-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
UFzyg4UfBybANXSXaxcxvXhMijlEQq0KWi2kEtRMUXfDLvDMfuKEkzA1vdCSsbaM
p7VBev9exGcyUq52E7rnnQ==
<SEC-DOCUMENT>/in/edgar/work/20000622/0001077604-00-000195/0001077604-00-000195.txt : 20000920
<SEC-HEADER>0001077604-00-000195.hdr.sgml : 20000920
ACCESSION NUMBER: 0001077604-00-000195
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 15
CONFORMED PERIOD OF REPORT: 20000331
FILED AS OF DATE: 20000622
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: STERIS CORP
CENTRAL INDEX KEY: 0000815065
STANDARD INDUSTRIAL CLASSIFICATION: [3842
] IRS NUMBER: 341482024
STATE OF INCORPORATION: OH
FISCAL YEAR END: 0331
</COMPANY-DATA>
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-14643
FILM NUMBER: 659356
</FILING-VALUES>
BUSINESS ADDRESS:
STREET 1: 5960 HEISLEY RD
CITY: MENTOR
STATE: OH
ZIP: 44060
BUSINESS PHONE: 4403542600
</BUSINESS-ADDRESS>
MAIL ADDRESS:
STREET 1: 5960 HEISLEY ROAD
CITY: MENTOR
STATE: OH
ZIP: 44060
</MAIL-ADDRESS>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
Commission file number 0-20165
STERIS Corporation
(Exact name of registrant as specified in its charter)
Ohio 34-1482024
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5960 Heisley Road 440-354-2600
Mentor, Ohio 44060-1834 (Registrant's telephone number
(Address of principal executive including area code)
offices)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of Exchange on Which Registered
------------------- ------------------------------------
<S> <C>
Common Shares, without par value New York Stock Exchange
</TABLE>
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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, computed by reference to the average of the bid and asked prices
of such stock as of May 31, 2000: $608,840,606.92
The number of Common Shares outstanding as of May 31, 2000: 67,527,075
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2000 Annual Meeting -- Part III
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS
Description of Business
STERIS Corporation, an Ohio corporation organized in 1987 (the "Company" or
"STERIS"), develops, manufactures, and markets infection prevention,
contamination prevention, microbial reduction, and therapy support systems,
products, services, and technologies for health care, scientific, research,
food, and industrial Customers throughout the world. STERIS is focused on
helping Customers address today's trends in the health care and scientific
industries. The health care industry is changing rapidly due to the growth of
minimally invasive surgical and diagnostic procedures; heightened public and
professional awareness and concern for the increasing number of transmittable
and antibiotic-resistant infectious diseases; the shifting of patient care
from acute care hospital settings to alternate sites; and the overall need to
reduce the cost of health care delivery. These trends have expanded the demand
for rapid, safe, and efficient infection prevention systems for critical tasks
such as the sterile processing of devices and the handling, decontamination,
destruction, and disposal of potentially infectious biohazardous waste. In the
scientific industry, the market is expanding as pharmaceutical, biotech,
medical device, food, and other United States Food and Drug Administration
("FDA") regulated manufacturers are under increasing pressure to adhere to
stricter guidelines for the validation and control of their antimicrobial
processes, as well as the trend towards global standardization of protocols.
The Company has 4,810 Associates (employees) worldwide, including 2,255
direct sales, service, field, and Customer Support personnel. Customer Support
and Training facilities are located in major global market centers with
production and manufacturing operations in the United States, Australia,
Canada, Germany, Finland, and Sweden.
The Company operates in a single business segment. See the accompanying
consolidated financial statements on page 15 of this Form 10-K for financial
information regarding the Company.
Principal Products and Services
Through a consistent strategic plan, a focused research and development
effort, and several business acquisitions, STERIS has emerged as a market
leader in low temperature sterilization, high temperature sterilization,
washing and decontamination systems, surgical tables, surgical lights, and
related consumables. The Company has expanded from its original narrow product
line to become a multi-faceted global organization that serves health care,
scientific, research, food, and industrial markets. Revenues by principal
market are as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended March 31
--------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Health Care...................................... $557,686 $597,146 $547,809
Scientific and Industrial........................ 202,940 200,465 171,847
-------- -------- --------
Total............................................ $760,626 $797,611 $719,656
======== ======== ========
</TABLE>
Health Care. Health Care systems, products, and services are used by
Customers to significantly reduce or eliminate microbial contamination of
surfaces with which human contact might occur. The Company provides complete
infection prevention material processing systems and specialty chemical
products, including those used for cleaning, decontaminating, disinfecting,
sterilizing, drying, and aerating medical and surgical instruments, devices,
and hard surfaces. Specialty chemical products are generally employed in the
material processing systems or used for high risk and routine skin care, hard
surface disinfection, and surgical preparation. STERIS infection prevention
systems support cost containment, productivity increases, and risk reduction
in a wide variety of health care settings through process standardization,
automatic monitoring and documentation, processing site flexibility, and
reduction in processing time.
1
<PAGE>
One of the Company's well known product lines is STERIS SYSTEM 1(R), a
complete system for just-in-time sterile processing at or near the site of
patient care. SYSTEM 1 enables health care professionals to safely, easily,
and economically sterilize immersible surgical and diagnostic devices between
patient procedures in less than thirty minutes. The use of SYSTEM 1 also
eliminates time consuming transportation to and from central processing sites.
Customers are able to use delicate, expensive, heat-sensitive devices and
instrument sets many times per day without compromising sterilization
standards.
SYSTEM 1 consists of a tabletop microprocessor-controlled unit, a patented,
proprietary, single-use sterilant, and multiple adapter trays and containers.
Installation requirements are tap water, electricity, and a drain. STERIS
20(TM), the sterilant component of SYSTEM 1, combines a powerful chemical
biocidal agent with a proprietary anti-corrosion formulation to provide low
temperature destruction of microorganisms. The STERIS process significantly
reduces processing time and safety concerns associated with conventional low
temperature sterilization and disinfection systems. SYSTEM 1 has particular
appeal in the increasingly decentralized delivery of therapeutic patient
services where capitated costs and standardized outcomes are emphasized. Since
commercially introducing SYSTEM 1 in November 1988, the Company has produced
over 20,000 SYSTEM 1 units for thousands of health care facilities, including
hospitals, medical centers, ambulatory facilities, and physician offices in
major markets throughout the world. We estimate that our Customers have now
safely processed approximately 250 million surgical and diagnostic devices in
STERIS SYSTEM 1.
The products and services of STERIS are sold under a variety of brand and
product names. As acquired businesses have been integrated and consolidated,
the STERIS name is increasingly visible on the product and service offerings.
The fundamental technology of the original STERIS brand is the rapid, safe
destruction of microorganisms on surfaces. STERIS's strategy is to employ this
technology in commercial applications with a focus on sterile processing,
biohazardous waste processing, and other surface safety applications in the
health care industry. The technology also has applications in a wide variety
of other settings where cleanliness and destruction of microorganisms is
important.
Recognized for years as the industry standard in large and medium scale,
high quality hardware systems and related service, STERIS is the leading
provider of infection prevention and surgical support. STERIS products include
thermal and low temperature gaseous sterilization systems, cleaning and
decontamination systems, accessories, and related consumables that are used to
prevent the spread of infectious diseases and reduce microbial contamination.
The Company's thermal sterilization systems use saturated steam to sterilize
items through a combination of heat, moisture, and pressure. Thermal
sterilizers are offered in a number of sizes based on Customer throughput
requirements and are designed for use in centralized or decentralized
processing environments. The product line includes a versatile microprocessor-
based control system which is designed to monitor each phase of the
sterilization cycle and provide the Customer a permanent record of important
cycle information, including type and parameters of sterilization cycle,
temperature, pressure, vacuum, and total cycle time. The Company's sterilizer
chambers are made of highly durable nickel-clad carbon steel or 316L stainless
steel.
In addition to thermal sterilization systems, the Company manufactures low
temperature ethylene oxide (EO) gas sterilizers which provide Customers the
capability to sterilize heat sensitive medical devices in a safe, controlled
processing environment. Each sterilization system includes an advanced
microprocessor-based control system which monitors cycle parameters and
provides the Customer a permanent record of each sterilization cycle. The
Company's leading ethylene oxide gas sterilization system, the Amsco 3017(TM)
100% EO Sterilizer/Aerator, utilizes a proprietary, single-use sterilant
cartridge and includes a built-in exhaust system.
STERIS develops, manufactures, and distributes infection prevention
consumables and supplies that are used to prevent the spread of infectious
diseases and to monitor sterilization and decontamination processes. STERIS
consumable products offer quality choices for infection and contamination
prevention for: Instrument Cleaning and Decontamination Systems; High Risk and
Routine Skin Care Products; Hard Surface Disinfectants;
2
<PAGE>
and Surgical Scrubs. STERIS quality assurance products to monitor
sterilization processes include over 300 sterility assurance and sterility
maintenance products for the worldwide health care market, including:
Protective and Decontamination Packaging; Biological Monitoring Systems;
Barrier Wraps; Integrator/Indicator Monitoring Systems; and Record Keeping
Systems.
The Company's Health Care product line also includes general and specialty
surgical tables, surgical and examination lights, operating room ("OR")
storage cabinets, fluid waste management systems, warming cabinets, scrub
sinks, and other complementary products and accessories for hospital and other
health care facilities. The Company's versatile surgical table product line
includes powered and manual general surgical tables as well as an orthopedic
specialty table. A wide variety of general and specialty surgical procedures
are accommodated through the use of attachable accessories which increase the
versatility of the tables. The Company produces and sells its own line of
accessories, as well as accessories manufactured by outside sources.
The Company's illumination and space management systems are designed for a
wide variety of locations where diagnostic and therapeutic procedures are
performed, including the emergency room, general surgery suite, OB/GYN suite,
ICU/CCU suite, and ambulatory surgery suite. The lighting products combine
optical performance with positioning flexibility that accommodate the surface
and cavity illumination needs of virtually all types of surgical procedures.
The Company's SurgiVision(TM) Surgical Lighting and Video System combines high
quality illumination with a technically advanced video system to provide
innovative and cost-effective systems for both acute care and non-acute care
Customers. The Company's products range from major surgical lights to minor
examination lights, and include the Orbiter(R) line of ceiling management
products for the OR and critical care markets.
