER IN RESPECT OF ANY COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN CALIFORNIA. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT (FOR ITSELF AND ON BEHALF OF THE BANKS) AND THE CUSTODIAN CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT (FOR ITSELF AND ON BEHALF OF THE BANKS) AND THE CUSTODIAN IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE -------------------- BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT (FOR ITSELF AND ON BEHALF OF THE BANKS) AND THE CUSTODIAN EACH WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. 10.04 Waiver of Jury Trial. THE COMPANY, THE AGENT (FOR ITSELF AND ON -------------------- BEHALF OF THE BANKS) AND THE CUSTODIAN EACH WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT J-11 BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE AGENT (FOR ITSELF AND ON BEHALF OF THE BANKS) AND THE CUSTODIAN EACH AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. 10.05 Notices; Written Instructions. ----------------------------- (a) All written instructions, notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by facsimile shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices below; or to such other address as shall be designated by any party in a written notice to the other parties. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery. Address of the Agent: -------------------- Bank of America National Trust and Savings Association 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Ivo Bakovic Vice President Agency Management Services #5596 Facsimile Number: (415) 622-4894 Address of the Company: ---------------------- McKesson Corporation One Post Street San Francisco, CA 94104 Attention: Facsimile: (415) 983-8464 J-12 Address of the Custodian: ------------------------ Bank of America National Trust and Savings Association 1455 Market Street, 16th Floor San Francisco, CA 94103 Attention: Rick Hawkins Facsimile: (415) 622-5167 10.06 Counterparts. This Agreement may be executed in any number of ------------ separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 10.07 No Waiver; Cumulative Remedies. No failure to exercise and no delay ------------------------------ in exercising, on the part of the Agent, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies of the parties provided herein are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. 10.08 Severability. The illegality or unenforceability of any provision ------------ of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.09 No Third Parties Benefited. This Agreement is made and entered into -------------------------- for the sole protection and legal benefit of the Custodian, the Company, the Agent, and the Banks for which the Agent acts as the Agent, and their permitted successors and assigns, and no other Person shall be a direct or indirect beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement. 10.10 Entire Agreement. This Agreement embodies the entire agreement and ---------------- understanding among the Custodian, on one hand, and the Company and the Agent, on the other, and supersedes all prior or contemporaneous agreements and understandings of such parties, verbal or written, relating to the subject matter hereof. J-13 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the day and year first above written. The Company: McKESSON CORPORATION By:_________________________________________ Its:________________________________________ The Agent: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By:_________________________________________ Its:________________________________________ The Custodian: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:_________________________________________ Its:________________________________________ By:_________________________________________ Its:________________________________________ J-14 Schedule A ---------- U.S. GOVERNMENT SECURITIES - -------------------------- 1 EXHIBIT A RE: McKesson Restricted Custodial Account CERTIFICATION OF THE CUSTODIAN UPON TRANSFER Reference is made to the Custodial Agreement Acknowledgment dated as of March 31, 1995 (the "Agreement") among McKesson Corporation (the "Company"), Bank of America National Trust and Savings Association (the "Custodian") and Bank of America National Trust and Savings Association, as Agent ("Agent"). Terms which are defined in the Agreement are used herein with the meanings given them in the Agreement. Pursuant to the terms of the Agreement, the Custodian hereby represents and warrants to the Agent that: (a) The person signing this instrument on behalf of the Custodian is the duly elected, qualified and acting officer of the Custodian as indicated below such officer's signature hereto, having all necessary authority to act for the Custodian in making the certification herein contained. (b) The Collateral described below represents all Collateral contained in the Restricted Custodial Account: [Investments to be described here by Issuer, Par Amount, Coupon and Maturity; other Collateral to be described by dollar amount and type] (c) The representations and warranties of the Custodian set forth in Article VII of the Agreement are true and correct on and as of the date hereof with respect to all Collateral, with the same effect as though such representations and warranties had been made on and as of the date hereof. (d) Except to the extent waived in writing by the Agent, the Custodian has performed and complied with all agreements and conditions in the Agreement required to be performed or complied with by the Custodian on or before the date hereof. A-1 In accordance with the instructions of the Company and the Agent, the Custodian agrees to transfer all Collateral immediately after its execution of this Certificate to account number __________ at [the successor custodian]. IN WITNESS WHEREOF, this instrument is executed as of ____________________, ________. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:______________________________ Name: ________________________ Title: _______________________ A-2 EXHIBIT K [FORM OF] NOTICE OF ELECTION OF PROJECTED COLLATERAL VALUE ---------------------------------------------------------- Date: ___________, ____ To: Bank of America National Trust and Savings Association, as Agent for the Banks parties to the Credit Agreement dated as of March 31, 1995 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") among ---------------- McKesson Corporation, Medis Health and Pharmaceutical Services Inc., certain Banks which are signatories thereto, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of America National Trust and Savings Association, as Agent Ladies and Gentlemen: The undersigned, McKesson Corporation, refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice that the Projected Market Value for the Collateral Period commencing ____________________ and ending _______________ is projected to be not less than $[0][______________]. MCKESSON CORPORATION By:________________ Title:_____________ cc: Custodian under the Custodial Agreement K-1 EXHIBIT L [FORM] OF GUARANTY GUARANTY This GUARANTY is entered into as of March 31, 1995 by MCKESSON CORPORATION, a Delaware corporation ("GUARANTOR"), in favor of and for the benefit of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for and representative of (in such capacity herein called "AGENT") the financial institutions ("BANKS") party to the Credit Agreement (as hereinafter defined). RECITALS A. Medis Health and Pharmaceutical Services Inc., an Ontario corporation and a wholly-owned subsidiary of Guarantor ("MEDIS"), has entered into that certain Credit Agreement dated as of March 31, 1995 with Guarantor, the Banks, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Agent (said Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT"; capitalized terms defined therein and not otherwise defined herein being used herein as therein defined). B. Credit extensions, including Loans and advances in respect of the Bankers' Acceptance Facility, may be made to Medis under the Credit Agreement, Medis is an indirect wholly-owned Subsidiary of the Company and the Guarantied Obligations (as hereinafter defined) are being incurred for and will inure to the benefit of Guarantor (which benefits are hereby acknowledged). C. It is a condition precedent to the making of the initial extensions of credit under the Credit Agreement that Medis's obligations thereunder be guarantied by Guarantor. D. Guarantor is willing irrevocably and unconditionally to guaranty such obligations of Medis. NOW, THEREFORE, based upon the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce Banks, the Co-Agent and Agents to enter into the Credit Agreement and to make the Loans and other extensions of credit thereunder, Guarantor hereby agrees as follows: L-1 SECTION 1. DEFINITIONS 1.1 CERTAIN DEFINED TERMS. As used in this Guaranty, the following terms --------------------- shall have the following meanings unless the context otherwise requires: "GUARANTIED OBLIGATIONS" has the meaning assigned to that term in subsection 2.1. "GUARANTY" means this Guaranty dated as of March 31, 1995, as may be amended, supplemented or otherwise modified from time to time. "PAYMENT IN FULL", "PAID IN FULL" or any similar term means payment in full of the Guarantied Obligations including, without limitation, all principal, interest, costs, fees and expenses (including, without limitation, legal fees and expenses) of Banks, Co-Agent and Agents as required under the Loan Documents. 1.2 INTERPRETATION. -------------- (a) References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Guaranty unless otherwise specifically provided. (b) In the event of any conflict or inconsistency between the terms, conditions and provisions of this Guaranty and the terms, conditions and provisions of the Credit Agreement, the terms, conditions and provisions of this Guaranty shall prevail. SECTION 2. THE GUARANTY 2.1 GUARANTY OF THE GUARANTIED OBLIGATIONS. Guarantor hereby irrevocably -------------------------------------- and unconditionally guaranties, as primary obligor and not merely as surety, the due and punctual payment in full of all Guarantied Obligations when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)). The term "GUARANTIED OBLIGATIONS" is used herein in its most comprehensive sense and includes: (a) any and all Obligations of Medis now or hereafter made, incurred or created, whether absolute or contingent, liquidated or unliquidated, whether due or not due, and however arising under or in connection with the Credit Agreement, the Notes and Drafts issued by Medis and the other Loan Documents, including those arising under successive borrowing transactions under the Credit Agreement which shall either continue the Obligations of L-2 Medis or from time to time renew them after they have been satisfied; and (b) those expenses set forth in Section 2.8 hereof. 2.2 LIABILITY OF GUARANTOR ABSOLUTE. Guarantor agrees that its ------------------------------- obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than indefeasible payment in full of the Guarantied Obligations. In furtherance of the foregoing and without limiting the generality thereof, Guarantor agrees as follows: (a) This Guaranty is a guaranty of payment when due and not of collectibility. (b) Agent may enforce this Guaranty upon the occurrence of an Event of Default under the Credit Agreement notwithstanding the existence of any dispute between Banks and any Borrower with respect to the existence of such Event of Default. (c) The obligations of Guarantor hereunder are independent of the obligations of Medis under the Loan Documents and the obligations of any other guarantor of the obligations of Medis under the Loan Documents, and a separate action or actions may be brought and prosecuted against Guarantor whether or not any action is brought against Medis or any of such other guarantors and whether or not Medis is joined in any such action or actions. (d) Guarantor's payment of a portion, but not all, of the Guarantied Obligations shall in no way limit, affect, modify or abridge Guarantor's liability for any portion of the Guarantied Obligations which has not been paid. Without limiting the generality of the foregoing, if Agent is awarded a judgment in any suit brought to enforce Guarantor's covenant to pay a portion of the Guarantied Obligations, such judgment shall not be deemed to release Guarantor from its covenant to pay the portion of the Guarantied Obligations that is not the subject of such suit. (e) Any Agent or any Bank, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any reduction, limitation, impairment, discharge or termination of Guarantor's liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied L-3 Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guaranty or the Guarantied Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of Agent or any Bank in respect of this Guaranty or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that Agents or Banks, or any of them, may have against any such security, as Agent in its discretion may determine consistent with the Credit Agreement and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of Guarantor against Medis or any security for the Guarantied Obligations; and (vi) exercise any other rights available to it under the Loan Documents. This Section 2.2(e) shall not modify Section 10.01 of the Credit Agreement. (f) This Guaranty and the obligations of Guarantor hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than indefeasible payment in full of the Guarantied Obligations), including without limitation the occurrence of any of the following, whether or not Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under the Loan Documents, at law, in equity or otherwise) with respect to the Guarantied Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guarantied Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including without limitation provisions relating to events of default) of the Credit Agreement, any of the other Loan Documents or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guarantied Obligations, in each case whether or not in accordance with the terms of the Credit Agreement or such Loan Document or L-4 any agreement relating to such other guaranty or security; (iii) the Guarantied Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the other Loan Documents or from the proceeds of any security for the Guarantied Obligations, except to the extent such security also serves as collateral for indebtedness other than the Guarantied Obligations) to the payment of indebtedness other than the Guarantied Obligations, even though Agents or Banks, or any of them, might have elected to apply such payment to any part or all of the Guarantied Obligations; (v) any Bank's or Agent's consent to the change, reorganization or termination of the corporate structure or existence of Company or any of its Subsidiaries and to any corresponding restructuring of the Guarantied Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guarantied Obligations; (vii) any defenses, set-offs or counterclaims which Medis may allege or assert against any Agent or any Bank in respect of the Guarantied Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of Guarantor as an obligor in respect of the Guarantied Obligations. 2.3 WAIVERS BY GUARANTOR. Guarantor hereby waives, for the benefit of -------------------- Banks and Agents: (a) any right to require any Agent or any Bank, as a condition of payment or performance by Guarantor, to (i) proceed against Medis, any other guarantor of the Guarantied Obligations or any other Person, (ii) proceed against or exhaust any security held from Medis, any other guarantor of the Guarantied Obligations or any other Person, (iii) proceed against or have resort to any balance of any deposit account or credit on the books of any Agent or any Bank in favor of Medis or any other Person, or (iv) pursue any other remedy in the power of any Agent or any Bank whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of Medis including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guarantied Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Medis from any cause other than indefeasible payment in full of the Guarantied Obligations; L-5 (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon any Agent's or any Bank's errors or omissions in the administration of the Guarantied Obligations, except behavior which amounts to bad faith; (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of this Guaranty and any legal or equitable discharge of Guarantor's obligations hereunder, (ii) the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that any Agent or any Bank protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of this Guaranty, notices of default under the Credit Agreement or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guarantied Obligations or any agreement related thereto, notices of any extension of credit to Medis and notices of any of the matters referred to in subsection 2.2 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guaranty, including without limitation the provisions of California Civil Code Sections 2809, 2810, 2819, 2839, 2845, 2846, 2850, 2899 and 3433. 2.4 PAYMENT BY GUARANTOR; APPLICATION OF PAYMENTS. Guarantor hereby --------------------------------------------- agrees, in furtherance of the foregoing and not in limitation of any other right which Agent or any other Person may have at law or in equity against Guarantor by virtue hereof, that upon the failure of Medis to pay any of the Guarantied Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)), Guarantor will upon demand pay, or cause to be paid, in cash, to Agent for the ratable benefit of Banks holding the Guarantied Obligations, an amount equal to the sum of the unpaid principal amount of all Guarantied Obligations then due as aforesaid, accrued and unpaid interest on such Guarantied Obligations (including, without limitation, interest which, but for the L-6 filing of a petition in bankruptcy with respect to Medis, would have accrued on such Guarantied Obligations, whether or not a claim is allowed against Medis for such interest in any such bankruptcy proceeding) and all other Guarantied Obligations then owed to Agent and/or Banks as aforesaid. All such payments shall be applied promptly from time to time by Agent: First, to the payment of the costs and expenses of any collection or ----- other realization under this Guaranty, including reasonable compensation to Agent and its agents and counsel, and all expenses, liabilities and advances made or incurred by Agent in connection therewith; Second, to the payment of all other Guarantied Obligations to each ------ Bank holding Guarantied Obligations its applicable share as provided in the Credit Agreement; and Third, after payment in full of all Guarantied Obligations, to the ----- payment to Guarantor, or its successors or assigns, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such payments. 