During fiscal 2000, STERIS formed an alliance with SterilTek, Inc., a
provider of sterilization management and outsourcing services for health care
facilities. STERIS has purchased a minority equity interest in SterilTek, and
STERIS has become the exclusive supplier of infection prevention systems,
consumables, and services to SterilTek. SterilTek develops comprehensive
solutions to meet the instrument reprocessing needs of hospitals and health
care facilities located throughout North America, and is positioned to
capitalize on the current hospital trend of outsourcing non-revenue generating
operations such as central sterile processing.
Scientific and Industrial. STERIS Scientific Division is a global provider
of contamination prevention and control, systems, products, and services for
the pharmaceutical, biotechnology, medical device, critical research, food,
laboratory research, and industrial markets. These products and services
assist Customers in following the stringent sterility assurance and microbial
reduction processes that are demanded by the FDA, as well as worldwide
regulatory and compliance agencies.
STERIS Scientific offers a complete range of systems and products with
several of the most trusted brand names in the scientific industry: Finn
Aqua(R) and Amsco(R) sterilizers, Reliance(R) and Basil(R) washers, VHP(R)
(Vapor Hydrogen Peroxide) biodecontamination systems, Finn Aqua high-purity
water systems, Lyovac(R) freeze dryers, as well as an extensive line of
consumable products for contamination prevention and sterility assurance.
Additionally, STERIS offers added services such as facility planning,
engineering support, process and cleaner evaluation, education, and
preventative maintenance and repair services.
STERIS Isomedix Services Division provides contract sterilization and
microbial reduction services to manufacturers of pre-packaged health care and
consumer products. As a result of external mergers -- beginning with STERIS's
1998 acquisition of Isomedix Inc., a leading North American provider of
contract sterilization and microbial reduction services -- and internal
expansion, STERIS now has a network of 16 contract sterilization facilities
which utilize gamma irradiation, ethylene oxide, and electron beam processing
technologies. STERIS Isomedix Services works closely with Customers to provide
high-quality processing and optimum logistical support to minimize the time it
takes to get a product from the factory to its final destination.
STERIS's Food Safety Division helps Customers meet the growing consumer and
regulatory demands for improved food safety. The Division's broad offering to
the food industry encompasses systems, products, services, and technologies
for monitoring, reducing, and/or preventing potential food contamination at
all stages of the food production process. Specifically, STERIS offers a full
line of cleaners, sanitizers, disinfectants and
3
<PAGE>
hand care products; environmental control systems and facility design
services; analytical and process validation services; and irradiation
pasteurization services. The increased emphasis on food safety, supported by
the United States government's multiple food safety initiatives, presents new
business opportunities for STERIS.
Manufacturing
The Company manufactures, assembles, and packages products in Erie,
Pennsylvania; Medina, Ohio; Mentor, Ohio; Montgomery, Alabama; St. Louis,
Missouri; Cologne, Germany; Helsinki, Finland; Quebec City, Canada; Stockholm,
Sweden; and Sydney, Australia. Each of the production facilities focuses on
particular processes and products. All of the Company's equipment production
facilities throughout the world are ISO 9001 certified. These factories and
production facilities supply products to both Health Care and Scientific and
Industrial Customers.
Raw materials, sub-assemblies, and other components essential to the
Company's business are readily available within the lead times specified to
vendors. The supply of such raw materials has posed no significant problem in
the operation of the Company's business. All major raw materials are available
from multiple sources, both domestic and foreign.
Foreign Operations
The Company's foreign operations are subject to the usual risks that may
affect such operations. These include, among other things, exchange controls
and currency restrictions, currency fluctuations, changes in local economic
conditions, unsettled political conditions, and foreign government-sponsored
boycotts of the Company's products or services for noncommercial reasons. Most
of the identifiable assets associated with the Company's foreign operations
are located in countries where the Company believes such risks to be minimal.
For certain financial information regarding the Company's international
operations, see Note K -- Business Segment Information to the accompanying
consolidated financial statements on page 28 of this Form 10-K.
Markets and Methods of Distribution
STERIS has, as of March 31, 2000, over 1,000 direct field sales and service
representatives in North America. The representatives reside in metropolitan
market areas throughout the United States and Canada. Sales and service
activities are supported by a staff of regionally based clinical specialists,
systems planners, corporate account managers, and an in-house Customer service
and field support department.
Customer training is an important aspect of the STERIS business. In addition
to training at Customer locations, STERIS provides a variety of courses for
Customers at the Company's training and education centers. The programs enable
Customer representatives to understand the science, technology, and operation
of STERIS products. Many of the Operator Training Programs are approved by
professional certifying organizations to offer contact hours for continuing
education to eligible course participants. The first program was implemented
in July 1991, and, as of March 31, 2000, approximately 17,000 Customer
representatives, primarily nurses, department managers, and biomedical
engineers, have received training at STERIS training and education centers.
The Company has adopted a strategy focused on employing direct sales,
service, and support personnel in developed international markets while
contracting with distributors in other selected markets. STERIS currently has
sales offices in Belgium, Canada, Costa Rica, Finland, France, Germany, Hong
Kong, Italy, Japan, Korea, Mexico, the Netherlands, Puerto Rico, Singapore,
Spain, Sweden, and the United Kingdom. STERIS has distribution agreements with
medical supply distributors in Australia, and various countries in North and
South America, Asia, Europe, and the Middle East.
The Company believes that one of its strengths is its broad Customer base
with no single Customer accounting for more than two percent of revenues
during the fiscal year ended March 31, 2000. Customers who are part of a
buying group generally make independent purchasing decisions and are invoiced
directly by the Company.
4
<PAGE>
Competition
A number of methodologies and commercial products are available for general
sterilization purposes. Getinge/Castle, Advanced Sterilization Products
(Johnson & Johnson), and 3M Corporation are well-known United States companies
offering products for general sterilization and disinfection. Skytron
(division of KMW Group, Inc.), Getinge/Castle, Maquet, and Midmark are
competitors in providing general surgical tables. Berchtold Corporation, ALM
Surgical Equipment, Inc., Heraeus Surgical, Inc., Hill-Rom, and Skytron are
competitors in major surgery OR light products. Competitors in sterility
assurance products include Kimberly-Clark Corporation, 3M Health Care, and
Allegiance (Cardinal Health). Competitors in environmental and instrument
decontamination products include Getinge/Castle, Ecolab Inc., and Allegiance.
The Company's high risk and routine skin care products compete against the
products of Ecolab, Provon (Gojo), and SaniFresh (Kimberly-Clark). Allegiance,
Becton Dickinson, Ecolab, and Purdue Frederick are competitors in providing
surgical scrubs. Competitors in the OEM service business are local and in-
hospital service groups. In contract sterilization, the Company primarily
competes with Griffith Micro Science and SteriGenics International, Inc.
(business units of Ion Beam Applications), and companies that sterilize
products in-house. The primary competitor for the Company's Scientific and
Industrial sterilization systems is Getinge/Castle.
In the surgical support market, the FDA has reclassified certain products
from a Device II (which require a 510(k) application) to a Device I
classification which lessens the requirements for new products. The lower
regulatory barriers could accelerate new product introductions for the Company
as well as improve the ability of foreign competitors to introduce products
into the United States market and as a result, increase competition.
Competition in the product markets served by the Company is based upon
product design and quality, product innovation, price, and product
serviceability that results in the greatest overall value to the Customer. In
addition, there is significant price competition among various instrument
preparation processes and services.
Several smaller, early-stage companies are believed to be working with a
variety of technologies and sterilizing agents, including microwave, ozone,
plasma, chlorine dioxide, peracids, and formaldehyde. In addition, a number of
companies have developed disposable medical instruments and other devices
designed to address the risk of contamination.
STERIS anticipates that it may face increased competition in the future as
new infection prevention, sterile processing, contamination control, and
surgical support products and services enter the market. There can be no
assurance that new products or services developed by the Company's competitors
will not be more commercially successful than those currently developed by
STERIS or that may be developed by STERIS. In addition, some of STERIS's
existing or potential competitors have greater financial, technical, and human
resources than the Company. Accordingly, the Company's competitors may succeed
in developing and commercializing products more rapidly than the Company.
Government Regulation
Many of the Company's products and manufacturing processes are subject to
regulation by the FDA, the United States Environmental Protection Agency
("EPA"), the United States Nuclear Regulatory Commission ("NRC"), and other
governmental authorities. Similar regulatory agencies exist in other countries
with a wide variety of regulatory review processes and procedures. Many
products offered for sale in Europe must meet CE Mark requirements, and must
be manufactured in accordance with ISO 9001 and EN 46001 certification
requirements. The Company's products are also subject to review or
certification by various non-governmental certification authorities, including
Underwriter's Laboratories, Canadian Standards Association, British Standards
Institute, and TUV/VDE (Europe). Compliance with the regulations and
certification requirements of domestic and foreign government regulatory and
certification authorities may delay or prevent product introductions, require
additional studies or tests prior to product introduction, require product
modifications, recalls, or mandate cessation of production and marketing of
existing products. The cost of compliance with applicable regulations
represents a considerable expense, and significant changes in such regulations
or their interpretation could have a material adverse impact.
5
<PAGE>
In the United States, the FDA regulates the introduction, manufacturing,
labeling, and record keeping requirements for medical devices and drugs. The
FDA regulates the majority of products manufactured by the Company, through
marketing clearance, pre-market approvals, new drug approvals, or compliance
with established monographs. The process of obtaining marketing clearance from
the FDA for new products, new applications for existing products, and changes
to existing products can be time-consuming and expensive. In addition, whether
separate marketing clearance is required under applicable regulations for any
particular product is often a matter of interpretation and judgment. There is
no assurance that marketing clearances will be granted, that the FDA will
agree or continue to agree with all judgments made from time to time by the
Company with respect to whether or not marketing clearance is required for any
particular new or existing product, or that the FDA review will not involve
delays that would adversely affect the Company's ability to commercialize
additional products or applications for existing products. Similar approvals
by comparable agencies are required in most countries. Foreign regulatory
requirements may vary widely from country to country. The time required to
obtain market clearance from a foreign country may be longer or shorter than
that required by the FDA or other agencies, and clearance or approval or other
product requirements may differ.