2.5 GUARANTOR'S RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the ---------------------------------------------------- Guarantied Obligations shall have been indefeasibly paid in full and the Tranche B Commitments shall have terminated, Guarantor shall withhold exercise of (a) any claim, right or remedy, direct or indirect, that Guarantor now has or may hereafter have against Medis or any of its assets in connection with this Guaranty or the performance by Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute (including without limitation under California Civil Code Section 2847, 2848 or 2849), under common law or otherwise and including without limitation (i) any right of subrogation, reimbursement or indemnification that Guarantor now has or may hereafter have against Medis, (ii) any right to enforce, or to participate in, any claim, right or remedy that any Agent or any Bank now has or may hereafter have against Medis, and (iii) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Agent or any Bank, and (b) any right of contribution Guarantor may have against any other guarantor of the Guarantied Obligations (including without limitation any such right of contribution under California Civil Code Section 2848). Guarantor further agrees that, to the extent the agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Guarantor may have against Medis or against any collateral or security, and any rights of contribution Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights any L-7 Agent or any Bank may have against Medis, to all right, title and interest any Agent or any Bank may have in any such collateral or security, and to any right any Agent or any Bank may have against such other guarantor. Each Agent, on behalf of Banks, may use, sell or dispose of any item of collateral or security as it sees fit without regard to any subrogation rights Guarantor may have, and upon any such disposition or sale any rights of subrogation against such collateral Guarantor may have shall terminate. If any amount shall be paid to Guarantor on account of any such subrogation, reimbursement or indemnification rights at any time when all Guarantied Obligations shall not have been paid in full, such amount shall be held in trust for Agent on behalf of Banks and shall forthwith be paid over to Agent for the benefit of Banks to be credited and applied against the Guarantied Obligations, whether matured or unmatured, in accordance with the terms hereof. 2.6 SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of Medis now or ---------------------------------- hereafter held by Guarantor is hereby subordinated in right of payment to the Guarantied Obligations, and any such indebtedness of Medis to Guarantor collected or received by Guarantor after an Event of Default has occurred and is continuing shall be held in trust for Agent on behalf of Banks and shall forthwith be paid over to Agent for the benefit of Banks to be credited and applied against the Guarantied Obligations but without affecting, impairing or limiting in any manner the liability of Guarantor under any other provision of this Guaranty. 2.7 REAL PROPERTY SECURITY. Guarantor agrees that, if all or a portion of ---------------------- the Guarantied Obligations or any other guaranty of all or a portion of the Guarantied Obligations are at any time secured by a deed of trust or mortgage covering interests in real property, Agent or its designee, in its sole discretion, without notice or demand and without affecting the liability of Guarantor, may foreclose, pursuant to the terms of the Loan Documents or otherwise, on any such deed of trust or mortgage and the property described therein by nonjudicial or other sale. Without limiting any of the waivers contained elsewhere herein, Guarantor hereby waives any defense to liability arising by reason of the exercise by Banks or Agent, or any of them, of any right or remedy contained in any such deed of trust or mortgage or any of the other Loan Documents. Guarantor waives all rights and defenses arising out of an election of remedies by Bank or the Agent, even though the election of remedies, such as a nonjudicial foreclosure with respect to security for a Guaranteed Obligation, has destroyed the Guarantor's rights of subrogation and reimbursement against Medis by the operation of Section 580d of the California Code of Civil Procedure or otherwise. L-8 2.8 EXPENSES. Guarantor agrees to pay, or cause to be paid, on demand, -------- and to save Agent and Banks harmless against liability for, any and all reasonable costs and expenses (including fees and disbursements of counsel and allocated costs of internal counsel) incurred or expended by Agent or any Bank in connection with the enforcement of or preservation of any rights under this Guaranty. 2.9 CONTINUING GUARANTY; TERMINATION OF GUARANTY. This Guaranty is a -------------------------------------------- continuing guaranty and shall remain in effect until all of the Guarantied Obligations shall have been indefeasibly paid in full and the Tranche B Commitments shall have terminated. Guarantor hereby irrevocably waives any right (including without limitation any such right arising under California Civil Code Section 2815) to revoke this Guaranty as to future transactions giving rise to any Guarantied Obligations. 2.10 AUTHORITY OF GUARANTOR OR MEDIS. It is not necessary for any Bank or ------------------------------- any Agent to inquire into the capacity or powers of Medis or the officers, directors or any agents acting or purporting to act on behalf of any of them. 2.11 FINANCIAL CONDITION OF MEDIS. Any extensions of credit may be granted ---------------------------- to Medis or continued from time to time without notice to or authorization from Guarantor regardless of the financial or other condition of Medis at the time of any such grant or continuation. No Bank or Agent shall have any obligation to disclose or discuss with Guarantor their assessment, or Guarantor's assessment, of the financial condition of Medis. Guarantor has adequate means to obtain information from Medis on a continuing basis concerning the financial condition of Medis and its ability to perform its obligations under the Loan Documents, and Guarantor assumes the responsibility for being and keeping informed of the financial condition of Medis and of all circumstances bearing upon the risk of nonpayment of the Guarantied Obligations. Guarantor hereby waives and relinquishes any duty on the part of any Agent or any Bank to disclose any matter, fact or thing relating to the business, operations or conditions of Medis now known or hereafter known by any Agent or any Bank. 2.12 RIGHTS CUMULATIVE. The rights, powers and remedies given to Banks and ----------------- Agents by this Guaranty are cumulative and shall be in addition to and independent of all rights, powers and remedies given to any Bank and any Agent by virtue of any statute or rule of law or in any of the other Loan Documents or any agreement between Guarantor and any Bank and/or any Agent or between Medis and any Bank and/or any Agent. Any forbearance or failure to exercise, and any delay by any Bank or any Agent in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. L-9 2.13 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a) ------------------------------------------------------------- So long as any Guarantied Obligations remain outstanding, Guarantor shall not, without the prior written consent of Agent in accordance with the terms of the Credit Agreement, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency proceedings of or against Medis. The obligations of Guarantor under this Guaranty shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Medis or by any defense which Medis may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding. (b) Guarantor acknowledges and agrees that any interest on any portion of the Guarantied Obligations which accrues after the commencement of any proceeding referred to in clause (a) above (or, if interest on any portion of the Guarantied Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Guarantied Obligations if said proceedings had not been commenced) shall be included in the Guarantied Obligations because it is the intention of Guarantor and Agent that the Guarantied Obligations which are guarantied by Guarantor pursuant to this Guaranty should be determined without regard to any rule of law or order which may relieve Medis of any portion of such Guarantied Obligations. Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Agent, or allow the claim of Agent in respect of, any such interest accruing after the date on which such proceeding is commenced. (c) In the event that all or any portion of the Guarantied Obligations are paid by Medis, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from any Agent or any Bank as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guarantied Obligations for all purposes under this Guaranty. SECTION 3. MISCELLANEOUS 3.1 SURVIVAL OF WARRANTIES. All agreements, representations and ---------------------- warranties made herein shall survive the execution and delivery of this Guaranty and the other Loan Documents and any increase in the Tranche B Commitments under the Credit Agreement. L-10 3.2 NOTICES. Any communications between Agent and Guarantor and any ------- notices or requests provided herein to be given may be given by mailing the same, postage prepaid, or by telex, facsimile transmission or cable to each such party at its address set forth in the Credit Agreement, on the signature pages hereof or to such other addresses as each such party may in writing hereafter indicate. Any notice, request or demand to or upon any Agent or any Bank or Guarantor shall not be effective until received. 3.3 SEVERABILITY. In case any provision in or obligation under this ------------ Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 3.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or ---------------------- waiver of any provision of this Guaranty, or consent to any departure by Guarantor therefrom, shall in any event be effective without the written concurrence of Agent and Banks as provided under Section 10.01 of the Credit Agreement. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. 3.5 HEADINGS. Section and subsection headings in this Guaranty are -------- included herein for convenience of reference only and shall not constitute a part of this Guaranty for any other purpose or be given any substantive effect. 3.6 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and ---------------------- shall be binding upon Guarantor and its successors and assigns. This Guaranty shall inure to the benefit of Banks, Agents and their respective successors and assigns. Guarantor shall not assign this Guaranty or any of the rights or obligations of Guarantor hereunder without the prior written consent of all Banks. Any Bank may, without notice or consent, in connection with any assignment of its interests in the Commitments, Loans or Bankers' Acceptance Facility pursuant to the Credit Agreement assign its interest in this Guaranty in whole or in part. The terms and provisions of this Guaranty shall inure to the benefit of any transferee or assignee of any Guarantied Obligation, and in the event of such transfer or assignment the rights and privileges herein conferred upon Banks and Agents shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. 3.7 GOVERNING LAW AND JURISDICTION. (A) THIS GUARANTY SHALL BE GOVERNED ------------------------------ BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS. L-11 (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR CONSENTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE GUARANTOR, THE AGENTS AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT -------------------- MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT RELATED HERETO. THE GUARANTOR, THE AGENTS AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. 3.8 WAIVER OF JURY TRIAL. THE GUARANTOR, THE BANKS AND THE AGENTS EACH -------------------- WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, PARTICIPANT OR ASSIGNEE, BASED UPON OR ARISING OUT OF THIS GUARANTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTOR, THE BANKS AND THE AGENTS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY OR PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. Guarantor and, by its acceptance of the benefits hereof, Agent each (i) acknowledges that this waiver is a material inducement for Guarantor and Agents and Banks to enter into a business relationship, that Guarantor and Agent have already relied on this waiver in entering into this Guaranty or accepting the benefits thereof, as the case may be, and that each will continue to rely on this waiver in their related future dealings and (ii) further warrants and represents that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court. 3.9 NO OTHER WRITING. This writing is intended by Guarantor and Agent as ---------------- the final expression of this Guaranty and is also intended as a complete and exclusive statement of the terms of their agreement with respect to the matters covered hereby. No course of dealing, course of performance or trade L-12 usage, and no parol evidence of any nature, shall be used to supplement or modify any terms of this Guaranty. There are no conditions to the full effectiveness of this Guaranty. 3.10 FURTHER ASSURANCES. At any time or from time to time, upon the ------------------ request of Agent or Majority Banks, Guarantor shall execute and deliver such further documents and do such other acts and things as Agent or Majority Banks may reasonably request in order to effect fully the purposes of this Guaranty. [Remainder of page intentionally left blank] L-13 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first written above. MCKESSON CORPORATION By _____________________________ Title __________________________ Acknowledged by: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS AGENT By __________________________ Title _______________________ L-14 EXHIBIT M [FORM OF INDEPENDENT AUDITOR'S LETTER] April __, 1995 Bank of America National Trust and Savings Association, as Agent Agency Management Services #5596 1455 Market Street, 12th Floor San Francisco, California 94103 Ladies and Gentlemen: We have received your letter (copy attached) dated _____________, acknowledged and agreed to by McKesson Corporation, which requests that we confirm that Bank of America National Trust and Savings Association ("Agent") on its own behalf and as Agent for certain other financial institutions (collectively the "Banks") may use Deloitte's Audit Report dated _____________ on the financial statements of Company and its subsidiaries, as of March 31, 1994 ("Current Audit Report"), in connection with Agent's and the Banks' decision whether to extent to the Company and to Medis a $250,000,000 revolving credit facility and, in addition, may use subsequent audit reports ("Subsequent Audit Reports") prepared by Deloitte or the annual financial statements delivered to the Agent and the Banks pursuant to the Credit Agreement (as amended, modified or supplemented, the "Credit Agreement") dated as of March 31, 1995 among McKesson Corporation, Medis Health and Pharmaceutical Services Inc., the Agent, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent and the Banks. The consolidated financial statements of McKesson Corporation (the "Company") are the responsibility of the Company's management. Management is also responsible for establishing and maintaining an internal control structure, the objective of which is to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. We were engaged by the Company to audit the Company's consolidated financial statements for the year ended March 31, 1994, and issued our report thereon dated May 16, 1994. We have been engaged to audit the Company's consolidated financial statements for the year ended March 31, 1995, in accordance with generally accepted auditing standards, the objective of which is to form an opinion as to whether the financial statements M-1 present fairly, in all material respects, the financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Generally accepted auditing standards require that the auditor plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. Because an audit incorporates the concept of selective testing of data, which is judgmental both as to the number of transactions audited and the selection of accounts to be tested, an audit is subject to the inherent risks that material errors or irregularities which may exist will not be detected. Further, an audit does not address the possibility that material errors or irregularities may occur in the future. We have not been engaged to perform an audit of the separate financial statements of Medis, a wholly-owned subsidiary of the Company, as of any date or for any period. The annual independent audit of the financial statements of the Company cannot substitute for a lender's own due diligence investigation of the Company, nor is it intended or designed to do so. Neither is it intended to substitute for a lender's prudent credit judgment regarding matters such as the value of collateral, the reasonableness and scope of covenants or waivers of any covenant violations, modification of terms of the credit agreement, the adequacy of the Company's capitalization, the reasonableness and sufficiency of the Company's business plan, or the ability of the Company to repay its debts as they mature. Also, an audit cannot be expected to disclose the materiality of unknown or unquantifiable contingent liabilities; material adverse changes in the financial or other condition of the Company or of any collateral subsequent to the date of the auditors' report; or matters of similar importance which are outside the scope of the audit (or only marginally within its scope and not its primary purpose) or outside the scope of the auditors' report. In conducting our audit and reporting the results thereof, materiality is evaluated and determined in the context of the financial statements taken as a whole. Additionally, no review will be undertaken to determine whether the scope of our audit is sufficient, in the Bank's view, to meet its needs, or the needs of any other third party. We have no responsibility for lending decisions of Bank of America National Trust and Savings Association (the "Bank") or other lenders, nor any responsibility to advise or consult with the Bank regarding the Bank's possible use of the Company's consolidated financial statements of our reports thereon, and we consider any use of, or reliance upon, the Company's consolidated financial statements or our reports thereon by the Bank to be entirely a matter of its responsibility and judgment. Ordinarily, a credit agreement provides for the lender to receive various documents directly from the borrower during the course of any year, including, but not limited to, monthly financial statements, as well as certifications and other notices as specified in the credit agreement. These documents M-2 and other communications typically provide a lender information other than that which is contained in borrower's annual financial statements or an auditors' report thereon, which would be relevant to a lender's credit determination regarding the borrower. Yours truly, cc: McKesson Corporation M-3 [Agent Letterhead] [Date] Deloitte & Touche _____________________ _____________________ _____________________ Attention: ______________ Ladies and Gentlemen: This letter is being sent to Deloitte & Touche ("Deloitte") with respect to a credit accommodation that Bank of America National Trust and Savings Association ("Agent") on its own behalf and as agent for certain other financial institutions (collectively, the "Banks") may grant to McKesson Corporation, a Delaware corporation (the "Company"), and Medis Health and Pharmaceutical Services Inc. ("Medis"). We wish to confirm that Agent and the Banks may use Deloitte's Audit Report dated _________________ on the financial statements of Company and its subsidiaries, as of March 31, 1994 ("Current Audit Report"), in connection with Agent's and the Banks' decision whether to extend to the Company and to Medis a $250,000,000 revolving credit facility ("Proposed Credit") and, in addition, may use subsequent audit reports ("Subsequent Audit Reports") prepared by Deloitte or the annual financial statements delivered to the Agent and the Banks pursuant to the Credit Agreement (as amended, modified or supplemented, the "Credit Agreement") dated as of March 31, 1995 among the Company, Medis, Banks, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Agent. M-4 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By:______________________________________ Its:_____________________________________ ACKNOWLEDGED: McKESSON CORPORATION By:____________________________ Its:___________________________ M-5 EX-10.26 7 CUSTODIAL AGREEMENT EXHIBIT 10.26 CUSTODIAL AGREEMENT ACKNOWLEDGMENT ---------------------------------- This CUSTODIAL AGREEMENT ACKNOWLEDGMENT (this "Agreement") is entered --------- into as of March 31, 1995 among McKesson Corporation, a Delaware corporation (the "Company"), Bank of America National Trust and Savings Association, a ------- national banking association (the "Custodian") in its capacity as Custodian --------- under the Custodial Agreement (as hereinafter defined), and Bank of America National Trust and Savings Association, as agent (in such capacity, the "Agent") ----- for the several financial institutions (the "Banks") from time to time party to ----- the Credit Agreement (as hereinafter defined). RECITALS -------- A. The Company and the Custodian have entered into a Custody Agreement dated as of November 21, 1994 (the "Custodial Agreement") pursuant to which, among other things, the Custodian has established the Restricted Custodial Account (as hereinafter defined) on behalf of the Company to hold and maintain certain securities, distributions with respect thereto and other property. B. The Agent and the Banks have entered into a Credit Agreement dated as of March 31, 1995 (the "Credit Agreement") with the Company, Medis ---------------- Health and Pharmaceutical Services Inc. ("Medis"), Chemical Bank, as Co-Agent, and Bank of America Canada, as Canadian Administrative Agent, pursuant to which the Banks have made certain commitments, subject to the terms and conditions set forth in the Credit Agreement, to extend certain credit facilities to the Company and Medis. C. The Company has entered into a Guaranty dated as of March 31, 1995 (the "Guaranty") pursuant to which the Company has guarantied the loans and other obligations of Medis under the Credit Agreement and other loan documents. D. Pursuant to the terms of the Credit Agreement and the Guaranty, the Company and the Agent have entered into a Pledge and Security Agreement dated as of March 31, 1995 (the "Pledge Agreement") pursuant to which the ---------------- Company has granted a security interest in favor of the Agent in the Collateral (as defined in the Pledge Agreement), including, without limitation, the Restricted Custodial Account and the securities and other property therein. E. The Agent has required that the Company and the Custodian enter into this Agreement to, among other things, set forth the terms on which the Custodian shall operate the Restricted Custodial Account and hold the Collateral. 1 NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS AND REFERENCES -------------------------- 1.01 General Definitions. All capitalized terms used in this Agreement ------------------- (including in the recitals hereof) and not otherwise defined herein shall have the meanings assigned to them in the Pledge Agreement. As used in this Agreement, the following terms shall have the following meanings: "Business Day" means any day other than a Saturday, Sunday or other day on ------------ which commercial banks in New York City or San Francisco are authorized or required by law to close. "CFR" means the United States Code of Federal Regulations, as from time to --- time amended. "Investments" means those investments, if any, made by the Custodian upon ----------- direction from the Company or the Agent, as the case may be, with amounts on deposit in the Restricted Custodial Account pursuant to Article III. "Person" means an individual, partnership, corporation, business trust, ------ joint stock company, trust, unincorporated association, or governmental authority. "U.S. Government Securities" means securities issued or directly and -------------------------- unconditionally guaranteed as to interest and principal by the United States Government or its agencies identified specifically by type on Schedule A, as ---------- supplemented from time to time in accordance with subsection 3.01(f). 1.02 Other Interpretive Provisions. (a) The meanings of defined terms are ----------------------------- equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." 2 (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." (d) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (f) This Agreement is the result of negotiations among and have been reviewed by counsel to the Agent, the Company and the Custodian and is the product of all parties. Accordingly, it shall not be construed against the Banks or the Agent merely because of the Agent's or Banks' involvement in its preparation. ARTICLE II OPERATION OF RESTRICTED CUSTODIAL ACCOUNT ----------------------------------------- 2.01 Restricted Custodial Account. The Company hereby authorizes and ---------------------------- directs the Custodian to maintain at its office at 1455 Market Street, San Francisco, California 94103, as a restricted account in the name of the Company but pledged to and under the dominion and control of the Agent as provided herein, an investment account designated as Account No. 197427321 (Ref: "McKesson Corporation") (the "Restricted Custodial Account"). 2.02 Operation of Restricted Custodial Account. (a) The Restricted ----------------------------------------- Custodial Account shall be operated, and all Investments shall be purchased and registered or held (as applicable), in accordance with the terms of the Custodial Agreement except as specifically set forth in this Agreement. (b) Anything contained herein to the contrary notwithstanding, the Restricted Custodial Account shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. 3 (c) The Custodian shall send the Agent and the Company written account statements with respect to the Restricted Custodial Account upon the written request of the Agent. (d) The obligations and liabilities of the Company and the Custodian with respect to the Restricted Custodial Account shall be governed by the Custodial Agreement, except as specifically provided otherwise in this Agreement. ARTICLE III PERMITTED INVESTMENTS OF AMOUNTS IN THE RESTRICTED CUSTODIAL ACCOUNT ----------------------------------- 3.01 Permitted Investments. (a) Cash held by the Custodian in the --------------------- Restricted Custodial Account shall not be (i) invested or reinvested or (ii) transferred from the Restricted Custodial Account, in either case except as provided in this Article III. (b) So long as the Custodian shall not have received written notice from the Agent suspending the Company's right to direct the investment of funds on deposit in the Restricted Custodial Account, the Custodian shall, in accordance with the Company's instructions with respect to the purchase and sale of Investments, given to the Custodian from time to time in accordance with the Custodial Agreement, make such purchase or sale of Investments, in the Custodian's name and as custodian under this Agreement and the Custodial Agreement. If the Custodian has received notice from the Agent suspending the Company's right to direct such investments under this subsection 3.01(b), such suspension of the Company's rights may be reversed by a subsequent written notice by the Agent to the Custodian to that effect. (c) Promptly upon the purchase of any Investment, the Custodian shall take all steps that it customarily takes in the ordinary course of its business to ensure that such Investment is transferred on its books to the Company, subject to a first priority security interest in favor of the Agent, and to ensure that such Investment is held in the Restricted Custodial Account. Without limiting the generality of the foregoing, the Custodian shall promptly identify in its records, by book entry or otherwise, that the Restricted Custodial Account and any Investments therein belong to the Company, subject to a first priority security interest in favor of the Agent. (d) Anything contained herein or in the Custodial Agreement to the contrary notwithstanding, the Custodian shall, if and as directed in writing by the Agent, (i) transfer any or all of the Collateral constituting cash to an account designated by the Agent or transfer any or all of the Collateral to an account established in the Agent's name (whether at the Agent or 4 the Custodian or otherwise), (ii) otherwise deal with the Collateral as directed by the Agent in writing; provided, that, as between the Agent and the Company, the terms of the Pledge Agreement shall control such directions of the Agent. (e) Subject to Section 3.01(d), any interest, cash dividends or other cash distributions received in respect of any Investments (other than proceeds from the sale of an Investment) shall be promptly transferred in accordance with the provisions of the Custodial Agreement or to an account designated by the Company. Any distribution of property other than cash in respect of any Investment shall be held in the Restricted Custodial Account and the net proceeds of any sale or payment of any Investments shall be held in the Restricted Custodial Account pending investment subject to the Company's rights under Section 3.06 of the Pledge Agreement. (f) The Company and the Agent may, from time to time, supplement Schedule A by written instructions signed by both of them. The Agent may - ---------- condition its execution of such written instructions upon receiving such opinions of counsel with respect to perfection of its security interest in investments named in such supplement as it may require. (g) Custodian shall hold all Investments in U.S. Government Securities directly or through a Federal Reserve Bank of the United States. 3.02 Transfer of Collateral. In the event that the Company delivers a ---------------------- notice to release Designated Collateral pursuant to Section 3.05 of the Pledge Agreement and the Custodian shall not have received a notice from the Agent suspending the Company's right to release Collateral as provided in Section 3.05(b) of the Pledge Agreement by 9:00 a.m. (San Francisco time) on the date specified for the release of the Designated Collateral in the Company's notice, the Custodian shall be entitled to transfer Collateral designated by the Company from the Restricted Custodial Account in accordance with the Company's written instructions. ARTICLE IV VALUATION OF COLLATERAL; REPORTS BY THE CUSTODIAN ------------------------------------------------- 4.01 Valuation of Collateral. The Custodian shall determine the Market ----------------------- Value of all Eligible Collateral and deliver Valuation Reports to the Agent as provided in Section 3.04 of the Pledge Agreement. The Company and the Agent each acknowledge that the Custodian employs one or more nationally recognized pricing services, financial periodicals and publications to ascribe market values to some or all of the Collateral. The Company and the Agent each acknowledge that these ascribed values 5 may not equal the actual market value of the Collateral and that neither the Custodian nor any vendor from whom the Custodian receives pricing information, guarantees their accuracy. ARTICLE V ACKNOWLEDGEMENT OF SECURITY INTEREST IN FAVOR OF AGENT; WAIVER OF SET-OFF ------------------------------------ (a) The Custodian hereby confirms that it has received a copy of the Pledge Agreement and acknowledges the security interest granted by the Company in favor of the Agent in the Collateral. (b) The Custodian hereby further acknowledges that it holds the Restricted Custodial Account, and all other Collateral registered to or held therein, for the benefit of, and subject to such security interest in favor of, the Agent. The Custodian shall, by book entry or otherwise, identify the Restricted Custodial Account, and all other Collateral registered to or held therein, as being subject to such security interest in favor of the Agent. (c) The Company, the Custodian and the Agent hereby agree that in the event any dispute arises with respect to the payment, ownership or right to possession of the Restricted Custodial Account or any other Collateral registered to or held therein, the Custodian shall take such actions and shall refrain from taking such actions with respect thereto as may be directed by the Agent, regardless of the rights of the Company under the Custodial Agreement. This paragraph (c) shall not affect or limit the Company's rights or remedies against the Agent if the Agent directs the Custodian to take any action which the Agent is not entitled to direct or take under the Credit Agreement or the other Loan Documents. (d) The Custodian shall not exercise any right of set-off, banker's lien, counterclaim or similar right against any of the Collateral; provided that -------- the Custodian may deduct, from (i) the Collateral, or otherwise from the Restricted Custodial Account, any amount necessary to settle any security transaction related thereto, in accordance with the Custodial Agreement, and (ii) any payments or cash distributions on or with respect to any Investments, any usual and ordinary transaction and administration fees payable in connection with the administration and operation of the Restricted Custodial Account. Notwithstanding anything herein, in the Credit Agreement, in the Pledge Agreement or any related documents to the contrary, the Agent and the Company hereby agree that the continuing lien and pledge on, and security interest in, the Collateral granted to the Custodian by the Company pursuant to the Custodial Agreement shall be equal to the security interest of the Agent but only to 6 the extent that such lien, pledge and security interest of the Custodian secures the obligations of the Company to the Custodian under the Custodial Agreement and that such lien, pledge and security interest of the Custodian shall be junior to the security interest of the Agent to the extent such lien, pledge and security interest secures obligations of the Company to the Custodian other than those arising under the Custodial Agreement. ARTICLE VI EXCULPATION AND INDEMNIFICATION OF CUSTODIAN -------------------------------------------- 6.01 Custodian's Duties. The Custodian's duties hereunder are only those ------------------ specifically provided herein and no implied duties shall be read into this Agreement, and the Custodian shall incur no liability whatsoever for any actions or omissions hereunder except for any such liability arising out of or in connection with the Custodian's gross negligence or willful misconduct. The Custodian shall be fully protected and shall suffer no liability in acting in accordance with any written instructions reasonably believed by it to have been given (a) by the Agent with respect to any aspect of the operation of the Restricted Custodial Account (including any such instructions relating to any investments of any amounts on deposit therein) or (b) by the Company, to the extent provided in Section 3.01, with respect to any investments of any amounts on deposit in the Restricted Custodial Account or in Section 3.02, with respect to the transfer of Collateral. The Custodian shall have no obligation to determine whether or not an Event of Default under the Credit Agreement shall have occurred. The Custodian shall not be liable or deemed to be in default hereunder for any failure or delay in performance of any duty in whole or in part arising out of or caused by circumstances beyond its control including, without limitation, acts of God, interruption, delay in, or loss (partial or complete) of electrical power or of computer (hardware or software) or communication services; act of civil or military authority; sabotage, war or other government action; civil disturbance or riot; strike or other industrial dispute; national emergency; epidemic; flood, earthquake, fire, or other catastrophe; government, judicial, or self-regulatory organization order, rule, or regulation; energy or natural resource difficulty or shortage; and inability to obtain or timely to obtain materials, equipment, or transportation. 