Even if regulatory clearances to market a product are obtained from the FDA
or comparable foreign agencies, these clearances may entail limitations on the
indicated uses of the product. Product clearances granted by the FDA or
comparable foreign agencies can also be withdrawn due to failure to comply
with regulatory standards or the occurrence of unforeseen problems following
initial approval. The FDA could also limit or prevent the manufacture or
distribution of the Company's products and has the authority to require the
recall of such products. FDA regulations depend heavily on administrative
interpretation and there can be no assurance that future interpretations made
by the FDA or other regulatory bodies, with possible retroactive effect, will
not adversely affect the Company. Further, additional government regulation
may be established that could prevent, delay, or result in the rejection of
regulatory clearance of the Company's products. The effect of government
regulation that may arise from future legislation or administrative action
cannot be predicted.
The FDA, various state agencies, and foreign regulatory agencies also have
the right to inspect the Company's facilities from time to time to determine,
among other things, whether the Company is in compliance with various subparts
relating to the Quality System Regulation ("QSR"). In complying with QSR,
manufacturers must continue to expend time, money, and effort in the areas of
production and quality control in order to ensure full regulatory compliance.
Failure to comply with any applicable regulatory requirements could result
in sanctions being imposed on the Company, including warning letters,
injunctions, civil money penalties, failure of the FDA or comparable foreign
agencies to grant pre-market clearance or pre-market approval of medical
devices, product recalls, operating restrictions, and, in extreme cases,
criminal sanctions.
In December 1999, STERIS received a warning letter from the FDA in
connection with the FDA's inspection of STERIS's manufacturing facility in
Mentor, Ohio. Since the inspection and receipt of the warning letter, STERIS
has been working diligently to resolve the FDA's concerns. STERIS submitted a
timely formal response to the warning letter and has continued to communicate
with the FDA both in writing and orally with respect to this matter. The
Company will continue to cooperate with the FDA to reach a final resolution of
all concerns. Although no assurance can be given regarding further actions by
the FDA or the timing of any such final resolution, management believes this
matter will not have a material adverse effect on STERIS's financial
condition, results of operations, or cash flow.
In addition, the Company is and may be subject to regulation under state,
federal, and foreign law regarding occupational safety, environmental
protection, and hazardous and toxic substance control, and to other present
and possible future local, state, federal, and foreign regulation. The gamma
irradiation and ethylene oxide sterilization activities of the Company produce
virtually no harmful solid, liquid, or gaseous effluents or pollutants.
The Company believes that it is currently in conformity in all material
respects with applicable regulatory requirements. The Company has received
licenses and permits it believes necessary to conduct its current
6
<PAGE>
manufacturing and contract sterilization business and believes that it will be
able to obtain any permits necessary for the future conduct of its
manufacturing and contract sterilization business. The Company is committed to
maintaining compliance with applicable FDA, EPA, and other governmental laws,
regulations and nongovernmental certification authorities.
Employees
As of March 31, 2000, the Company employed 4,810 Associates (employees).
Management considers its relations with its Associates to be good.
Intellectual Property and Research and Development
The Company protects its technology and products by, among other means,
filing United States and foreign patent applications that it considers
important to its business. There can be no assurance, however, that any patent
will provide adequate protection for the technology, system, product, service,
or process it covers. In addition, the process of obtaining and protecting
patents can be long and expensive. The Company also relies upon trade secrets,
technical know-how, and continuing technological innovation to develop and
maintain its competitive position.
Research activities are important to the Company's business. The costs of
the Company's research activities relating to the discovery and development of
new products and the improvement of existing products amounted to $24.2
million, $24.8 million, and $23.9 million in fiscal years 2000, 1999, and
1998, respectively. These costs are charged directly to income in the year in
which incurred.
As of March 31, 2000, the Company held 213 United States patents and 321
foreign patents with expiration dates ranging from 2000 to the year 2018. In
addition, the Company, as of March 31, 2000, had 53 United States patents and
138 foreign patents pending.
The Company also considers its various trademarks to be valuable in the
marketing of its products. The Company has a total of 747 trademark
registrations in the United States and in various foreign countries in which
the Company does business.
ITEM 2. PROPERTIES
At March 31, 2000, the Company operated 26 manufacturing, distribution, and
engineering facilities comprising approximately 2.5 million square feet.
Substantially all such facilities are owned. Twenty of these sites are located
in the United States, with the others located in Australia, Canada, Finland,
Germany, and Sweden. Management believes that its facilities are adequate for
operations and are maintained in good condition. At March 31, 2000, the
Company leased or owned sales, service, and support offices in 18 countries.
The Company is confident that, if needed, it will be able to acquire
additional facilities at commercially reasonable rates.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to Note J -- Contingencies to the accompanying
consolidated financial statements on page 27 of this Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's 2000 fiscal year.
7
<PAGE>
Executive Officers of the Registrant
The following table sets forth certain information regarding the executive
officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Bill R. Sanford......... 56 Chairman of the Board of Directors and Chief Executive Officer
Les C. Vinney........... 51 President, Chief Operating Officer, and Director
Laurie Brlas............ 42 Senior Vice President and Chief Financial Officer
David C. Dvorak......... 36 Senior Vice President, General Counsel, and Secretary
Gerard J. Reis.......... 48 Senior Vice President, Associate and Business Relations
Joseph C. McDonald...... 46 Corporate Vice President and Group President, Scientific and Industrial
William A. O'Riordan.... 41 Corporate Vice President and Group President, Health Care
</TABLE>
The following is a brief account of the business experience during the past
five years of each such executive officer:
Bill R. Sanford served as Chairman of the Board of Directors, President, and
Chief Executive Officer of the Company from April 1987 until March 2000 when
the Board appointed Les C. Vinney President and Chief Operating Officer of the
Company. Mr. Sanford continues as Chairman of the Board of Directors and Chief
Executive Officer of the Company. Mr. Sanford is also currently a member of
the Board of Directors of KeyCorp, a financial services company.
Les C. Vinney serves as President, Chief Operating Officer, and Director.
Mr. Vinney joined the Company's Board of Directors in March 2000 at the same
time as he was appointed as the Company's President and Chief Operating
Officer, a new position. Mr. Vinney became Senior Vice President and Chief
Financial Officer of STERIS in August 1999. He became Senior Vice President
Finance and Operations, while continuing as Chief Financial Officer, in
October 1999. Immediately prior to Mr. Vinney's employment with STERIS, he
most recently served as Senior Vice President and Chief Financial Officer at
The BF Goodrich Company, a Fortune 500 manufacturer of advanced aerospace
systems, performance materials, and engineered industrial products. During his
eight year career with BF Goodrich he held a variety of senior operating and
financial management positions, including Vice President and Treasurer,
President and CEO of the former Tremco subsidiary, and Senior Vice President,
Finance and Administration of BF Goodrich Specialty Chemicals.
Laurie Brlas serves as a Senior Vice President and Chief Financial Officer.
She joined the Company in April 2000. Prior to joining STERIS, Ms. Brlas was
employed by OfficeMax, Inc., a Fortune 500 retailer, from September 1995
through April 2000, serving most recently as Senior Vice President and
Corporate Controller. She was employed by Corning Clinical Labs, the
laboratory testing division of Corning, Inc., from June 1994 through September
1995 serving most recently as Divisional Controller.
David C. Dvorak serves as Senior Vice President, General Counsel, and
Secretary. He joined the Company in June 1996. Prior to joining the Company,
Mr. Dvorak served as an attorney with the law firm of Thompson Hine & Flory
LLP from June 1994 to June 1996.
Gerard J. Reis serves as Senior Vice President, Associate and Business
Relations. He joined the Company in July 1994 as Vice President,
Administration. Mr. Reis has held positions as Vice President, Business and
Professional Relations and Vice President, Associate and Business Relations.
He became Senior Vice President in October 1999.
Joseph C. McDonald serves as Corporate Vice President and Group President of
the Scientific and Industrial Group. He joined the Company in May 1989 as
Scientific Zone Manager, and has held positions as Vice President of
Marketing, General Manager of European Health Care and Scientific
Distribution, and President of the Company's Scientific Division. He became
Group President in April 2000.
William A. O'Riordan serves as Corporate Vice President and Group President
of the Health Care Group. He joined the Company in June 1991 as Division Vice
President -- Customer Support, and has held positions as Vice President --
Operations, Group Vice President -- Customer Support, and Corporate Vice
President -- Global Operations. He became Group President in April 1999.
8
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Market Information and Dividends
The Company's Common Shares are traded on the New York Stock Exchange under
the symbol "STE." The following table sets forth, for the periods indicated,
the high and low sales prices for the Company's Common Shares.
<TABLE>
<CAPTION>
Quarters Ended
----------------------------------------
June
March 31 December 31 September 30 30
-------- ----------- ------------ ------
<S> <C> <C> <C> <C>
Fiscal 2000
High............................... $12.13 $15.00 $20.13 $28.44
Low................................ 9.13 9.44 11.50 15.13
Fiscal 1999
High............................... $35.06 $29.00 $35.94 $33.50
Low................................ 25.00 18.50 22.59 25.44
</TABLE>
The Company has not paid any cash dividends on its Common Shares since its
inception and does not anticipate paying any such dividends in the foreseeable
future. The Company has entered into a credit agreement which includes
operational conditions and financial ratio covenants that, in certain
circumstances, could limit the Company's ability to pay dividends. The Company
currently intends to retain all of its earnings for the operation and
expansion of its businesses. At June 9, 2000, there were approximately 2,085
shareholders of record of the Company's Common Shares.
9
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended March 31
-----------------------------------------------
2000(1)(2) 1999(1) 1998(1) 1997(3) 1996(3)
---------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operational Data:
Net revenues.................. $760,626 $797,611 $719,656 $587,852 $534,612
Gross profit.................. 315,425 368,591 324,558 231,845 202,701
Non-recurring expenses........ 90,831
Income (loss) from
operations................... 29,706 136,379 112,614 (6,487) 69,731
Net income (loss)............. 10,485 84,854 65,496 (30,606) 40,790
Net income (loss) per Common
Share -- basic............... $ 0.16 $ 1.24 $ 0.96 $ (0.45) $ 0.63
Shares used in computing net
income (loss) per share --
basic....................... 67,489 68,200 67,898 67,356 65,022
Net income (loss) per Common
Share -- diluted............. $ 0.15 $ 1.20 $ 0.93 $ (0.45) $ 0.59
Shares used in computing net
income (loss) per share --
diluted..................... 68,567 70,592 70,224 67,356 69,714
Balance Sheet Data:
Working Capital............... $233,217 $236,260 $174,678 $143,734 $231,996
Total assets.................. 903,574 865,996 728,069 539,455 592,697
Long-term debt................ 268,700 221,500 152,879 35,879 102,631
Total liabilities............. 482,480 430,059 369,117 244,739 288,638
Total shareholders' equity.... 421,094 435,937 358,952 294,716 304,059
</TABLE>
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(2) Earnings for fiscal 2000 include a pre-tax special charge of $39,722,
primarily related to plans for manufacturing consolidations, productivity
improvements and associated workforce reductions. Of the $39,722 charge,
$24,808 was charged to cost of sales and $14,914 was charged to selling,
informational, and administration expenses in the consolidated statement
of operations.