6.02 Indemnification. The Company agrees to indemnify the Custodian from --------------- and against any and all claims, losses, liabilities and expenses (including reasonable attorneys' fees and expenses and the reasonable allocated charges of internal counsel) in any way relating to, growing out of or resulting from this Agreement or the performance of its obligations hereunder, except to the extent arising out of or in connection with the 7 Custodian's gross negligence or willful misconduct. The Custodian agrees to indemnify the Company, the Agent and the Banks from and against any and all claims, losses, liabilities and expenses (including reasonable attorneys' fees and expenses and the reasonable allocated charges of internal counsel) in any way relating to, growing out of or resulting from any actions taken by the Custodian under this Agreement amounting to gross negligence or willful misconduct of the Custodian or its officers or employees, except for consequential damages caused thereby. The Agent, for itself and on behalf of the Banks, agrees to indemnify the Custodian from and against any and all claims, losses, liabilities and expenses (including reasonable attorneys' fees and expenses and the reasonable allocated charges of internal counsel) in any way relating to, growing out of or resulting from any actions taken by the Agent or its officers or employees under this Agreement or the Pledge Agreement amounting to negligence or willful misconduct, except for consequential damages caused thereby. The Company agrees to release, indemnify and defend against, and each of the Company and the Agent, for itself and on behalf of the Banks, agrees to hold the Custodian harmless against, any risk, loss, claim, liability, demand, damage or expense resulting from and/or related to the ascribed market value of the Collateral, including without limitation, claims made against the Company or the Agent by any third party. The provisions of this Article shall survive termination of this Agreement. ARTICLE VII REPRESENTATIONS AND WARRANTIES BY THE CUSTODIAN ----------------------------------------------- The Custodian hereby represents and warrants to the Company and the Agent as follows: (a) The Custodian has all necessary corporate power and authority to enter into and perform this Agreement. (b) The execution, delivery and performance of this Agreement by the Custodian have been duly authorized by all necessary corporate action on the part of the Custodian. This Agreement constitutes the valid, legal and binding agreement of the Custodian, enforceable in accordance with its terms. (c) The Custodian is (i) a national banking association and (ii) eligible to maintain custodial book entry accounts with a Federal Reserve Bank under Sections 306.115 through 306.122 of Title 31 of the CFR. In the ordinary course of its business, the Custodian accepts for deposit items similar to the Eligible Investments as a service for its customers, and maintains securities accounts in the names of such customers reflecting ownership of or interests in such items. The Custodian is a "financial intermediary" (as that term is defined 8 in Section 8-313 of the Uniform Commercial Code as in effect in the State of California) and is acting in such capacity for purposes of this Agreement. (d) At the time any Collateral is valued in any Valuation Report, the Custodian's Custody Unit located at the address set forth in Section 10.05(b) will not have received, acknowledged or accepted any notice, order, registration or other document which purports to constitute any pledge, claim, security interest, lien, encumbrance or adverse claim of any kind with respect to such Collateral, other than the pledge and security interest in favor of the Agent pursuant to the Pledge Agreement, or been served with legal process with respect to such Collateral. The Custodian has not sold, transferred, assigned, pledged or granted, and after the date hereof the Custodian will not, except as specified in Article III, paragraph (d) of Article V or subsection 9.03(d), sell, transfer, assign, pledge or grant a security interest in, the Collateral, or any part thereof, to any Person, including the Federal Reserve Bank of New York, any other Federal Reserve Bank, the United States Treasury or any other transferee or pledgee eligible to maintain a book-entry account in its name with a Federal Reserve Bank. ARTICLE VIII TERMINATION ----------- This Agreement shall terminate, and all rights to the Restricted Custodial Account and all other Collateral registered to or held therein shall revert to the Company, upon the Custodian's receipt of written notice, signed by an authorized officer of the Agent, that the Pledge Agreement has terminated. ARTICLE IX RESIGNATION AND REMOVAL OF THE CUSTODIAN ---------------------------------------- 9.01 Removal. The Custodian may be removed at any time by written notice ------- given by the Agent to the Custodian and the Company, but such removal shall not become effective until a successor Custodian shall have been appointed in accordance with Section 9.03 and shall have accepted such appointment in writing. 9.02 Resignation. The Custodian may resign at any time by giving not less ----------- than thirty days' written notice to the Agent and the Company, but such resignation shall not become effective until a successor Custodian shall have been appointed in accordance with Section 9.03 and shall have accepted such appointment in writing. If an instrument of acceptance by a successor Custodian shall not have been delivered to the resigning Custodian within thirty days after the giving of any 9 such notice of resignation, the resigning Custodian may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Custodian. 9.03 Successor Custodian. (a) If the Custodian resigns or is removed ------------------- hereunder or becomes incapable of acting or is adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Custodian, or of its property, shall be appointed, or if any public officer shall take charge or control of the Custodian, or of its property or affairs, the Company may appoint an Approved Custodian as successor hereunder or, with the consent of the Agent and Majority Banks, may appoint another entity complying with Section 9.03(b) as successor hereunder. (b) Any Custodian appointed under the provisions of Section 9.03(a) in succession to the Custodian shall be either (i) an Approved Custodian or (ii) a bank or trust company or banking association in good standing having capital stock and surplus aggregating at least $1,000,000,000, which, in the case of either (i) or (ii), shall be authorized by law to perform all the duties imposed upon it by this Agreement and able to make the representations contained in subsections (a), (b) and (c) of Article VII. (c) Any company into which the Custodian may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party, or any company to which the Custodian may sell or transfer all or substantially all of its custody business shall be the successor to the Custodian hereunder without the execution or filing of any paper or the performance of any further act, if and only if such company shall be either (i) an Approved Custodian or (ii) a bank or trust company or banking association in good standing having capital stock and surplus aggregating at least $1,000,000,000, which, in the case of either (i) or (ii), shall be authorized by law to perform all the duties imposed upon it by this Agreement and able to make the representations contained in clauses (a), (b) and (c) of Article VII. (d) Upon the appointment of a successor Custodian and its acceptance of such appointment and upon payment of all Obligations (as defined in the Custodial Agreement) and all fees and expenses owed to the Custodian hereunder, the resigning or removed Custodian shall transfer all items of Collateral held by it to such successor (which items of Collateral shall be deposited in a new Restricted Custodial Account established and maintained by such successor) and the original Custodian shall deliver a certificate in the form of Exhibit A with --------- respect to all Collateral so transferred. Following such appointment all references herein to the Custodian shall be deemed a reference to such successor; provided that the provisions of Article VI hereof and of Section 8 of -------- the Custodial Agreement shall continue to 10 inure to the benefit of the resigning or removed Custodian with respect to any actions taken or omitted to be taken by it under this Agreement while it was the Custodian hereunder. ARTICLE X MISCELLANEOUS ------------- 10.01 Amendments; Conflicts With Custodial Agreement. No amendment or ---------------------------------------------- waiver of any provision of this Agreement or the Custodial Agreement and no consent with respect to any departure by the Company or the Custodian therefrom, shall be effective unless the same shall be in writing and signed by the Agent, the Company, and the Custodian, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. In the event of a conflict between the terms of this Agreement and the terms of the Custodial Agreement, the terms of this Agreement shall prevail. 10.02 Successors and Assigns. The provisions of this Agreement shall be ---------------------- binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither the Company nor the Custodian (except as provided in Section 9.03(c)) may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each of the other parties hereto. 10.03 Governing Law. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND TO THE EXTENT THE VALIDITY OR PERFECTION OF THE LIENS HEREUNDER IN RESPECT OF ANY COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN CALIFORNIA. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT (FOR ITSELF AND ON BEHALF OF THE BANKS) AND THE CUSTODIAN CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT (FOR ITSELF AND ON BEHALF OF THE BANKS) AND THE CUSTODIAN IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE -------------------- BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT (FOR ITSELF AND ON BEHALF OF THE BANKS) AND THE CUSTODIAN EACH WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. 11 10.04 Waiver of Jury Trial. THE COMPANY, THE AGENT (FOR ITSELF AND ON -------------------- BEHALF OF THE BANKS) AND THE CUSTODIAN EACH WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE AGENT (FOR ITSELF AND ON BEHALF OF THE BANKS) AND THE CUSTODIAN EACH AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. 10.05 Notices; Written Instructions. ----------------------------- (a) All written instructions, notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by facsimile shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices below; or to such other address as shall be designated by any party in a written notice to the other parties. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery. Address of the Agent: -------------------- Bank of America National Trust and Savings Association 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Ivo Bakovic Vice President Agency Management Services #5596 Facsimile No.: (415) 622-4894 12 Address of the Company: ---------------------- McKesson Corporation One Post Street San Francisco, CA 94104 Attention: Facsimile: (415) 983-8464 Address of the Custodian: ------------------------ Bank of America National Trust and Savings Association 1455 Market Street, 16th Floor San Francisco, CA 94103 Attention: Rick Hawkins Facsimile: (415) 622-5167 10.06 Counterparts. This Agreement may be executed in any number of ------------ separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 10.07 No Waiver; Cumulative Remedies. No failure to exercise and no delay ------------------------------ in exercising, on the part of the Agent, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies of the parties provided herein are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. 10.08 Severability. The illegality or unenforceability of any provision ------------ of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.09 No Third Parties Benefited. This Agreement is made and entered into -------------------------- for the sole protection and legal benefit of the Custodian, the Company, the Agent, and the Banks for which the Agent acts as the Agent, and their permitted successors and assigns, and no other Person shall be a direct or indirect beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement. 10.10 Entire Agreement. This Agreement embodies the entire agreement and ---------------- understanding among the Custodian, on one hand, and the Company and the Agent, on the other, and supersedes all prior 13 or contemporaneous agreements and understandings of such parties, verbal or written, relating to the subject matter hereof. [Remainder of this page intentionally left blank] 14 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the day and year first above written. The Company: McKESSON CORPORATION By: ------------------------------------------ Its: ----------------------------------------- The Agent: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By:__________________________________________ Its:_________________________________________ The Custodian: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:__________________________________________ Its:_________________________________________ By:__________________________________________ Its:_________________________________________ S-1 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the day and year first above written. The Company: McKESSON CORPORATION By:__________________________________________ Its:_________________________________________ The Agent: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: ------------------------------------------ Its: ----------------------------------------- The Custodian: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: ------------------------------------------ Its: ----------------------------------------- By: ------------------------------------------ Its: ----------------------------------------- S-1 Schedule A ---------- U.S. GOVERNMENT SECURITIES - -------------------------- United States Treasury Bills United States Treasury Bonds United States Treasury Notes EXHIBIT A RE: McKesson Restricted Custodial Account CERTIFICATION OF THE CUSTODIAN UPON TRANSFER Reference is made to the Custodial Agreement Acknowledgment dated as of March 31, 1995 (the "Agreement") among McKesson Corporation (the "Company"), Bank of America National Trust and Savings Association (the "Custodian") and Bank of America National Trust and Savings Association, as Agent ("Agent"). Terms which are defined in the Agreement are used herein with the meanings given them in the Agreement. Pursuant to the terms of the Agreement, the Custodian hereby represents and warrants to the Agent that: (a) The person signing this instrument on behalf of the Custodian is the duly elected, qualified and acting officer of the Custodian as indicated below such officer's signature hereto, having all necessary authority to act for the Custodian in making the certification herein contained. (b) The Collateral described below represents all Collateral contained in the Restricted Custodial Account: [Investments to be described here by Issuer, Par Amount, Coupon and Maturity; other Collateral to be described by dollar amount and type] (c) The representations and warranties of the Custodian set forth in Article VII of the Agreement are true and correct on and as of the date hereof with respect to all Collateral, with the same effect as though such representations and warranties had been made on and as of the date hereof. (d) Except to the extent waived in writing by the Agent, the Custodian has performed and complied with all agreements and conditions in the Agreement required to be performed or complied with by the Custodian on or before the date hereof. A-1 In accordance with the instructions of the Company and the Agent, the Custodian agrees to transfer all Collateral immediately after its execution of this Certificate to account number __________ at [the successor custodian]. IN WITNESS WHEREOF, this instrument is executed as of ____________________, ________. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:______________________________ Name: ________________________ Title: _______________________ A-2 EX-10.27 8 PLEDGE AGREEMENT EXHIBIT 10.27 PLEDGE AGREEMENT ---------------- This PLEDGE AND SECURITY AGREEMENT (this "Agreement") is entered into --------- as of March 31, 1995 among McKesson Corporation, a Delaware corporation (the "Pledgor"), and Bank of America National Trust and Savings Association, as agent ------- (in such capacity, the "Agent") for the several financial institutions (the ----- "Banks") from time to time party to the Credit Agreement (as hereinafter ----- defined). RECITALS -------- A. The Agent, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and the Banks have entered into a Credit Agreement dated as of March 31, 1995 (the "Credit Agreement") with the Pledgor ---------------- and Medis Health and Pharmaceutical Services Inc. ("Medis") pursuant to which the Banks have made certain commitments, subject to the terms and conditions set forth in the Credit Agreement, to extend certain credit facilities to the Pledgor and to Medis. B. Pledgor may, from time to time, but is not required to, pledge Collateral (as hereinafter defined) pursuant to the terms of this Agreement. C. It is a condition precedent to the initial extensions of credit by the Banks under the Credit Agreement that the Pledgor shall have executed and delivered to the Agent and the Banks this Agreement. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS AND REFERENCES -------------------------- 1.01 General Definitions. All capitalized terms used in this Agreement ------------------- (including in the recitals hereof) and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement. As used in this Agreement, the following terms shall have the following meanings: "Applicable CFR Sections" has the meaning specified in Section 6.04(b). ----------------------- "Approved Custodian" has the meaning specified in the Credit Agreement. ------------------ 1 "Business Day" means any day other than a Saturday, Sunday or other day on ------------ which commercial banks in New York City or San Francisco are authorized or required by law to close. "CFR" means the United States Code of Federal Regulations, as from time to --- time amended. "Collateral" means (a) the Collateral Accounts, (b) all amounts on deposit ---------- from time to time in the Collateral Accounts, (c) all Investments, including all securities (whether certificated or uncertificated), instruments, accounts, general intangibles and deposits representing or evidencing any Investments, (d) all interest, dividends, cash, instruments, securities and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Collateral (other than such interest, dividends, cash, instruments, securities and other property deposited into an account designated by the Pledgor that is not a Collateral Account in accordance with Section 3.03(c)), (e) all of the Pledgor's right, title and interest in, to and under the Custodial Agreement (as, and only to the extent it refers or applies to the Collateral Accounts), and (f) to the extent not covered by clauses (a) through (e) above, all Proceeds of any or all of the foregoing Collateral. "Collateral Accounts" means the Restricted Custodial Account and any other ------------------- accounts in which Investments may be held or registered. "Collateral Period" means (a) the period from the Closing Date to June 30, ----------------- 1995 and (b) any calendar quarter commencing thereafter. "Custodial Agreement" means the Custody Agreement dated November 21, 1994 ------------------- between BofA in its capacity as Custodian and the Pledgor and any successor or other Custodial Agreement permitted under the terms of this Agreement and the Credit Agreement. "Custodial Agreement Acknowledgment" means the Custodial Agreement ---------------------------------- Acknowledgment among the Pledgor, the Custodian and Agent substantially in the form of Exhibit J annexed to the Credit Agreement and any other Custodial Agreement Acknowledgment approved by Majority Banks. "Custodian" means BofA in its capacity as custodian under the Custodial --------- Agreement and any successor custodian or custodians under a Custodial Agreement permitted under the terms of this Agreement and the Credit Agreement. "Designated Collateral" has the meaning specified in Section 3.05. --------------------- 2 "Eligible Collateral" means, as of any Valuation Day, cash and Eligible ------------------- Investments on deposit in the Restricted Custodial Account as of such day. "Eligible Investments" means U.S. Government Securities. -------------------- "Investments" means those investments, if any, made by the Custodian upon ----------- direction from the Pledgor or Agent, as the case may be, with amounts on deposit in the Restricted Custodial Account pursuant to Article III of the Custodial Agreement Acknowledgment. "Lowest Quarterly Market Value" has the meaning specified in Section ----------------------------- 3.04(c). "Market Value" means, with respect to the Eligible Collateral on any ------------ Valuation Day, a dollar value determined as follows: (a) cash shall be valued at its face amount on such Valuation Day; and (b) an Eligible Investment shall be valued pursuant to the Custodian's standard and customary pricing sources for such Eligible Investment which it believes to be reliable. "Proceeds" means whatever is receivable or received from or upon the sale, -------- lease, license, collection, use, exchange or other disposition, whether voluntary or involuntary, of any Collateral, including "proceeds" as defined at UCC Section 9306, any and all proceeds of any insurance, indemnity, warranty or guaranty payable to or for the account of the Pledgor from time to time with respect to any of the Collateral, any and all payments (in any form whatsoever) made or due and payable to the Pledgor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of Governmental Authority), any and all other amounts from time to time paid or payable under or in connection with any of the Collateral or for or on account of any damage or injury to or conversion of any Collateral by any Person, any and all other tangible or intangible property received upon the sale or disposition of Collateral, and all proceeds of proceeds. "Restricted Custodial Account" means account No. 197427321 (Ref: ---------------------------- McKesson Corporation) established and maintained with the Custodian pursuant to the Custodial Agreement that is pledged to Agent on behalf of Banks pursuant to the terms hereof. "Secured Obligations" means all obligations and liabilities of every nature ------------------- of the Pledgor now or hereafter existing under or arising out of or in connection with the Credit Agreement, the Guaranty and the other Loan Documents and all extensions or 3 renewals thereof, whether for principal, interest (including interest that, but for the filing of a petition in bankruptcy with respect to the Pledgor, would accrue on such obligations), fees, expenses, indemnities or otherwise, whether voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from the Agent or any Bank as a preference, fraudulent transfer or otherwise, and all obligations of every nature of the Pledgor now or hereafter existing under this Agreement. "UCC" means the Uniform Commercial Code as the same may, from time to time, --- be in effect in the State of California; provided, however, in the event that, -------- ------- by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of California, the term "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions. "U.S. Government Securities" means securities issued or directly and -------------------------- unconditionally guaranteed as to interest and principal by the United States Government or its agencies identified specifically by type on Schedule A to the ---------- Custodial Agreement Acknowledgment, as supplemented from time to time in accordance with the Custodial Agreement Acknowledgment. "Valuation Day" has the meaning specified in subsection 3.04(a) . ------------- "Valuation Report" has the meaning specified in subsection 3.04(b). ---------------- "Valuation Summary" has the meaning specified in subsection 3.04(c). ----------------- 1.02 Other Interpretive Provisions. (a) The meanings of defined terms are ----------------------------- equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. 4 (c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." (d) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (f) This Agreement is the result of negotiations among and have been reviewed by counsel to the Agent, the Customer and the Custodian and is the product of all parties. Accordingly, it shall not be construed against the Banks or the Agent merely because of the Agent's or Banks' involvement in its preparation. ARTICLE II PLEDGE OF SECURITY FOR SECURED OBLIGATIONS ------------------------------------------ 2.01 Grant of Security Interest. The Pledgor hereby pledges and -------------------------- assigns to the Agent, and hereby grants to the Agent (for itself and on behalf of and for the Canadian Administrative Agent and the ratable benefit of the Banks) a security interest in, all of the Pledgor's right, title and interest in and to the Collateral as collateral security for the prompt payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. 362(a)), of all Secured Obligations. 2.02 Financing Statements, Etc. The Pledgor shall execute and -------------------------- deliver to the Agent, at any time and from time to 5 time, all financing statements for filing in California and such other jurisdictions as may be designated by the Agent, continuation statements, termination statements, notices, and all other documents and instruments (the "Financing Statements") which the Agent may reasonably request, in form -------------------- satisfactory to the Agent, and the Pledgor hereby agrees to, and authorizes the Agent to, take such other steps as shall be requested by the Agent to perfect and continue perfected, maintain the priority of or provide notice of the pledge of and security interest in the Collateral and to accomplish the purposes of this Agreement. 2.03 Delivery of Payments and Other Distributions. Upon the -------------------------------------------- occurrence and during the continuation of an Event of Default, if the Pledgor shall become entitled to receive or shall receive in connection with the Collateral any payment or other distribution, the Pledgor shall accept such payment or distribution as the agent for the Agent, shall hold it in trust for the benefit of the Agent, shall segregate it from other property or funds of the Pledgor, and shall deliver all such payments and distributions, in the exact form received, forthwith to or for the account of the Agent, at the address and to the Person or Persons to be designated by the Agent, with any necessary endorsements and other instruments of transfer or assignment, all in form and substance satisfactory to the Agent, as the Agent shall request, to be held by the Agent subject to the terms hereof, as part of the Collateral. 2.04 Continuing Security Interest. The Pledgor agrees that this ---------------------------- Agreement shall create a continuing security interest in and pledge of the Collateral which shall remain in effect until terminated in accordance with Article VIII. ARTICLE III ESTABLISHMENT AND OPERATION OF COLLATERAL ACCOUNTS; --------------------------------------------------- VALUATION AND RELEASE OF COLLATERAL ----------------------------------- 3.01 Restricted Custodial Account. The Pledgor has established with ---------------------------- the Custodian the Restricted Custodial Account and from time to time may deposit Collateral therein all of which is and will be held and applied in accordance with this Agreement, the Custodial Agreement and the Custodial Agreement Acknowledgment. 3.02 Operation of Collateral Accounts. -------------------------------- (a) The Restricted Custodial Account shall be operated, and all Investments shall be purchased and registered or held (as applicable), in accordance with the terms of the Custodial Agreement and the Custodial Agreement Acknowledgment. 6 (b) The Agent shall be fully protected and shall suffer no liability in acting in accordance with any instructions reasonably believed by it to have been given by the Pledgor with respect to any aspect of the operation of the Collateral Accounts (including any such instructions relating to any Investments of any amounts on deposit therein). (c) Anything contained herein to the contrary notwithstanding, the Collateral Accounts shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. 3.03 Investment of Amounts In the Collateral Accounts. ------------------------------------------------ (a) Cash held by the Custodian in the Restricted Custodial Account shall not be invested or reinvested except as provided in this Article III and in the Custodial Agreement Acknowledgement. (b) So long as no Event of Default shall have occurred and be continuing, Pledgor may direct the purchase and sale of Investments on deposit in the Restricted Custodial Account in accordance with Article III of the Custodial Agreement Acknowledgement. At any time after the occurrence and during the continuance of an Event of Default, Agent may provide written notice to the Custodian suspending the Pledgor's right to direct the investment of funds on deposit in the Restricted Custodial Account; provided that, if the Agent has so notified the Custodian and such Event of Default shall no longer be continuing, then, upon request of the Pledgor, the Agent shall provide written notice to the Custodian revoking such suspension. (c) Subject to the Agent's rights under clause (d), any interest, cash dividends or other cash distributions received by the Custodian in respect of any Investments (other than proceeds from the sale of Investments) shall be transferred in accordance with Section 4 of the Custodial Agreement or to any other account designated by the Pledgor. Any distribution of property other than cash in respect of any Investment shall be held in the Restricted Custodial Account and the net proceeds of any sale or payment of any Investments shall be held in a Collateral Account pending investment. (d) The Pledgor agrees that the Agent may sell or cause the sale of any Investment and, if appropriate, instruct the Custodian to transfer the proceeds of such sale or any other cash on deposit in the Restricted Custodial Account to an account designated by the Agent, in either case (i) if such sale or transfer is necessary to permit the Agent to perform its duties under this Agreement or the Credit Agreement and (ii) as otherwise provided in Section 6.04. 7 3.04 Valuation of Collateral. ----------------------- (a) On or prior to the fifth Business Day after (1) the last Business Day of each calendar month, (2) the next Business Day after any day on which Collateral is released from the Custodial Account pursuant to Section 3.05 hereof and (3) the Business Day immediately preceding any day on which Collateral is added to the Custodial Account pursuant to Section 3.06 hereof, the Pledgor shall cause the Custodian to, as provided in the Custodial Agreement Acknowledgment: (i) determine the Market Value of all Eligible Collateral which was held in the Restricted Custodial Account as of the close of business on such (1) last Business Day of the calendar month, (2) next Business Day after the day on which Collateral is released or (3) Business Day immediately preceding the day on which Collateral is added, as the case may be, (each such day, a "Valuation Day"); and ------------- (ii) prepare a valuation report stating the Market Value of the Eligible Collateral and any cash held in the Restricted Custodial Account as of the close of business on each such Valuation Day ("Valuation Report"). ---------------- (b) On or prior to the fifth Business Day after each Valuation Day referred to in subsection 3.04(a)(i)(1), the Pledgor shall cause the Custodian to deliver by facsimile transmission to the Agent and the Pledgor the Valuation Report, and, for any other Valuation Day, upon request of the Agent, the Pledger shall cause the Custodian to deliver by facsimile transmission to the Agent the related Valuation Report. (c) The Agent may conclusively rely on each Valuation Report. The Agent shall deliver to each Bank as soon as available, but on or before the tenth day of each calendar quarter, and to the Pledgor along with each statement of fees and interest due under the Credit Agreement, a quarterly statement ("Valuation Summary") showing the lowest Market Value of the Eligible Collateral on a Valuation Day during such quarter or, in the case of a quarter in which the Closing Date occurs or the Commitments have been terminated, showing the lowest Market Value of the Eligible Collateral on a Valuation Day during such calendar quarter during which the Commitments were in effect ("Lowest Quarterly Market ----------------------- Value"), and the Market Value of the Eligible Collateral on each such Valuation - ----- Day during such calendar quarter. The Lowest Quarterly Market Value so determined by the Agent shall be final, conclusive and binding on all parties in the absence of manifest error. 3.05 Release of Collateral. (a) The Pledgor may, at any time and from time --------------------- to time (x) if any Loans or Bankers' Acceptances are outstanding, on one Business Day prior written notice to the Custodian and the Agent and (y) if no Loans or 8 Bankers' Acceptances are outstanding, upon written notice to the Custodian and the Agent, request that the Custodian release Collateral as designated by the Pledgor from the Restricted Custodial Account ("Designated Collateral") (which --------------------- notice shall describe the Designated Collateral in detail); provided that there shall not have occurred and be continuing a Default or an Event of Default on the date that the Pledgor requests a release of Designated Collateral, or on the date that all or any portion of the Designated Collateral is released; and (b) Provided that the foregoing conditions shall have been satisfied, the Pledgor shall be entitled to a release of the Designated Collateral. At any time after the occurrence and during the continuance of a Default or an Event of Default (or if a Default or Event of Default would occur on the date that the Designated Collateral is to be released) the Agent may provide written notice to the Custodian suspending the Pledgor's right to release Collateral from the Restricted Custodial Account; provided that, if the Agent has so notified the Custodian and such Default or Event of Default shall no longer be continuing, then, upon request of the Pledgor, the Agent shall provide written notice to the Custodian rescinding such suspension. 