(3) Fiscal 1996 includes the combined results of the STERIS merger with Amsco
International, Inc. in a tax free, stock-for-stock transaction. The Amsco
merger has been accounted for using the pooling-of-interests method.
Fiscal 1997 Non-recurring expenses relate to the Amsco merger.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Fiscal Year 2000 Compared to Fiscal Year 1999
Net revenues decreased by 4.6% to $760.6 million in fiscal 2000 from $797.6
million in fiscal 1999. Health Care Group revenues decreased by 6.6% to $557.7
million in fiscal 2000 from $597.1 million in fiscal 1999. Scientific and
Industrial Group revenues increased 1.2% to $202.9 million in fiscal 2000 from
$200.5 million in fiscal 1999. North America revenues for fiscal 2000 were
$659.8 million, or 86.7% of total revenues, with $100.8 million, or 13.3%,
from International markets. North America revenues for fiscal 1999 were $701.1
million, or 87.9% of total revenues, with $96.5 million, or 12.1%, from
International markets. Revenues from consumables and services contributed
$443.5 million, or 58.3%, of total revenues for fiscal 2000 compared to $429.3
million, or 53.8% in the prior year. The decrease in net revenues was due
principally to softness in United States hospital spending, particularly for
capital equipment, and delays in scientific and pharmaceutical projects.
Non-recurring charges of $39.7 million ($24.6 million net of tax, or $.36
per share) were recorded in the fiscal 2000 fourth quarter after the Company
completed a review of certain manufacturing and support functions. This charge
primarily related to plans for manufacturing consolidations, productivity
improvements, and associated workforce reductions. The charge to cost of sales
includes $19.3 million for inventory write-downs and disposals relating to the
restructuring of the Company's remanufactured equipment business as well as
improvements to production flows and facility restructurings to align with
revised strategic plans. The charge to
10
<PAGE>
cost of sales also includes $5.5 million for closing the Company's sterility
assurance production operations in North Carolina, which will be consolidated
into a dedicated facility in Mentor, Ohio. Costs to close the facility include
write-downs in inventory, lease termination costs, severance, property
abandonment, and other miscellaneous costs. The Company expects to be
completed with the consolidation by July 31, 2000. The charge to selling,
informational, and administrative expenses includes $10.4 million related to
plans for implementing specific improvements to manufacturing and
administrative support functions, primarily related to severance costs. The
remaining $4.5 million of charges relates to accounts receivable management
initiatives including implementation of a new program to enhance the
collection of receivables and the write-off of certain aged smaller balance
accounts.
The cost of products and services sold increased by 3.8% to $445.2 million
in fiscal 2000, including the effect of the fourth quarter charge, from $429.0
million in fiscal 1999. Excluding the charge, the cost of products and
services sold decreased by 2.0% to $420.4 million. The cost of products and
services sold as a percentage of net revenues was 55.3% in fiscal 2000
excluding the fourth quarter charge, compared to 53.8% in fiscal 1999. The
increase in the cost of products and services sold as a percentage of net
revenue for fiscal 2000 resulted primarily from decreased overhead absorption
from lower volumes.
Selling, informational, and administrative expenses increased in fiscal 2000
by 26.1% to $261.6 million, including the effect of the fourth quarter charge,
from $207.4 million in fiscal 1999. Excluding the charge, selling,
informational, and administrative expenses increased in fiscal 2000 by 18.9%
to $246.6 million. The increase in expenses was primarily attributable to the
higher payroll and marketing costs incurred to support the reorientation and
expansion of the field organization. The expenses as a percentage of net
revenue excluding the charge increased to 32.4% in fiscal 2000 from 26.0% in
fiscal 1999.
Research and development expenses decreased by 2.7% to $24.2 million in
fiscal 2000 from $24.8 million in fiscal 1999. Research and development
expenses as a percentage of net revenues were 3.2% in fiscal 2000 compared to
3.1% in fiscal 1999.
Interest expense increased by 50.6% to $16.2 million in fiscal 2000 from
$10.7 million in fiscal 1999. The increase was due to additional borrowing,
principally for funding the Company's share repurchase plan and the purchase
of acquired businesses, as well as the effects of higher interest rates.
Income tax expense was 38.0% of pretax income in fiscal 2000, including a
$2.0 million accrual reduction. In fiscal 1999, the income tax rate was 38.0%
before a reduction in the income tax accruals of approximately $6.0 million,
which reduced the effective rate to 33.3%. These accrual reductions were due
to benefits from the Company's global tax strategies and active tax management
programs and the overall effect of the fourth quarter charge in fiscal 2000.
Net income for fiscal 2000 decreased by 87.6% to $10.5 million ($.15 per
diluted share), including the effect of the fourth quarter charge, from $84.9
million ($1.20 per diluted share) in fiscal 1999. Excluding the fourth quarter
charge, net income decreased by 58.6% to $35.1 million ($.51 per diluted
share).
Fiscal Year 1999 Compared to Fiscal Year 1998
Net revenues increased by 10.8% to $797.6 million in fiscal 1999 from $719.7
million in fiscal 1998. Health Care Group revenues increased by 9.0% to $597.1
million in fiscal 1999 from $547.8 million in fiscal 1998. Scientific and
Industrial Group revenues increased 16.7% to $200.5 million in fiscal 1999
from $171.8 million in fiscal 1998. North America revenues for fiscal 1999
were $701.1 million, or 87.9% of total revenues, with $96.5 million, or 12.1%,
from International markets. North America revenues for fiscal 1998 were $633.3
million, or 88.0% of total revenues, with $86.4 million, 12.0% from
International markets. Revenues from consumables and services contributed
$429.3 million, or 53.8%, of total revenues for fiscal 1999 compared to $359.6
million, or 50.0% in the prior year. The increase in net revenues was due
principally to higher sales of capital equipment, consumable products, and
services.
11
<PAGE>
The cost of products and services sold increased by 8.6% to $429.0 million
in fiscal 1999 from $395.1 million in fiscal 1998. The cost of products and
services sold as a percentage of net revenues was 53.8% in fiscal 1999
compared to 54.9% in fiscal 1998. The decrease in the cost of products and
services sold as a percentage of net revenue for fiscal 1999 resulted
principally from improved overhead absorption from volume increases, favorable
changes in the mix of products sold, and the benefits from the restructuring
of the acquired and merged businesses.
Selling, informational, and administrative expenses increased in fiscal 1999
by 10.3% to $207.4 million from $188.0 million in fiscal 1998. The increase in
expenses was attributable to the continued investments in customer support
systems, information technology systems, and to support the increased level of
business. The expenses as a percentage of net revenue decreased to 26.0% in
fiscal 1999 from 26.1% in fiscal 1998.
Research and development expenses increased by 3.9% to $24.8 million in
fiscal 1999 from $23.9 million in fiscal 1998. Research and development
expenses as a percentage of net revenues were 3.1% in fiscal 1999 compared to
3.3% in fiscal 1998.
Interest expense increased by 72.1% to $10.7 million in fiscal 1999 from
$6.2 million in the fiscal 1998. The increase was due to the additional
borrowing, principally for the purchase of acquired companies and funding the
Company's share repurchase plan.
Income tax expense decreased to 33.3% of pretax income in fiscal 1999 from
39.0% of pretax income in fiscal 1998. The decrease was due to events which
enabled STERIS to capitalize on its previously implemented tax planning
strategies and the effective integration of its previously acquired
businesses. A significant component of the decrease was a $6.0 million
reduction in the income tax accruals. Excluding this reduction, the effective
income tax rate decreased to 38.0% of pretax income in fiscal 1999 from 39.0%
of pretax income in fiscal 1998.
Net income for fiscal 1999 increased by 29.6% to $84.9 million ($1.20 per
diluted share) from $65.5 million ($.93 per diluted share) in fiscal 1998.
Liquidity and Capital Resources
At March 31, 2000, the Company had $35.5 million in cash and cash
equivalents, compared to $23.7 million of cash and cash equivalents at March
31, 1999. The increase was a result of net cash provided by operating and
financing activities, offset by net cash used in investing activities.
At March 31, 2000, the Company had accounts receivable of $206.3 million,
compared to $230.3 million at March 31, 1999. The decrease was primarily
attributed to decreased revenues in the fourth quarter fiscal 2000 compared to
the fourth quarter fiscal 1999.
At March 31, 2000, the Company had inventory of $107.7 million, compared to
$99.3 million at March 31, 1999. The increase was primarily attributed to
decreased revenues in the fourth quarter fiscal 2000 compared to the fourth
quarter fiscal 1999.
Property, plant, and equipment increased by 19.1% to $443.6 million as of
March 31, 2000, compared to $372.4 million at March 31, 1999. The increase was
due primarily to the increases resulting from the investment in information
systems, plant and equipment, facility renovations, and acquired businesses
that were accounted for using the purchase method of accounting.
Intangibles increased by 0.7% to $282.6 million as of March 31, 2000,
compared to $280.8 million at March 31, 1999. Goodwill and other intangible
assets represented 22.6% and 24.1% of total assets at March 31, 2000 and 1999,
respectively.
Net deferred income tax assets decreased by 21.2% to $15.0 million as of
March 31, 2000, compared to $19.1 million at March 31, 1999. The decrease was
due primarily to the recognition of amounts for tax purposes during fiscal
2000 that were previously recognized for financial reporting purposes.
12
<PAGE>
Current liabilities decreased by 0.8% to $155.9 million as of March 31,
2000, compared to $157.1 million at March 31, 1999.
Other liabilities were $49.0 million as of March 31, 2000, compared to $48.6
million of the same at March 31, 1999.
On June 19, 2000, STERIS entered into a $325 million Revolving Credit
Facility (the "Revolving Credit Facility"), which replaced the prior credit
facility (see Note E to the consolidated financial statements). The Revolving
Credit Facility matures June 29, 2003 and provides financial covenants and
borrowing alternatives which are more appropriate for the Company's strategic
objectives. The Revolving Credit Facility may be used to refinance existing
indebtedness, as well as for general corporate purposes. The Revolving Credit
Facility will bear interest at LIBOR plus 1.25% to 2.25% or KeyBank National
Association's prime rate. The Revolving Credit Facility contains customary
covenants which include maintenance of certain financial ratios such as a
fixed charge covenant and consolidated leverage ratios. The Revolving Credit
Facility also places restrictions on the Company's ability to pay dividends.
The Company has no material commitments for capital expenditures. The
Company believes that its cash requirements will increase due to increased
sales requiring more working capital, accelerated research and development,
and potential acquisitions or investments in complementary businesses.
However, the Company believes that its available cash, cash flow from
operations, and sources of credit will be adequate to satisfy its capital
needs for the foreseeable future.
The overall effects of inflation on the Company's business during the
periods discussed have not been significant. The Company monitors the prices
it charges for its products and services on an ongoing basis and believes that
it will be able to adjust those prices to take into account future changes in
the rate of inflation.
The overall effects of foreign currency exchange rates on the Company's
business during the periods discussed have not been significant. Movements in
foreign currency exchange rates create a degree of risk to the Company's
operations. These movements affect the United States dollar value of sales
made in foreign currencies, and the United States dollar value of costs
incurred in foreign currencies. Changing currency exchange rates also affect
the company's competitive position, as exchange rate changes may affect
profitability and business and/or pricing strategies of non-United States
based competitors.
Contingencies
For a discussion of contingencies, see Note J to the consolidated financial
statements.
Seasonality
Historical data indicates that financial results were subject to recurring
seasonal fluctuations. A number of factors have contributed to the seasonal
patterns, including sales promotion and compensation programs, Customer buying
patterns of capital equipment, and international business practices. Sales and
profitability of certain of the acquired and consolidated product lines have
historically been disproportionately weighted toward the latter part of each
quarter and generally weighted toward the latter part of each fiscal year.
Various changes in business practices resulting from the integration of
acquired businesses into STERIS may alter the historical patterns of the
previously independent businesses.
Euro
On January 1, 1999, eleven of the fifteen member countries of the European
Monetary Union (EMU) began a three-year transition phase during which a common
currency called the Euro was adopted. The Euro trades on currency exchanges
and is available for non-cash transactions. During the transition period,
parties may pay for goods and services using either the Euro or the
participating country's legacy currency on a "no compulsion, no prohibition"
basis. The conversion rates between the existing legacy currencies and the
Euro were fixed on
13
<PAGE>
January 1, 1999. The legacy currencies will remain legal tender for cash
transactions until January 1, 2002, at which time all legacy currencies will
be withdrawn from circulation and the new Euro denominated bills and coins
will be used for cash transactions.
The Company has several operations within the eleven participating countries
that are utilizing the Euro. Additionally, the Company's operations in other
countries conducting business transactions with Customers and suppliers that
will be denominated in the Euro. Euro denominated bank accounts have been
established to accommodate Euro transactions.
The Company has established and implemented certain plans to review
strategic and tactical areas arising from the Euro conversion. Initial efforts
were focused on aspects of the Euro conversion that required adjustment or
compliance by January 1, 1999, and for conducting Euro-denominated business.
These aspects included transacting business in the Euro, the competitive
impact on product pricing, and adjustments to billing systems to handle
parallel currencies. The Company has determined that these systems have the
capability to handle Euro transactions and is currently in a position to
transact business in Euros. Continuing analysis and development efforts will
help ensure that the implementation of the Euro meets the timetable and
regulations established by the EMU. Based on current estimates, the Company
does not expect the costs incurred to address the Euro will have a material
impact on its financial condition or results of operations.
Forward-Looking Statements
This discussion contains statements concerning certain trends and other
forward-looking information affecting or relating to the Company and its
industry that are intended to qualify for the protections afforded "forward-
looking statements" under the Private Securities Litigation Reform Act of
1995. Forward-looking statements may be identified by the use of forward-
looking terms such as "may," "will," "expects," "anticipates," "plans,"
"estimates," "projects," "targets," "forecasts," or "seeks" or the negative of
such terms or other variations on such terms or comparable terminology. There
are many important factors that could cause actual results to differ
materially from those in the forward-looking statements. Many of these
important factors are outside STERIS's control. Changes in market conditions,
including competitive factors and changes in government regulations, could
cause actual results to differ materially from the Company's expectations. No
assurance can be provided as to any future financial results. Other
potentially negative factors that could cause actual results to differ
materially from those in the forward-looking statements include (a) the
possibility that the continuing integration of acquired businesses will take
longer than anticipated, (b) the potential for increased pressure on pricing
that leads to erosion of profit margins, (c) the possibility that market
demand will not develop for new technologies, products, and applications, (d)
the possibility that compliance with the regulations and certification
requirements of domestic and foreign authorities may delay or prevent new
product introductions or affect the production and marketing of existing
products, (e) the potential effects of fluctuations in foreign currencies
where the Company does a sizable amount of business, (f) the possibility that
the Company's activities related to changes in its sales force will take
longer or incur greater expense than anticipated, and (g) the possibility of
reduced demand, or reductions in the rate of growth in demand, for the
Company's products.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Consistent with the prior year, the Company is exposed to market risk
through various financial instruments, including fixed rate and floating rate
debt instruments. Based on March 31, 2000 debt levels, a 1% change in interest
rates would impact interest expense by approximately $2.2 million annually.
Additionally, the Company operates internationally and as a result is exposed
to foreign currency fluctuations. Specifically, the exposure includes
intercompany loans, and third party sales or payments. The Company does not
consider the market risk associated with its international operations to be
material. The Company does not use derivative financial instruments for
hedging or speculative purposes.
14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
STERIS Corporation
We have audited the accompanying consolidated balance sheets of STERIS
Corporation and subsidiaries as of March 31, 2000 and 1999, and the related
consolidated statements of income, shareholders' equity and cash flows for
each of the three years in the period ended March 31, 2000. Our audits also
included the financial statement schedule listed in the index at Item
14(a)(2). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of STERIS
Corporation and subsidiaries at March 31, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended March 31, 2000, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Ernst & Young LLP
Cleveland, Ohio
April 20, 2000,
except for Note E, as to which the date is
June 19, 2000
15
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31
--------------------
2000 1999
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............................... $ 35,476 $ 23,680
Accounts receivable (net of allowances of $6,047 and
$6,000, respectively).................................. 206,344 230,346
Inventories............................................. 107,728 99,279
Deferred income taxes................................... 23,923 21,910
Prepaid expenses and other assets....................... 15,648 18,182
--------- ---------
Total current assets..................................... 389,119 393,397
Property, plant, and equipment........................... 443,608 372,386
Accumulated depreciation................................. (138,603) (111,105)
--------- ---------
Net property, plant, and equipment...................... 305,005 261,281
Intangibles.............................................. 282,639 280,750
Accumulated amortization................................. (78,300) (72,499)
--------- ---------
Net intangibles......................................... 204,339 208,251
Other assets............................................. 5,111 3,067
--------- ---------
Total assets............................................. $ 903,574 $ 865,996
========= =========
Liabilities and shareholders' equity
Current liabilities:
Current portion of long-term indebtedness............... $ 1,816 $ 2,200
Accounts payable........................................ 51,374 47,431
Accrued expenses and other.............................. 102,712 107,506
--------- ---------
Total current liabilities................................ 155,902 157,137
Long-term indebtedness................................... 268,700 221,500
Deferred income taxes.................................... 8,880 2,810
Other liabilities........................................ 48,998 48,612
--------- ---------
Total liabilities........................................ 482,480 430,059
Shareholders' equity:
Serial preferred shares, without par value, 3,000 shares
authorized; no shares issued or outstanding............