3.06 Additions of Collateral. The Pledgor may at any time and from time to ----------------------- time pledge additional Collateral pursuant hereto by depositing cash or other Collateral in the Restricted Custodial Account and in the event Pledgor deposits any additional Collateral, Pledgor shall notify the Agent in writing (which notice shall describe the additional Collateral in detail) and cause the Custodian to prepare and deliver a Valuation Report as of the related Valuation Day as contemplated pursuant to Section 3.04(a)(3). ARTICLE IV REPRESENTATIONS AND WARRANTIES ------------------------------ The Pledgor represents and warrants as follows: (a) The Pledgor is (or at the time of transfer thereof to the Agent or the Custodian will be) the legal and beneficial owner of the Collateral from time to time transferred by the Pledgor to the Agent or to the Custodian, as agent for the Agent, free and clear of any Lien except for the security interest created by this Agreement and the security interest created by the Custodial Agreement. No dispute, right of set-off, recoupment, counterclaim or defense exists with respect to all or any part of the Collateral and no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office 9 except such as may have been filed in favor of the Agent relating to this Agreement. (b) No approval, consent, exemption, authorization or other action by, or no notice to, or filing with, any governmental authority or regulatory body is necessary or required in connection with (i) the grant by the Pledgor of the security interest granted hereby, or (ii) the perfection of or the exercise by the Agent or the Custodian of its rights and remedies hereunder or under the Custodial Agreement (except as may have been taken by or at the direction of the Pledgor). (c) The pledge and assignment of the Collateral pursuant to this Agreement and the Custodial Agreement creates a valid and perfected first priority security interest in the Collateral, securing the payment of the Secured Obligations. (d) Unless otherwise notified by the Pledgor pursuant to Section 5.04, Pledgor's chief executive office and principal place of business, and all books and records concerning the Collateral are located at One Post Street, San Francisco, California. (e) All information heretofore, herein or hereafter supplied to the Agent or the Custodian by or on behalf of the Pledgor with respect to the Collateral is accurate and complete in all material respects. ARTICLE V COVENANTS OF PLEDGOR -------------------- 5.01 Delivery of Collateral. All documents, certificates, ---------------------- instruments and writings, if any, evidencing any Collateral pledged concurrently herewith shall be delivered to the Agent or the Custodian on or prior to the execution and delivery of this Agreement. All other documents, certificates, instruments and writings, if any, hereafter evidencing Collateral or constituting Collateral shall be delivered to the Agent or the Custodian promptly upon the pledge thereof by the Pledgor. All such documents, certificates, instruments and writings, if any, shall be held by Custodian on behalf of the Agent pursuant to the terms of the Custodial Agreement. The Pledgor will not cause or permit any document, instrument, or certificate constituting or evidencing Collateral to at any time be in the actual or constructive possession or control of any Person other than the Agent or a bailee selected by the Agent (including Custodian) who is holding such Collateral for the benefit of Agent. 5.02 Further Assurances. The Pledgor agrees that from time to time, ------------------ at the expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments and 10 documents, and take all further action, that may be necessary or desirable, or that the Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce its rights and remedies hereunder or under the other Collateral Documents with respect to any Collateral. Without limiting the generality of the foregoing, the Pledgor will: (i) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Agent may reasonably request, in order to perfect and preserve the security interest granted or purported to be granted hereby and (ii) at the Agent's reasonable request, appear in and defend any action or proceeding that may adversely affect the Pledgor's title to or the Agent's security interest in all or any part of the Collateral constituting cash or Eligible Investments; provided that Pledgor shall not be obligated to make such appearance or defense relating to actions or proceedings challenging security interests junior to the security interest of the Agent or to the extent the Pledgor shall provide evidence satisfactory to the Agent that the Pledgor does not intend for such Collateral to constitute Qualifying Collateral (as defined in the Credit Agreement). 5.03 Transfers and other Liens. Subject to Sections 3.03(d) and ------------------------- 3.05, the Pledgor agrees that it will not (a) sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral or (b) create or suffer to exist any Lien upon or with respect to any of the Collateral, or file or record any financing statement with respect to the Collateral or otherwise identify the Collateral as being subject to a pledge or security interest, except for the security interest under this Agreement and the Custodial Agreement. 5.04 Chief Executive Office. The Pledgor will (a) keep all books and ---------------------- records pertaining to the Collateral at the location set forth in Article IV (or such other location as to which Pledgor shall notify Agent pursuant to subsection 5.04(b)(ii)) and (b) within 30 days after such change) give written notice to the Agent of any changes in (i) the Pledgor's corporate name, any tradenames or trade styles or any fictitious business names, or (ii) any such location where books and records pertaining to the Collateral are kept, or the location of the Pledgor's chief executive office and principal place of business. 5.05 Impairment of Security Interest. Subject to the terms of this ------------------------------- Agreement and the Custodial Agreement Acknowledgement, including Sections 3.03 and 3.05, the Pledgor will not take or fail to take any action which would impair the enforceability of the Agent's security interest in any Collateral. 5.06 Voting. Subject to the terms of this Agreement and the ------ Custodial Agreement Acknowledgement, including Sections 11 3.03 and 3.05, the Pledgor will not cast any vote, give or grant any consent, waiver or ratification or take any action with respect to the Collateral which would have the effect of impairing the position or interest of the Agent or the Banks in respect of the Collateral or would be inconsistent with or violate any provision of this Agreement or any other Loan Documents. 5.07 Inspection of Collateral and Information. The Pledgor will keep ---------------------------------------- adequate records concerning the Collateral and will permit the Agent, any Bank and their respective representatives to inspect the Pledgor's books and records concerning the Collateral on the same terms and conditions as set forth in Section 6.08 of the Credit Agreement. The Pledgor will furnish to the Agent any information which the Agent may from time to time request at the request of any Bank concerning any covenant, provision or representation contained herein or any other matter in connection with the Collateral. ARTICLE VI REMEDIES, POWERS AND AUTHORIZATIONS ----------------------------------- 6.01. Agent Appointed Attorney-in-Fact. The Pledgor hereby -------------------------------- irrevocably appoints the Agent (and any of the Agent's officers, employees or agents designated by the Agent) as the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor, the Agent or otherwise, from time to time in the Agent's discretion upon the occurrence and during the continuation of an Event of Default during any period when Collateral shall have been pledged to Agent hereunder to take any action and to execute any instrument that the Agent may deem necessary or advisable to accomplish the purposes of this Agreement or the Custodial Agreement, including (a) to file one or more financing or continuation statements, or amendments thereto, relative to all or any part of the Collateral without the signature of the Pledgor and (b) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (c) to receive, endorse and collect any instruments or other Investments made payable to the Pledgor representing any dividend, principal or interest payment or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same and (d) to file any claims or take any action or institute any proceedings the Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Agent with respect to any of the Collateral. 12 6.02. Agent May Perform. If the Pledgor fails to perform any ----------------- agreement contained herein, the Agent may (but shall have no obligation to) itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by the Pledgor in accordance with Section 7.02. 6.03. Standard of Care. The powers conferred on the Agent hereunder ---------------- are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Agent, acting in its capacity as Agent, shall have no duty as to any Collateral, it being understood that the Agent shall have no responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Agent has or is deemed to have knowledge of such matters, (b) taking any necessary steps (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Collateral) to preserve rights against any parties with respect to any Collateral, (c) taking any necessary steps to collect or realize upon the Secured Obligations or any guarantee therefor, or any part thereof, or any of the Collateral, (d) initiating any action to protect the Collateral against the possibility of a decline in market value, (e) any loss resulting from Investments made, held or sold pursuant to Article III, except for a loss resulting from the Agent's gross negligence or willful misconduct in complying with Article III, or (f) determining (i) the correctness of any statement or calculation made by the Pledgor in any written or telex (tested or otherwise) instructions or (ii) whether any deposit in the Collateral Accounts is proper. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Agent accords its own property of like kind. In addition to the foregoing and without limiting the generality thereof, the Agent shall not be responsible for any actions or omissions of the Custodian. 6.04. Remedies. -------- (a) If any Event of Default shall have occurred and be continuing, the Agent may (i) sell any of the Collateral, (ii) transfer any or all of the Collateral constituting cash to an account designated by the Agent or transfer any or all of the Collateral to an account established in the Agent's name (whether at the Agent or the Custodian or otherwise), or (iii) register title to any Collateral in the name of the Agent or one of its nominees or agents, without reference to any interest of the Pledgor. 13 (b) If any Event of Default shall have occurred and be continuing, the Agent may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether or not the Code ---- applies to the affected Collateral), under 31 CFR (S)(S) 306.115 through 306.122 (herein called the "Applicable CFR Sections"), and the Agent may also in its sole discretion sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or broker's board or at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Agent may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Collateral. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Pledgor hereby waives any claims against the Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if (in the case of U.S. Government Securities) the Agent accepts the first offer received and does not offer such Collateral to more than one offeree. (c) The Pledgor hereby agrees that the Collateral is of a type customarily sold on recognized markets and, accordingly, that no notice to any Person is required prior to any sale of any of the Collateral pursuant to the terms of this Agreement; provided that, without prejudice to the foregoing, the Pledgor agrees that, to the extent notice of any such sale shall be required by law, at least five days' notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. (d) If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, the Pledgor shall be liable for the deficiency and the fees of any attorneys employed by the Agent to collect such deficiency. 14 6.05. Application of Proceeds. If any Event of Default shall have ----------------------- occurred and be continuing, all cash held by the Agent as Collateral and all proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Agent, be held by the Agent as Collateral for, and/or then, or at any other time thereafter, applied in full or in part by the Agent against, the Secured Obligations in the following order of priority: FIRST: To the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to the Agent and its agents and counsel, and all other expenses, liabilities and advances made or incurred by the Agent in connection therewith, and all amounts for which the Agent is entitled to indemnification hereunder and all advances made by the Agent hereunder for the account of the Pledgor, and to the payment of all costs and expenses paid or incurred by the Agent in connection with the exercise of any right or remedy hereunder, all in accordance with Section 7.02; SECOND: To the payment of all other Secured Obligations (for the ratable benefit of the holders thereof) in such order as the Agent shall elect; and THIRD: To the payment to or upon the order of the Pledgor, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. ARTICLE VII INDEMNIFICATION AND EXPENSES ---------------------------- 7.01 Indemnification. The Pledgor agrees to indemnify the Agent and --------------- each Bank from and against any and all claims, losses and liabilities of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against the Agent or a Bank as a result of any claim or threatened claim by a Person not a party to this Agreement or by the Company (except for claims by the Company against the Agent or a Bank that are successful on the merits as determined by a court of competent jurisdiction) in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including enforcement of this Agreement), except to the extent such claims, losses or liabilities result from the Agent's or such Bank's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. 15 7.02 Expenses. The Pledgor shall pay to the Agent upon demand the -------- amount of any and all costs and expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that the Agent may incur in connection with (a) the administration of this Agreement, (b) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (c) the exercise or enforcement of any of the rights of the Agent hereunder, (d) the failure by the Pledgor to perform or observe any of the provisions hereof. ARTICLE VIII CONTINUING SECURITY INTEREST; TRANSFER OF SECURED OBLIGATIONS ------------------------------------------------------------- This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the indefeasible payment in full of the Secured Obligations and the cancellation or termination of the Commitments, (b) be binding upon the Pledgor, its successors and assigns, and (c) inure, together with the rights and remedies of the Agent hereunder, to the benefit of the Agent and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), but subject to the provisions of Section 10.08 of the Credit Agreement, any Bank may assign or otherwise transfer any Secured Obligations held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Banks herein or otherwise. Upon the indefeasible payment in full of all Secured Obligations and the cancellation or termination of the Commitments, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Pledgor. Upon any such termination the Agent will, at the Pledgor's expense, execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence such termination (including the notice described in Article VIII of the Custodial Agreement Acknowledgment) and the Pledgor shall be entitled to the return, upon its request and at its expense, against receipt and without recourse to the Agent, of such of the Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof. Notwithstanding anything to the contrary contained in this Agreement, it is agreed and understood that under the terms and provisions of the Credit Agreement, the Pledgor is not required to pledge any Collateral to Agent; provided that if the Pledgor pledges Collateral to Agent the Pledgor and the Collateral shall be subject to this Agreement. This Article VIII shall not limit the rights of the Pledgor under Section 3.03(d) or Section 3.06. 16 ARTICLE IX AGENT AS AGENT -------------- 9.01 The Agent has been appointed to act as the Agent hereunder by the Banks. The Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including the release or substitution of Collateral), solely in accordance with this Agreement and the Credit Agreement. 9.02 The Agent shall at all times be the same Person that is the Agent under the Credit Agreement. Written notice of resignation by the Agent pursuant to Section 9.09 of the Credit Agreement shall also constitute notice of resignation as the Agent under this Agreement; removal of the Agent pursuant to Section 9.09 of the Credit Agreement shall also constitute removal as the Agent under this Agreement; and appointment of a successor Agent pursuant to Section 9.09 of the Credit Agreement shall also constitute appointment of a successor Agent under this Agreement. Upon the acceptance of any appointment as the Agent under Section 9.09 of the Credit Agreement by a successor Agent, that successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent under this Agreement, and the retiring or removed Agent under this Agreement shall promptly (i) transfer to such successor Agent all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Agent under this Agreement, and (ii) execute and deliver to such successor Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Agent of the security interests created hereunder, whereupon such retiring or removed Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Agent's resignation or removal hereunder as the Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Agent hereunder. 