Common Shares, without par value, 300,000 shares
authorized; issued and outstanding shares of 67,517 at
March 31, 2000 and 67,956 at March 31, 1999, excluding
1,052 and 523 treasury shares, respectively............ 198,253 222,946
Retained earnings........................................ 230,348 219,863
Cumulative translation adjustment........................ (7,507) (6,872)
--------- ---------
Total shareholders' equity............................... 421,094 435,937
--------- ---------
Total liabilities and shareholders' equity............... $ 903,574 $ 865,996
========= =========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended March 31
----------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Net revenues...................................... $760,626 $797,611 $719,656
Cost of products sold............................. 445,201 429,020 395,098
-------- -------- --------
Gross profit...................................... 315,425 368,591 324,558
Cost and expenses:
Selling, informational, and administrative....... 261,550 207,375 188,030
Research and development......................... 24,169 24,837 23,914
-------- -------- --------
285,719 232,212 211,944
-------- -------- --------
Income from operations............................ 29,706 136,379 112,614
Interest expense.................................. (16,166) (10,736) (6,239)
Interest income and other......................... 3,372 1,553 980
-------- -------- --------
Income before income taxes........................ 16,912 127,196 107,355
Income taxes...................................... 6,427 42,342 41,859
-------- -------- --------
Net income........................................ $ 10,485 $ 84,854 $ 65,496
======== ======== ========
Net income per share -- basic..................... $ 0.16 $ 1.24 $ 0.96
======== ======== ========
Net income per share -- diluted................... $ 0.15 $ 1.20 $ 0.93
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended March 31
------------------------------
2000 1999 1998
-------- --------- ---------
<S> <C> <C> <C>
Operating activities
Net income.................................... $ 10,485 $ 84,854 $ 65,496
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................ 39,672 33,279 24,202
Deferred income taxes........................ 4,057 14,000 7,446
Other items.................................. 1,115 (1,252) (5,577)
Changes in operating assets and liabilities:
Accounts receivable......................... 24,566 (22,654) (31,945)
Inventories................................. (8,449) (12,998) (11,311)
Other assets................................ 6,994 (5,229) 368
Accounts payable and accruals............... (7,333) (25,541) (36,686)
-------- --------- ---------
Net cash provided by operating activities..... 71,107 64,459 11,993
Investing activities
Purchases of property, plant, equipment, and
patents...................................... (77,131) (77,286) (39,181)
Proceeds from sales of assets................. 43,084
Investment in businesses, net of cash
acquired..................................... (8,134) (41,457) (126,505)
Proceeds from sales of marketable securities.. 2,977
-------- --------- ---------
Net cash used in investing activities......... (85,265) (118,743) (119,625)
Financing activities
Payments on long-term obligations............. (8,884) (206,339) (4,512)
Borrowings under line of credit............... 55,000 275,000 110,000
Purchase of treasury shares................... (28,712) (17,697) (10,051)
Stock option and other equity transactions.... 8,340 10,166 9,250
-------- --------- ---------
Net cash provided by financing activities..... 25,744 61,130 104,687
Effect of exchange rate changes on cash and
cash equivalents............................. 210 (338) (459)
-------- --------- ---------
Increase (decrease) in cash and cash
equivalents.................................. 11,796 6,508 (3,404)
Cash and cash equivalents at beginning of
period....................................... 23,680 17,172 20,576
-------- --------- ---------
Cash and cash equivalents at end of period.... $ 35,476 $ 23,680 $ 17,172
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Shares Total
---------------- Retained Cumulative Shareholders
Number Amount Earnings Translation Equity
------ -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1997.. 67,969 $231,278 $ 69,513 $(6,075) $294,716
Net income................ 65,496 65,496
Foreign currency
translation adjustment
(including taxes of
$247).................... (459) (459)
--------
Comprehensive income...... 65,037
Stock options exercised... 652 6,584 6,584
Tax benefit of stock
options exercised........ 2,666 2,666
Treasury shares
purchased................ (600) (10,051) (10,051)
------ -------- -------- ------- --------
Balance at March 31,
1998..................... 68,021 230,477 135,009 (6,534) 358,952
Net income................ 84,854 84,854
Foreign currency
translation adjustment
(including taxes of
$207).................... (338) (338)
--------
Comprehensive income...... 84,516
Stock options exercised... 631 5,489 5,489
Other equity
transactions............. 4 109 109
Tax benefit of stock
options exercised........ 4,568 4,568
Treasury shares
purchased................ (700) (17,697) (17,697)
------ -------- -------- ------- --------
Balance at March 31,
1999..................... 67,956 222,946 219,863 (6,872) 435,937
Net income................ 10,485 10,485
Foreign currency
translation adjustment
(including taxes of
$393).................... (635) (635)
--------
Comprehensive income...... 9,850
Stock options exercised... 1,010 4,253 4,253
Tax benefit of stock
options exercised........ 4,232 4,232
Treasury shares
purchased................ (1,540) (28,712) (28,712)
Other equity
transactions............. 91 (4,466) (4,466)
------ -------- -------- ------- --------
Balance at March 31,
2000..................... 67,517 $198,253 $230,348 $(7,507) $421,094
====== ======== ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Years Ended March 31, 2000 and 1999
A. Accounting Policies
STERIS Corporation (the "Company" or "STERIS") develops, manufactures, and
markets infection prevention, contamination prevention, microbial reduction,
and surgical support systems, products, services, and technologies for health
care, scientific, research, food, and industrial Customers throughout the
world.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Intercompany accounts and transactions have
been eliminated upon consolidation. Certain reclassifications have been made
to the Company's prior year financial statements to agree with current year
classifications.
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful life of any long-lived
or intangible asset may warrant revision or that the remaining balance of the
asset may not be recoverable. When factors indicate that the long-lived assets
should be evaluated for possible impairment, the Company uses an estimate of
the related operation's cash flow from operations over the remaining life to
determine recoverability; the measurement of the impairment would be based on
a market valuation.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions in certain circumstances that affect the amounts
reported in the accompanying consolidated financial statements and notes.
Actual results could differ from these estimates.
The accounts of the Company's foreign subsidiaries are recorded in the
currency of the country in which they operate. All balance sheet accounts
except shareholders' equity are translated at current exchange rates, and
revenue and expense items are translated at rates of exchange prevailing
during the year. Gains and losses resulting from the translation of foreign
currency financial statements, which amounted to $7,507 and $6,872 as of March
31, 2000 and 1999, respectively, represent other comprehensive income and are
reflected in the cumulative translation adjustment component of shareholders'
equity.
Business Combinations
During the second quarter fiscal 2000, the Company completed two
acquisitions to extend the capabilities of STERIS's Scientific and Industrial
Group in areas targeted as future growth markets. The assets of Quality
Sterilization Services, a contract sterilization business located near
Minneapolis, Minnesota, were acquired to expand STERIS's network of contract
sterilization and microbial reduction services in North America. The
acquisition resulted in an increase in goodwill of $6,408. FoodLabs, Inc.,
based in Manhattan, Kansas, was also acquired. FoodLabs is a provider of
analytical, product development, and consulting services to the food and
agricultural industries, with a particular focus on food safety. These
acquisitions were accounted for as purchase transactions and did not have a
material effect on the operations of the Company.
During the third quarter fiscal 1999, the Company acquired Detach AB. Detach
AB, located in Sweden, possesses proprietary technology and produces
innovative systems for the Company's scientific and industrial marketplace.
These acquisitions were accounted for as purchase transactions and did not
have a material effect on the operations of the Company. In late September
1998, the Company completed the acquisition of Hausted Inc. for cash. Hausted
is a leading provider of mobile systems for surgical and diagnostic patient
positioning and transport. The acquisition resulted in an increase in goodwill
of $41,977.
20
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In September 1997, STERIS purchased the common shares of Isomedix Inc. in
exchange for cash of $134,102. Isomedix is a leading provider of contract
sterilization and microbial reduction services, with gamma irradiation,
ethylene oxide, and electron-beam processing facilities across North America.
The acquisition was accounted for using the purchase method of accounting and
resulted in an increase in goodwill of $53,376.
In July 1997, STERIS acquired the assets of Joslyn Sterilizer Corporation, a
designer and manufacturer of high quality, high performance sterile processing
systems based upon widely accepted steam and gas sterilization methodologies.
The acquisition was accounted for using the purchase method of accounting and
resulted in an increase in goodwill of $7,367.
Cash Equivalents and Supplemental Cash Flow Information
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Cash and cash
equivalents consisted primarily of interest-bearing savings accounts and
United States government securities.
Supplemental disclosure of cash flow information follows:
<TABLE>
<CAPTION>
Years Ended March 31
-----------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Cash paid during the year for:
Interest........................................... $17,280 $ 8,942 $ 5,885
Income taxes....................................... $ 9,114 $20,042 $27,193
</TABLE>
Revenues
The Company's net revenues include revenues earned on product sales and
related after-sales, third-party service contracts, and long-term construction
contracts. The Company recognizes product revenues upon shipment to a location
designated by the Customer. After-sales and third-party service contract
revenues are recognized upon completion of the work. Advance billings for
products or service work are recorded as deferred revenue until earned.
Revenue on long-term construction contracts is recognized under the cost-to-
cost type of percentage-of-completion method, resulting in revenue being
recorded as costs are incurred.
The Company performs periodic credit evaluations of its Customers' financial
condition and generally does not require collateral on sales. The Company
principally sells to health care, scientific, and industrial institutions and
companies with no single Customer accounting for more than two percent of
revenues during the year ended March 31, 2000.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101.
"Revenue Recognition", which explains how the SEC staff believes existing
revenue recognition rules should be applied. It is anticipated that the SEC
will issue SAB No. 101 interpretive guidance by the end of the second calendar
quarter of 2000. The Company is currently studying the provisions of SAB No.
101 and plans to utilize this interpretive guidance to determine if any change
is required to ensure compliance with this SAB.
B. Inventories
Inventories are stated at cost, which does not exceed market. The Company
uses the last-in, first-out (LIFO) and first-in, first-out (FIFO) cost
methods. Inventories utilizing LIFO represent approximately 59% and 57% of the
inventory at March 31, 2000 and 1999, respectively. Inventory costs include
material, labor, and overhead. If
21
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
the FIFO method of inventory costing had been used exclusively, inventories
would have been $10,552 and $11,025 higher than those reported at March 31,
2000 and 1999, respectively. Inventories were as follows:
<TABLE>
<CAPTION>
March 31
----------------
2000 1999
-------- -------
<S> <C> <C>
Raw material................................................ $ 29,346 $36,878
Work in process............................................. 24,743 19,585
Finished goods.............................................. 53,639 42,816
-------- -------
Total Inventories........................................... $107,728 $99,279
======== =======
</TABLE>
C. Property, Plant, and Equipment
Property, plant, and equipment are stated at cost, less accumulated
depreciation. Property, plant, and equipment costs include capitalized labor,
overhead, and interest costs. As a result of a capital improvements campaign
to add significant manufacturing assets at several locations, labor and
overhead capitalized in fiscal 2000 totaled $7,490 and $4,850 in fiscal 1999.
The Company provides for depreciation of the net carrying cost less
anticipated salvage value over the estimated remaining useful lives of
property, plant, and equipment, principally by using the straight-line method.
Depreciation of radioisotope is determined by use of the annual decay factor
inherent in the material, which is similar to the sum-of-the-years-digits
method. Depreciation expense was $32,865, $27,367, and $18,929 for the years
ended March 31, 2000, 1999, and 1998, respectively. Expenditures that increase
the value or productive capacity of assets, including information systems, are
capitalized. Capitalized internal costs associated with information systems
implementation amounted to $2,446 in fiscal 2000 and $1,263 in fiscal 1999.
Property, plant, and equipment consisted of the following:
<TABLE>
<CAPTION>
March 31
-----------------
2000 1999
-------- --------
<S> <C> <C>
Asset (asset lives)
Land and land improvements (12 years)..................... $ 21,422 $ 18,300
Buildings and leasehold improvements (7-50 years)......... 126,572 115,678
Machinery and equipment (3-15 years)...................... 239,786 195,191
Radioisotope (20 years)................................... 55,828 43,217
-------- --------
Total..................................................... 443,608 372,386
Less: accumulated depreciation............................ 138,603 111,105
-------- --------
Property, plant, and equipment, net....................... $305,005 $261,281
======== ========
</TABLE>
Rental expense for leases was approximately $11,052, $10,617, and $10,383
for the years ended March 31, 2000, 1999, and 1998, respectively. Operating
leases relate principally to warehouse and office space, service facilities,
vehicles, equipment, and communication systems. Future minimum annual rentals
payable under noncancelable leases in fiscal 2001, 2002, 2003, 2004, and 2005
and thereafter are $10,410, $8,981, $6,927, $4,425, $2,959, and $11,584,
respectively.
D. Intangible Assets
Costs incurred to obtain product technology rights, including patents, have
been capitalized and are being amortized over their estimated useful lives of
five to seventeen years using the straight-line method. The
22
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Company currently provides for the amortization of intangible assets,
including goodwill, over lives ranging from 17-40 years. Intangible assets
consisted of the following:
<TABLE>
<CAPTION>
March 31
-----------------
2000 1999
-------- --------
<S> <C> <C>
Assets (amortization period)
Goodwill, net of accumulated amortization of $29,866 and
$24,420, respectively (35-40 years)...................... $193,066 $196,831
Patents, trademarks, and other intangible assets, net of
accumulated amortization of $48,434 and $48,079,
respectively (17 years).................................. 11,273 11,420
-------- --------
Total..................................................... $204,339 $208,251
======== ========
</TABLE>
E. Financial Instruments
Long-term indebtedness was as follows:
<TABLE>
<CAPTION>
March 31
-----------------
2000 1999
-------- --------
<S> <C> <C>
Credit Facility............................................ $263,000 $215,000
Other debt................................................. 7,516 8,700
-------- --------
Total...................................................... 270,516 223,700
Less current portion....................................... 1,816 2,200
-------- --------
Long-term portion.......................................... $268,700 $221,500
======== ========
</TABLE>
As of March 31, 2000, STERIS maintained an unsecured credit facility of
$250,000 maturing on January 26, 2002. The Company also maintained a $150,000
unsecured 364 day facility maturing on January 25, 2001. The $400,000 could be
used for general corporate purposes and bore interest at either LIBOR plus
.325 to .700 percent, which amounted to 6.7 and 5.4 percent at March 31, 2000
and 1999, respectively, or KeyBank National Association's prime rate.
On June 19, 2000, STERIS entered into a $325,000 Revolving Credit Facility
(the "Revolving Credit Facility"), which replaced the prior credit facility.
The Revolving Credit Facility matures June 29, 2003 and provides financial
covenants and borrowing alternatives which are more appropriate for the
Company's strategic objectives. The Revolving Credit Facility may be used to
refinance existing indebtedness, as well as for general corporate purposes.
The Revolving Credit Facility will bear interest at LIBOR plus 1.25 to 2.25
percent or KeyBank National Association's prime rate. The Revolving Credit
Facility contains customary covenants which include maintenance of certain
financial ratios such as a fixed charge covenant and consolidated leverage
ratios. The Revolving Credit Facility also places restrictions on the
Company's ability to pay dividends. As of March 31, 2000, no dividend
distributions could be made under these provisions.
Other debt consisted mainly of industrial development revenue bonds which
bear interest at a variable rate based on the bank/marketing agent's demand
note index. These bond agreements contain various covenants relating to
minimum capitalization, net worth, and working capital. At March 31, 2000,
outstanding obligations under the industrial development revenue bonds were
$6,400, with a weighted average interest rate of 3.2 percent.
Amounts payable for borrowings in fiscal 2001, 2002, 2003, 2004, and 2005
and thereafter are $1,816, $700, $700, $263,700, and $2,900, respectively.
23
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
As of March 31, 2000 and 1999, the Company was contingently liable in the
amount of $20,770 and $21,066, respectively, under standby letters of credit
and guarantees. Approximately $12,300 of the totals at March 31, 2000 and 1999
relate to letters of credit required as security under the Company's self-
insured risk retention policies. The remaining balance in each year relates to
performance bonds on long-term contracts.
The recorded value of the Company's financial instruments, which includes
cash, cash equivalents and the revolving credit facility, approximates fair
value. Financial instruments which potentially subject the Company to
concentration of credit risk, consists principally of cash investments. The
Company invests its excess cash in high-quality securities placed with major
banks and financial institutions. The Company has established guidelines
relative to diversification and maturities to maintain safety and liquidity.
F. Accrued Expenses and Other
Accrued expenses and other consisted of the following:
<TABLE>
<CAPTION>
March 31
-----------------
2000 1999
-------- --------
<S> <C> <C>
Associate compensation................................... $ 33,903 $ 15,374
Self insured retention................................... 6,504 8,000
Taxes.................................................... 27,481 42,879
Warranty................................................. 4,460 5,490
Other.................................................... 30,364 35,763
-------- --------
Total.................................................... $102,712 $107,506
======== ========
</TABLE>
G. Income Taxes
The Company records the effect of income taxes using the liability method.
Income (loss) from continuing operations before income taxes was as follows:
<TABLE>
<CAPTION>
Years Ended March 31
-------------------------
2000 1999 1998
------- -------- --------
<S> <C> <C> <C>
United States operations.......................... $13,916 $112,889 $110,755
Non-United States operations...................... 2,996 14,307 (3,400)
------- -------- --------
$16,912 $127,196 $107,355
======= ======== ========
</TABLE>
The components of the provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
Years Ended March 31
------------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Current provision:
United States federal............................. $(2,020) $23,899 $27,211
United States state and local..................... 2,493 3,218 4,465
Non-United States................................. 1,898 3,176 2,742
------- ------- -------
Total current provision............................ 2,371 30,293 34,418
Deferred expense................................... 4,056 12,049 7,441
------- ------- -------
Total provision for income taxes................... $ 6,427 $42,342 $41,859
======= ======= =======
</TABLE>
24
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The total provision for income taxes can be reconciled to the tax computed
at the United States federal statutory rate as follows:
<TABLE>
<CAPTION>
Years Ended March 31
------------------------
2000 1999 1998
------ ------- -------
<S> <C> <C> <C>
Tax computed at the United States federal
statutory tax rate.............................. $5,919 $44,518 $37,574
Reduction of income tax accruals................. (2,081) (6,000)
State and local taxes, net of federal income tax
benefit......................................... 1,024 2,092 2,902
Amortization of excess cost over net assets
acquired........................................ 1,041 629 530
Difference in non-United States tax rates........ 526 1,046 532
All other, net................................... (2) 57 321
------ ------- -------
Total provision for income taxes................. $6,427 $42,342 $41,859
====== ======= =======
</TABLE>
The significant components of the deferred tax assets and liabilities
recorded in the accompanying balance sheets at March 31, 2000 and 1999, were
as follows:
<TABLE>
<CAPTION>
March 31
------------------
2000 1999
-------- --------
<S> <C> <C>
Deferred Tax Assets
Post-retirement benefit accrual........................ $ 16,869 $ 16,768
Net operating loss carryforwards....................... 940 1,929
Inventory.............................................. 1,566 1,559
Accrued expenses and other............................. 23,035 21,247
-------- --------
Gross deferred tax assets............................... 42,410 41,503
Valuation allowance..................................... (940) (1,929)
-------- --------
Total deferred tax assets............................... $ 41,470 $ 39,574
======== ========
Deferred Tax Liabilities
Plant and equipment.................................... $(21,905) $(16,669)
Intangibles............................................ (4,500) (3,236)
Other.................................................. (22) (569)
-------- --------
Total deferred tax (liabilities)........................ $(26,427) $(20,474)
======== ========
</TABLE>
For tax return purposes, certain subsidiaries, both United States and non-
United States, had operating loss carryforwards of $940 which expire at
various dates from 2001 through 2011. The valuation allowance applies to net
operating loss carryforwards that may expire before the Company can utilize
them. The net change in deferred tax assets related to carryforwards and the
valuation allowance for the year ended March 31, 2000 was a decrease of $989,
primarily due to the decrease in foreign operating loss carryforwards.
At March 31, 2000, undistributed earnings of non-United States subsidiaries
included in consolidated retained earnings amounted to $35,518. These earnings
are indefinitely reinvested in non-United States operations. Accordingly, no
provision has been made for withholding taxes related to such earnings, nor is
it practicable to determine the amount of this liability.
25
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
H. Benefit Plans
The following table sets forth the funded status and amounts recognized in
the accompanying consolidated balance sheets for the Company's defined benefit
plans:
<TABLE>
<CAPTION>
Other Post-
Pension Retirement
Benefits Benefits
---------------- ------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Benefit obligation
Balance at beginning of measurement
period.............................. $42,622 $41,638 $ 53,585 $ 47,704
Service cost......................... 968 1,081 487 399
Interest cost........................ 2,708 2,768 3,476 3,187
Actuarial (gains) loss............... (1,438) 202 3,869 5,689
Benefits paid........................ (2,384) (2,616) (3,971) (3,394)
Plan curtailments (gain)............. 0 (451) 0 0
Settlements.......................... (780) 0 0 0
Balance at end of measurement
period.............................. 41,696 42,622 57,446 53,585
Fair value of plan assets
Balance at beginning of measurement
period.............................. 45,286 43,966 0 0
Actual return on plan assets......... 4,512 4,044 0 0
Employer contribution................ 0 103 3,971 3,394
Benefits paid........................ (2,341) (2,575) (3,971) (3,394)
Settlement........................... (780) 0 0 0
------- ------- -------- --------
Balance at end of measurement
period.............................. 46,677 45,538 0 0
------- ------- -------- --------
Funded status........................ 4,981 2,916 (57,446) (53,585)
Unamortized transition amount........ (1,067) (1,180) 0 0
Unamortized prior service cost....... 2,761 3,052 (556) (752)
Unamortized (gain) loss.............. (8,036) (6,814) 9,100 5,725
------- ------- -------- --------
(Accrued) benefit cost............... $(1,361) $(2,026) $(48,902) $(48,612)
======= ======= ======== ========
</TABLE>
Net periodic cost of the Company's defined benefit plans includes the
following components:
<TABLE>
<CAPTION>
Other Post-
Retirement
Pension Benefits Benefits
------------------------- ---------------------
2000 1999 1998 2000 1999 1998
------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Service cost.............. $ 968 $ 1,081 $ 989 $ 487 $ 399 $ 399
Interest cost............. 2,708 2,768 2,701 3,476 3,187 3,529
Expected return on plan
assets................... (3,478) (3,423) (2,963) 0 0 0
Effect of settlement...... (131) 0 0 0 0 0
Net amortization and
deferral................. (731) (576) 351 297 (233) 0
------- ------- ------- ------ ------ ------
Net periodic (benefit)
cost..................... $ (664) $ (150) $ 1,078 $4,260 $3,353 $3,928
======= ======= ======= ====== ====== ======
</TABLE>
A weighted average discount rate of 7.0%, 6.75%, and 7.0% was used in
determining the actuarial present value of the projected benefit obligations
at March 31, 2000, 1999, and 1998, respectively. The expected long-term rates
of return on assets at the respective measurement dates were 8.0% at March 31,
2000, 1999, and 1998. Unrecognized gains and losses and the initial net
pension asset are amortized over a fifteen-year period.