9.03 In connection with the release of any Collateral under this Agreement, the Custodial Agreement Acknowledgement or the Custodial Agreement, the Agent may conclusively assume that no Default or Event of Default has occurred and continues unless it has received written notice from the Pledgor or any Bank to the contrary. The Agent may conclusively rely on each Valuation Report and the Market Value of the Collateral contained therein, and shall have no duty or obligation to verify the contents of any Valuation Report (including the Market Values contained therein) or to independently determine the Market Value of any Collateral. 17 ARTICLE X MISCELLANEOUS ------------- 10.01 Amendments. No amendment or waiver of any provision of this ---------- Agreement and no consent with respect to any departure by the Pledgor therefrom, shall be effective unless the same shall be in writing and signed by the Agent and the Pledgor, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 10.02 Successors and Assigns. The provisions of this Agreement shall ---------------------- be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Pledgor may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent. 10.03 Governing Law and Jurisdiction. ------------------------------ (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND TO THE EXTENT THE VALIDITY OR PERFECTION OF THE LIENS HEREUNDER IN RESPECT OF ANY COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN CALIFORNIA. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PLEDGOR, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PLEDGOR AND THE AGENT FOR AND ON BEHALF OF ITSELF AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER -------------------- HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE PLEDGOR AND THE AGENT FOR AND ON BEHALF OF ITSELF AND THE BANKS EACH WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. 10.04 Waiver of Jury Trial. THE PLEDGOR AND THE AGENT FOR AND ON -------------------- BEHALF OF ITSELF AND THE BANKS EACH WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE PLEDGOR AND THE AGENT FOR 18 AND ON BEHALF OF ITSELF AND THE BANKS EACH AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. 10.05 Notices; Written Instructions. ----------------------------- (a) All written instructions, notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by facsimile shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices below; or to such other address as shall be designated by any party in a written notice to the other parties. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery. Address of the Agent: -------------------- Bank of America National Trust and Savings Association 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Ivo Bakovic Vice President Agency Management Services #5596 Facsimile Number: (415) 622-4894 Address of the Pledgor: ---------------------- McKesson Corporation One Post Street San Francisco, CA 94104 Attention: Alan Pearce Facsimile: (415) 983-8464 10.06 Counterparts. This Agreement may be executed in any number of ------------ separate counterparts, each of which, when so executed, 19 shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 10.07 No Waiver; Cumulative Remedies. No failure to exercise and no delay ------------------------------ in exercising, on the part of the Agent, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies of the parties provided herein are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. 10.08 Severability. The illegality or unenforceability of any provision ------------ of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.09 No Third Parties Benefited. This Agreement is made and entered into -------------------------- for the sole protection and legal benefit of the Agent, the Pledgor and the Banks for which the Agent acts as agent, and their permitted successors and assigns, and no other person shall be a direct or indirect beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement. 10.10 Entire Agreement. This Agreement embodies the entire agreement and ---------------- understanding among the Pledgor and the Agent and supersedes all prior or contemporaneous agreements and understandings of such parties, verbal or written, relating to the subject matter hereof. [Reminder of this page intentionally left blank] 20 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the day and year first written above. MCKESSON CORPORATION By: Its: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,as Agent By: Its: S-1 EX-10.28 9 GUARRANTY Exhibit 10.28 GUARANTY This GUARANTY is entered into as of March 31, 1995 by MCKESSON CORPORATION, a Delaware corporation ("GUARANTOR"), in favor of and for the benefit of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for and representative of (in such capacity herein called "AGENT") the financial institutions ("BANKS") party to the Credit Agreement (as hereinafter defined). RECITALS A. Medis Health and Pharmaceutical Services Inc., an Ontario corporation and a wholly-owned subsidiary of Guarantor ("MEDIS"), has entered into that certain Credit Agreement dated as of March 31, 1995 with Guarantor, the Banks, Chemical Bank, as Co-Agent, Bank of America Canada, as Canadian Administrative Agent, and Agent (said Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT"; capitalized terms defined therein and not otherwise defined herein being used herein as therein defined). B. Credit extensions, including Loans and advances in respect of the Bankers' Acceptance Facility, may be made to Medis under the Credit Agreement, Medis is an indirect wholly-owned Subsidiary of the Company and the Guarantied Obligations (as hereinafter defined) are being incurred for and will inure to the benefit of Guarantor (which benefits are hereby acknowledged). C. It is a condition precedent to the making of the initial extensions of credit under the Credit Agreement that Medis's obligations thereunder be guarantied by Guarantor. D. Guarantor is willing irrevocably and unconditionally to guaranty such obligations of Medis. NOW, THEREFORE, based upon the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce Banks, the Co-Agent and Agents to enter into the Credit Agreement and to make the Loans and other extensions of credit thereunder, Guarantor hereby agrees as follows: SECTION 1. DEFINITIONS 1.1 CERTAIN DEFINED TERMS. As used in this Guaranty, the following terms --------------------- shall have the following meanings unless the context otherwise requires: "GUARANTIED OBLIGATIONS" has the meaning assigned to that term in subsection 2.1. 1 "GUARANTY" means this Guaranty dated as of March 31, 1995, as may be amended, supplemented or otherwise modified from time to time. "PAYMENT IN FULL", "PAID IN FULL" or any similar term means payment in full of the Guarantied Obligations including, without limitation, all principal, interest, costs, fees and expenses (including, without limitation, legal fees and expenses) of Banks, Co-Agent and Agents as required under the Loan Documents. 1.2 INTERPRETATION. -------------- (a) References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Guaranty unless otherwise specifically provided. (b) In the event of any conflict or inconsistency between the terms, conditions and provisions of this Guaranty and the terms, conditions and provisions of the Credit Agreement, the terms, conditions and provisions of this Guaranty shall prevail. SECTION 2. THE GUARANTY 2.1 GUARANTY OF THE GUARANTIED OBLIGATIONS. Guarantor hereby irrevocably -------------------------------------- and unconditionally guaranties, as primary obligor and not merely as surety, the due and punctual payment in full of all Guarantied Obligations when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)). The term "GUARANTIED OBLIGATIONS" is used herein in its most comprehensive sense and includes: (a) any and all Obligations of Medis now or hereafter made, incurred or created, whether absolute or contingent, liquidated or unliquidated, whether due or not due, and however arising under or in connection with the Credit Agreement, the Notes and Drafts issued by Medis and the other Loan Documents, including those arising under successive borrowing transactions under the Credit Agreement which shall either continue the Obligations of Medis or from time to time renew them after they have been satisfied; and (b) those expenses set forth in Section 2.8 hereof. 2.2 LIABILITY OF GUARANTOR ABSOLUTE. Guarantor agrees that its ------------------------------- obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor 2 or surety other than indefeasible payment in full of the Guarantied Obligations. In furtherance of the foregoing and without limiting the generality thereof, Guarantor agrees as follows: (a) This Guaranty is a guaranty of payment when due and not of collectibility. (b) Agent may enforce this Guaranty upon the occurrence of an Event of Default under the Credit Agreement notwithstanding the existence of any dispute between Banks and any Borrower with respect to the existence of such Event of Default. (c) The obligations of Guarantor hereunder are independent of the obligations of Medis under the Loan Documents and the obligations of any other guarantor of the obligations of Medis under the Loan Documents, and a separate action or actions may be brought and prosecuted against Guarantor whether or not any action is brought against Medis or any of such other guarantors and whether or not Medis is joined in any such action or actions. (d) Guarantor's payment of a portion, but not all, of the Guarantied Obligations shall in no way limit, affect, modify or abridge Guarantor's liability for any portion of the Guarantied Obligations which has not been paid. Without limiting the generality of the foregoing, if Agent is awarded a judgment in any suit brought to enforce Guarantor's covenant to pay a portion of the Guarantied Obligations, such judgment shall not be deemed to release Guarantor from its covenant to pay the portion of the Guarantied Obligations that is not the subject of such suit. (e) Any Agent or any Bank, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any reduction, limitation, impairment, discharge or termination of Guarantor's liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guaranty or the Guarantied Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties 3 of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of Agent or any Bank in respect of this Guaranty or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that Agents or Banks, or any of them, may have against any such security, as Agent in its discretion may determine consistent with the Credit Agreement and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of Guarantor against Medis or any security for the Guarantied Obligations; and (vi) exercise any other rights available to it under the Loan Documents. This Section 2.2(e) shall not modify Section 10.01 of the Credit Agreement. (f) This Guaranty and the obligations of Guarantor hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than indefeasible payment in full of the Guarantied Obligations), including without limitation the occurrence of any of the following, whether or not Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under the Loan Documents, at law, in equity or otherwise) with respect to the Guarantied Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guarantied Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including without limitation provisions relating to events of default) of the Credit Agreement, any of the other Loan Documents or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guarantied Obligations, in each case whether or not in accordance with the terms of the Credit Agreement or such Loan Document or any agreement relating to such other guaranty or security; (iii) the Guarantied Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the other Loan Documents or from the proceeds of any security for the Guarantied Obligations, except to the extent such security also serves as collateral 4 for indebtedness other than the Guarantied Obligations) to the payment of indebtedness other than the Guarantied Obligations, even though Agents or Banks, or any of them, might have elected to apply such payment to any part or all of the Guarantied Obligations; (v) any Bank's or Agent's consent to the change, reorganization or termination of the corporate structure or existence of Company or any of its Subsidiaries and to any corresponding restructuring of the Guarantied Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guarantied Obligations; (vii) any defenses, set-offs or counterclaims which Medis may allege or assert against any Agent or any Bank in respect of the Guarantied Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of Guarantor as an obligor in respect of the Guarantied Obligations. 2.3 WAIVERS BY GUARANTOR. Guarantor hereby waives, for the benefit of -------------------- Banks and Agents: (a) any right to require any Agent or any Bank, as a condition of payment or performance by Guarantor, to (i) proceed against Medis, any other guarantor of the Guarantied Obligations or any other Person, (ii) proceed against or exhaust any security held from Medis, any other guarantor of the Guarantied Obligations or any other Person, (iii) proceed against or have resort to any balance of any deposit account or credit on the books of any Agent or any Bank in favor of Medis or any other Person, or (iv) pursue any other remedy in the power of any Agent or any Bank whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of Medis including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guarantied Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Medis from any cause other than indefeasible payment in full of the Guarantied Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon any Agent's or any Bank's errors or omissions in the administration of the Guarantied Obligations, except behavior which amounts to bad faith; 5 (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of this Guaranty and any legal or equitable discharge of Guarantor's obligations hereunder, (ii) the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that any Agent or any Bank protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of this Guaranty, notices of default under the Credit Agreement or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guarantied Obligations or any agreement related thereto, notices of any extension of credit to Medis and notices of any of the matters referred to in subsection 2.2 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guaranty, including without limitation the provisions of California Civil Code Sections 2809, 2810, 2819, 2839, 2845, 2846, 2850, 2899 and 3433. 2.4 PAYMENT BY GUARANTOR; APPLICATION OF PAYMENTS. Guarantor hereby --------------------------------------------- agrees, in furtherance of the foregoing and not in limitation of any other right which Agent or any other Person may have at law or in equity against Guarantor by virtue hereof, that upon the failure of Medis to pay any of the Guarantied Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)), Guarantor will upon demand pay, or cause to be paid, in cash, to Agent for the ratable benefit of Banks holding the Guarantied Obligations, an amount equal to the sum of the unpaid principal amount of all Guarantied Obligations then due as aforesaid, accrued and unpaid interest on such Guarantied Obligations (including, without limitation, interest which, but for the filing of a petition in bankruptcy with respect to Medis, would have accrued on such Guarantied Obligations, whether or not a claim is allowed against Medis for such interest in any such bankruptcy proceeding) and all other Guarantied Obligations then owed to Agent and/or Banks as aforesaid. All such payments shall be applied promptly from time to time by Agent: 6 First, to the payment of the costs and expenses of any collection or ----- other realization under this Guaranty, including reasonable compensation to Agent and its agents and counsel, and all expenses, liabilities and advances made or incurred by Agent in connection therewith; Second, to the payment of all other Guarantied Obligations to each ------ Bank holding Guarantied Obligations its applicable share as provided in the Credit Agreement; and Third, after payment in full of all Guarantied Obligations, to the ----- payment to Guarantor, or its successors or assigns, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such payments. 2.5 GUARANTOR'S RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the ---------------------------------------------------- Guarantied Obligations shall have been indefeasibly paid in full and the Tranche B Commitments shall have terminated, Guarantor shall withhold exercise of (a) any claim, right or remedy, direct or indirect, that Guarantor now has or may hereafter have against Medis or any of its assets in connection with this Guaranty or the performance by Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute (including without limitation under California Civil Code Section 2847, 2848 or 2849), under common law or otherwise and including without limitation (i) any right of subrogation, reimbursement or indemnification that Guarantor now has or may hereafter have against Medis, (ii) any right to enforce, or to participate in, any claim, right or remedy that any Agent or any Bank now has or may hereafter have against Medis, and (iii) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Agent or any Bank, and (b) any right of contribution Guarantor may have against any other guarantor of the Guarantied Obligations (including without limitation any such right of contribution under California Civil Code Section 2848). Guarantor further agrees that, to the extent the agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Guarantor may have against Medis or against any collateral or security, and any rights of contribution Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights any Agent or any Bank may have against Medis, to all right, title and interest any Agent or any Bank may have in any such collateral or security, and to any right any Agent or any Bank may have against such other guarantor. Each Agent, on behalf of Banks, may use, sell or dispose of any item of collateral or security as it sees fit without regard to any subrogation rights Guarantor may have, and upon any such disposition or sale any rights of subrogation 7 against such collateral Guarantor may have shall terminate. If any amount shall be paid to Guarantor on account of any such subrogation, reimbursement or indemnification rights at any time when all Guarantied Obligations shall not have been paid in full, such amount shall be held in trust for Agent on behalf of Banks and shall forthwith be paid over to Agent for the benefit of Banks to be credited and applied against the Guarantied Obligations, whether matured or unmatured, in accordance with the terms hereof. 2.6 SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of Medis now or ---------------------------------- hereafter held by Guarantor is hereby subordinated in right of payment to the Guarantied Obligations, and any such indebtedness of Medis to Guarantor collected or received by Guarantor after an Event of Default has occurred and is continuing shall be held in trust for Agent on behalf of Banks and shall forthwith be paid over to Agent for the benefit of Banks to be credited and applied against the Guarantied Obligations but without affecting, impairing or limiting in any manner the liability of Guarantor under any other provision of this Guaranty. 2.7 REAL PROPERTY SECURITY. Guarantor agrees that, if all or a portion of ---------------------- the Guarantied Obligations or any other guaranty of all or a portion of the Guarantied Obligations are at any time secured by a deed of trust or mortgage covering interests in real property, Agent or its designee, in its sole discretion, without notice or demand and without affecting the liability of Guarantor, may foreclose, pursuant to the terms of the Loan Documents or otherwise, on any such deed of trust or mortgage and the property described therein by nonjudicial or other sale. Without limiting any of the waivers contained elsewhere herein, Guarantor hereby waives any defense to liability arising by reason of the exercise by Banks or Agent, or any of them, of any right or remedy contained in any such deed of trust or mortgage or any of the other Loan Documents. Guarantor waives all rights and defenses arising out of an election of remedies by Bank or the Agent, even though the election of remedies, such as a nonjudicial foreclosure with respect to security for a Guaranteed Obligation, has destroyed the Guarantor's rights of subrogation and reimbursement against Medis by the operation of Section 580d of the California Code of Civil Procedure or otherwise. 2.8 EXPENSES. Guarantor agrees to pay, or cause to be paid, on demand, -------- and to save Agent and Banks harmless against liability for, any and all reasonable costs and expenses (including fees and disbursements of counsel and allocated costs of internal counsel) incurred or expended by Agent or any Bank in connection with the enforcement of or preservation of any rights under this Guaranty. 8 2.9 CONTINUING GUARANTY; TERMINATION OF GUARANTY. This Guaranty is a -------------------------------------------- continuing guaranty and shall remain in effect until all of the Guarantied Obligations shall have been indefeasibly paid in full and the Tranche B Commitments shall have terminated. Guarantor hereby irrevocably waives any right (including without limitation any such right arising under California Civil Code Section 2815) to revoke this Guaranty as to future transactions giving rise to any Guarantied Obligations. 2.10 AUTHORITY OF GUARANTOR OR MEDIS. It is not necessary for any Bank or ------------------------------- any Agent to inquire into the capacity or powers of Medis or the officers, directors or any agents acting or purporting to act on behalf of any of them. 2.11 FINANCIAL CONDITION OF MEDIS. Any extensions of credit may be granted ---------------------------- to Medis or continued from time to time without notice to or authorization from Guarantor regardless of the financial or other condition of Medis at the time of any such grant or continuation. No Bank or Agent shall have any obligation to disclose or discuss with Guarantor their assessment, or Guarantor's assessment, of the financial condition of Medis. Guarantor has adequate means to obtain information from Medis on a continuing basis concerning the financial condition of Medis and its ability to perform its obligations under the Loan Documents, and Guarantor assumes the responsibility for being and keeping informed of the financial condition of Medis and of all circumstances bearing upon the risk of nonpayment of the Guarantied Obligations. Guarantor hereby waives and relinquishes any duty on the part of any Agent or any Bank to disclose any matter, fact or thing relating to the business, operations or conditions of Medis now known or hereafter known by any Agent or any Bank. 2.12 RIGHTS CUMULATIVE. The rights, powers and remedies given to Banks and ----------------- Agents by this Guaranty are cumulative and shall be in addition to and independent of all rights, powers and remedies given to any Bank and any Agent by virtue of any statute or rule of law or in any of the other Loan Documents or any agreement between Guarantor and any Bank and/or any Agent or between Medis and any Bank and/or any Agent. Any forbearance or failure to exercise, and any delay by any Bank or any Agent in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. 2.13 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a) ------------------------------------------------------------- So long as any Guarantied Obligations remain outstanding, Guarantor shall not, without the prior written consent of Agent in accordance with the terms of the Credit Agreement, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency proceedings of or against Medis. The obligations of Guarantor under this Guaranty 9 shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Medis or by any defense which Medis may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding. (b) Guarantor acknowledges and agrees that any interest on any portion of the Guarantied Obligations which accrues after the commencement of any proceeding referred to in clause (a) above (or, if interest on any portion of the Guarantied Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Guarantied Obligations if said proceedings had not been commenced) shall be included in the Guarantied Obligations because it is the intention of Guarantor and Agent that the Guarantied Obligations which are guarantied by Guarantor pursuant to this Guaranty should be determined without regard to any rule of law or order which may relieve Medis of any portion of such Guarantied Obligations. Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Agent, or allow the claim of Agent in respect of, any such interest accruing after the date on which such proceeding is commenced. (c) In the event that all or any portion of the Guarantied Obligations are paid by Medis, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from any Agent or any Bank as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guarantied Obligations for all purposes under this Guaranty. SECTION 3. MISCELLANEOUS 3.1 SURVIVAL OF WARRANTIES. All agreements, representations and ---------------------- warranties made herein shall survive the execution and delivery of this Guaranty and the other Loan Documents and any increase in the Tranche B Commitments under the Credit Agreement. 3.2 NOTICES. Any communications between Agent and Guarantor and any ------- notices or requests provided herein to be given may be given by mailing the same, postage prepaid, or by telex, facsimile transmission or cable to each such party at its address set forth in the Credit Agreement, on the signature pages hereof or to such other addresses as each such party may in writing hereafter indicate. Any notice, request or demand to or upon any 10 Agent or any Bank or Guarantor shall not be effective until received. 3.3 SEVERABILITY. In case any provision in or obligation under this ------------ Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 3.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or ---------------------- waiver of any provision of this Guaranty, or consent to any departure by Guarantor therefrom, shall in any event be effective without the written concurrence of Agent and Banks as provided under Section 10.01 of the Credit Agreement. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. 3.5 HEADINGS. Section and subsection headings in this Guaranty are -------- included herein for convenience of reference only and shall not constitute a part of this Guaranty for any other purpose or be given any substantive effect. 3.6 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and ---------------------- shall be binding upon Guarantor and its successors and assigns. This Guaranty shall inure to the benefit of Banks, Agents and their respective successors and assigns. Guarantor shall not assign this Guaranty or any of the rights or obligations of Guarantor hereunder without the prior written consent of all Banks. Any Bank may, without notice or consent, in connection with any assignment of its interests in the Commitments, Loans or Bankers' Acceptance Facility pursuant to the Credit Agreement assign its interest in this Guaranty in whole or in part. The terms and provisions of this Guaranty shall inure to the benefit of any transferee or assignee of any Guarantied Obligation, and in the event of such transfer or assignment the rights and privileges herein conferred upon Banks and Agents shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. 3.7 GOVERNING LAW AND JURISDICTION. (A) THIS GUARANTY SHALL BE GOVERNED ------------------------------ BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS. (B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR CONSENTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE GUARANTOR, THE AGENTS AND THE BANKS IRREVOCABLY WAIVES ANY 11 OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE -------------------- BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT RELATED HERETO. THE GUARANTOR, THE AGENTS AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. 3.8 WAIVER OF JURY TRIAL. THE GUARANTOR, THE BANKS AND THE AGENTS EACH -------------------- WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, PARTICIPANT OR ASSIGNEE, BASED UPON OR ARISING OUT OF THIS GUARANTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTOR, THE BANKS AND THE AGENTS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY OR PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. Guarantor and, by its acceptance of the benefits hereof, Agent each (i) acknowledges that this waiver is a material inducement for Guarantor and Agents and Banks to enter into a business relationship, that Guarantor and Agent have already relied on this waiver in entering into this Guaranty or accepting the benefits thereof, as the case may be, and that each will continue to rely on this waiver in their related future dealings and (ii) further warrants and represents that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court. 3.9 NO OTHER WRITING. This writing is intended by Guarantor and Agent as ---------------- the final expression of this Guaranty and is also intended as a complete and exclusive statement of the terms of their agreement with respect to the matters covered hereby. No course of dealing, course of performance or trade usage, and no parol evidence of any nature, shall be used to supplement or modify any terms of this Guaranty. There are no conditions to the full effectiveness of this Guaranty. 3.10 FURTHER ASSURANCES. At any time or from time to time, upon the ------------------ request of Agent or Majority Banks, Guarantor shall 12 execute and deliver such further documents and do such other acts and things as Agent or Majority Banks may reasonably request in order to effect fully the purposes of this Guaranty. [Remainder of page intentionally left blank] 13 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first written above. MCKESSON CORPORATION By ----------------------------- Title -------------------------- Acknowledged by: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS AGENT By -------------------------- Title ----------------------- S-1 EX-11 10 COMPUTATION OF EARNINGS EXHIBIT 11 McKESSON CORPORATION - CONSOLIDATED COMPUTATION OF EARNINGS PER COMMON SHARE FOR THE FIVE YEARS ENDED MARCH 31 (in thousands except per share amounts)
1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- --------- FULLY DILUTED EARNINGS PER SHARE Income (loss) after taxes from continuing operations $(193,174) $126,428 $ 95,070 $ 22,077 $ 85,016 Dividend requirements - convertible preferred stocks - - - (7,081)/(1)/ - Interest charges on convertible debentures - net of tax - 18 1,352 - /(2)/ 3,391 Contribution adjustment - Series B ESOP convertible preferred stock/(3)/ (1,836) (3,706) (3,758) - /(2)/ (3,711) --------- -------- -------- --------- ------- (195,010) 122,740 92,664 14,996 84,696 Discontinued operations 21,028 30,628 19,665 10,256 10,311 Discontinued operations - gain on sale of PCS 576,656 - - - - Extraordinary item - (4,186) - - - Cumulative effects of accounting changes - (16,660) - (110,500) - --------- -------- -------- --------- ------- Total $ 402,674 $132,522 $112,329 $ (85,248) $95,007 ========= ======== ======== ========= ======= Fully diluted shares Common shares outstanding/(4)/ 43,568 40,943 40,025 38,776 38,544 Convertible securities - dilutive 1,882 3,160 4,783 -/(2)/ 6,060 --------- -------- -------- --------- ------- Total 45,450 44,103 44,808 38,776 44,604 ========= ======== ======== ========= ======= Fully diluted earnings per share Continuing operations $ (4.29) $ 2.78 $ 2.07 $ .39 $ 1.90 Discontinued operations .46 .70 .44 .26 .23 Discontinued operations - gain on sale of PCS 12.69 - - - - Extraordinary item - (.10) - - - Cumulative effects of accounting changes - (.38) - (2.85) - --------- -------- -------- --------- ------- Total $ 8.86 $ 3.00 $ 2.51 $ (2.20) $ 2.13 ========= ======== ======== ========= ======= PRIMARY EARNINGS PER SHARE Income (loss) after taxes from continuing operations $(193,174) $126,428 $ 95,070 $ 22,077 $85,016 Dividend requirements - convertible preferred stocks/(1)/ (3,501) (7,052) (7,010) (7,081) (6,973) --------- -------- -------- --------- ------- (196,675) 119,376 88,060 14,996 78,043 Discontinued operations 21,028 30,628 19,665 10,256 10,311 Discontinued operations - gain on sale of PCS 576,656 - - - - Extraordinary item - (4,186) - - - Cumulative effects of accounting changes - (16,660) - (110,500) - --------- -------- -------- --------- ------- Total $ 401,009 $129,158 $107,725 $ (85,248) $88,354 ========= ======== ======== ========= ======= Common shares outstanding/(4)/ 43,568 40,789 40,025 38,776 38,539 ========= ======== ======== ========= ======= Primary earnings per share Continuing operations $ (4.51) $ 2.93 $ 2.20 $ .39 $ 2.02 Discontinued operations .48 .75 .49 .26 .27 Discontinued operations - gain on sale of PCS 13.23 - - - - Extraordinary item - (.10) - - - Cumulative effects of accounting changes - (.41) - (2.85) - --------- -------- -------- --------- ------- Total $ 9.20 $ 3.17 $ 2.69 $ (2.20) $ 2.29 ========= ======== ======== ========= =======
- ----------------------------------------------------------- (1) Net of certain related tax benefits. (2) 1992 fully diluted earnings per share computation excludes the effect of convertible securities which were anti-dilutive. (3) Represents the assumed additional ESOP contribution expense that the Company would have incurred if the Series B ESOP convertible preferred stock had been converted at the beginning of the period presented. (4) Common shares outstanding have been computed by adding the monthly average (beginning of the month plus end of the month divided by 2), dividing the aggregate by 12 and adjusting this total for dilutive stock options using the treasury stock method. 21 EX-13 11 1995 ANNUAL REPORT EXHIBIT 13 1995 Annual Report to Security Holders Pursuant to Rule 14a-3(b) 22 EX-21 12 LIST OF SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT There is no parent of the Company. The following is a listing of the significant subsidiaries of the Company.
Jurisdiction of Organization --------------- Armor All Products Corporation...................... Delaware McKesson Water Products Company..................... California Millbrook Distribution Services Co. ................ Indiana Medis Health and Pharmaceutical Services Inc. ...... Canada
23 EX-23 13 AUDITORS' CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in McKesson Corporation Registration Statement No. 33-86536 on Form S-8 of our report dated May 12, 1995 which expresses an unqualified opinion and includes an explanatory paragraph relating to the Corporation's change in its method of accounting for postemployment benefits and our report dated May 12, 1995, incorporated by reference in and appearing in this Annual Report on Form 10-K of McKesson Corporation, respectively, for the year ended March 31, 1995. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP San Francisco, California June 9, 1995 24 EX-27 14 FINANCIAL DATA SCHEDULE
5 0000927653 MCKESSON 1,000 YEAR MAR-31-1995 APR-01-1994 MAR-31-1995 385,400 307,300 834,600 (56,000) 1,160,200 2,699,400 763,100 (396,800) 3,479,200 1,738,200 458,800 400 0 0 1,013,100 3,479,200 13,189,100 13,189,100 12,095,200 12,095,200 0 49,500 46,000 (70,700) (111,500) (193,200) 597,700 0 0 404,500 9.20 8.86
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