Future benefit costs for other post-retirement benefit plans were estimated
assuming medical costs would increase at approximately a 9.0% annual rate
(6.5% in fiscal 1999 and 1998), decreasing to approximately a 5%
26
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
annual growth rate ratably over an eight-year period and then remaining at
that rate. A 1% change in the annual trend rate would have changed the
accumulated postretirement benefit obligation at March 31, 2000, by $5,400 and
changed the fiscal 2000 postretirement benefit expense by $428.
The Company's contributions to defined contribution plans were $3,818,
$3,231, and $2,936 for fiscal 2000, 1999, and 1998, respectively.
I. Non-recurring Transactions
Fiscal 2000 Charge
The Company completed a review of certain manufacturing and support
functions during the fourth quarter of fiscal 2000. The review of
manufacturing operations included an outside consultant's study and evaluation
of manufacturing practices at several manufacturing plants. As a result of the
review and study performed and the related plan to initiate improvements in
these and other functions, a special charge of $39,722 ($24,628 net of tax, or
$0.36 per share) was recorded in the fourth quarter. This charge primarily
related to plans for manufacturing consolidations, productivity improvements
in both manufacturing and support functions, restructuring of the
remanufactured equipment business, and associated workforce reductions. The
implementation of these actions will result in a reduction of approximately
200 Associates (employees) in the manufacturing and support functions
beginning in early fiscal 2001. Of the $39,722 charge, $24,808 was charged to
cost of sales and $14,914 was charged to selling, informational, and
administrative expenses in the consolidated statement of income.
The charge to cost of sales includes $19,349 for inventory write-downs and
disposals relating to the restructuring of the Company's remanufactured
equipment business as well as improvements to production flows and facility
restructurings to align with revised strategic plans. The charge to cost of
sales also includes $5,459 for closing the Company's sterility assurance
production operations in North Carolina, which will be consolidated into a
dedicated facility in Mentor, Ohio. Costs to close the facility include write-
downs in inventory, lease termination costs, severance, property abandonment
and other miscellaneous costs. The Company expects to complete the
consolidation by July 31, 2000.
The charge to selling, informational and administrative expenses includes
$10,373 related to plans for implementing specific improvements to
manufacturing and administrative support functions, primarily related to
severance costs. The remaining $4,540 of charges relates to accounts
receivable management initiatives including implementation of a new program to
enhance the collection of receivables and the write-off of certain aged
smaller balance accounts.
Fiscal 1998 Sale of Assets
During the second quarter of fiscal 1998, STERIS completed the sale of the
assets of its Management Services Division to General Electric Medical
Systems, a business of General Electric Company. The transaction did not
result in a material income statement effect. The transaction included
tangible and intangible assets relating to the business, and costs included
impairment of redundant assets and transaction related costs.
J. Contingencies
There are various pending lawsuits and claims arising out of the conduct of
STERIS's business. In the opinion of management, the ultimate outcome of these
lawsuits and claims will not have a material adverse effect on STERIS's
consolidated financial position or results of operations. STERIS presently
maintains product liability insurance coverage in amounts and with deductibles
that it believes are prudent.
27
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In December 1999, STERIS received a warning letter from the FDA in
connection with the FDA's inspection of STERIS's manufacturing facility in
Mentor, Ohio. Since the inspection and receipt of the warning letter, STERIS
has been working diligently to resolve the FDA's concerns. STERIS submitted a
timely formal response to the warning letter and has continued to communicate
with the FDA both in writing and orally with respect to this matter. The
Company will continue to cooperate with the FDA to reach a final resolution of
all concerns. Although no assurance can be given regarding further actions by
the FDA or the timing of any such final resolution, management believes this
matter will not have a material adverse effect on STERIS's financial
condition, results of operations, or cash flow.
K. Business Segment Information
The Company operates in a single business segment. The following is
information about the Company's operations by geographic area:
<TABLE>
<CAPTION>
Years Ended March 31
--------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Net revenues
United States................................... $633,295 $649,990 $582,644
Non-United States............................... 127,331 147,621 137,012
-------- -------- --------
Consolidated net revenues........................ $760,626 $797,611 $719,656
======== ======== ========
Long-lived assets
United States................................... $289,091 $245,447 $192,538
Non-United States............................... 21,025 18,901 15,773
-------- -------- --------
Consolidated long-lived assets................... $310,116 $264,348 $208,311
======== ======== ========
</TABLE>
Long-lived assets are those assets that are identified with the operations
in each geographic area. Revenues are based on the location of these
operations and their Customers. Revenues to a single Customer did not
aggregate 2 percent or more of total revenues. Revenues by principal market
are as follows:
<TABLE>
<CAPTION>
Years Ended March 31
--------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Health Care...................................... $557,686 $597,146 $547,809
Scientific and Industrial........................ 202,940 200,465 171,847
-------- -------- --------
Total............................................ $760,626 $797,611 $719,656
======== ======== ========
</TABLE>
L. Common Shares
Basic earnings per share is based on average Common Shares outstanding.
Diluted earnings per share includes the dilutive effect of stock options.
Incremental Common Share equivalents are calculated for each measurement using
the treasury stock method. The following is a summary of Common Shares and
Common Share equivalents outstanding used in the calculations of earnings per
share:
<TABLE>
<CAPTION>
Years Ended March 31
--------------------
(in thousands)
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Weighted average Common Shares outstanding -- basic... 67,489 68,200 67,898
Dilutive effect of stock options...................... 1,078 2,392 2,326
------ ------ ------
Weighted average Common Shares and equivalents --
diluted............................................. 68,567 70,592 70,224
====== ====== ======
</TABLE>
28
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The Company has granted nonqualified stock options to certain Associates to
purchase the Company's Common Shares at the market price on the date of grant.
Stock options granted become exercisable to the extent of one-fourth of the
optioned shares for each full year of employment following the date of grant
and expire 10 years after the date of grant, or earlier if an option holder
ceases to be employed by the Company. The Company accounts for stock based
compensation under the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" and accordingly recognizes no
compensation expense when the exercise price equals the market price of the
stock on the date of grant.
Following is a summary of option share information.
<TABLE>
<CAPTION>
Beginning
of year Granted Exercised Canceled End of year
--------- --------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Fiscal 2000
Option Shares............ 6,573,104 1,494,920 (1,010,273) (443,403) 6,614,348
Average Price............ $13.07 $11.49 $4.21 $25.15 $13.25
Fair Value............... $6.17
Fiscal 1999
Option Shares............ 6,228,596 1,162,604 (630,937) (187,159) 6,573,104
Average Price............ $9.52 $30.40 $8.70 $16.96 $13.07
Fair Value............... $14.24
Fiscal 1998
Option Shares............ 5,922,772 1,196,404 (652,242) (238,338) 6,228,596
Average Price............ $8.31 $19.06 $10.10 $25.47 $9.52
Fair Value............... $9.14
</TABLE>
An executive officer of the Company has an outstanding balance on a loan
originally made during fiscal year 1997 in connection with the exercise of
373,000 options by the executive officer. As of March 31, 2000 and 1999, the
outstanding balance was $2,644 and $2,501, respectively. The loan is evidenced
by a full recourse promissory note which bears interest at the rate of 5.7%
per annum, and is repayable in a lump sum on or before February 28, 2002. The
executive officer subsequently entered into an employment agreement with the
Company which provides, among other things, that if the executive officer
observes all obligations thereunder through February 28, 2002, the loan and
all accrued interest thereon will be forgiven by the Company. In addition, the
employment agreement provides the executive officer with the right to put up
to 600,000 of the Company's common shares to the Company at any time between
July 21, 2001 and February 28, 2002 at a purchase price of $15.00 per share in
cash. Compensation expense of $2,850 was recognized based on market value as
of March 31, 2000.
Shares available for future grants were 3,762,146 at March 31, 2000. At
March 31, 2000, the range and weighted average per share exercise prices of
options outstanding and exercisable, and the weighted average remaining
contractual life (years), was as follows:
<TABLE>
<CAPTION>
Outstanding Exercisable
--------------------------- ------------------
Weighted Weighted
Average Contract Average
Option Exercise Life Option Exercise
Range of Exercise Prices Shares Price (Years) Shares Price
------------------------ --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$ 0.48 - $ 5.49............. 1,668,015 $ 2.80 2.4 1,668,015 $ 2.80
$ 5.50 - $10.99............. 1,640,638 9.46 8.5 408,634 8.78
$11.00 - $17.99............. 1,359,578 13.56 6.5 997,078 13.57
$18.00 - $30.66............. 1,946,117 25.18 7.6 905,116 23.61
--------- ------ --- --------- ------
6,614,348 $13.25 6.3 3,978,843 $10.85
========= ====== === ========= ======
</TABLE>
29
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
At March 31, 1999, options with an average exercise price of $7.46 were
exercisable on 4,107,099 shares; at March 31, 1998, options with an average
exercise price of $5.90 were exercisable on 3,761,000 shares.
Had the compensation cost for the stock options granted in fiscal 2000,
1999, and 1998 been determined based on the value at the grant date consistent
with the Financial Accounting Standards Board's fair value method, the
Company's net earnings and earnings per share would have been reduced by
$4,629 ($.07 per share) in fiscal 2000, $5,104 ($.07 per share) in fiscal
1999, and $3,197 ($.05 per share) in fiscal 1998. Fair value was estimated at
the date of grant using the Black-Scholes option pricing model and the
following weighted-average assumptions for fiscal 2000, 1999, and 1998: risk-
free interest rate of 6.1%; dividend yield of 0%; expected volatility of 45%;
and an expected option life of 5 years.
On January 30, 1997, the Company announced that its Board of Directors had
authorized the periodic repurchase of up to six million STERIS Common Shares
in the open market. As of March 31, 2000, the Company had repurchased
3,740,100 STERIS Common Shares.
Under a Shareholder Rights Agreement, one Common Share purchase Right is
attached to each outstanding Common Share. Each Right is exercisable only if a
person or group acquires 15% or more of the outstanding Common Shares. If the
Rights become exercisable, each Right will entitle the holder (other than the
acquiring person or group) to acquire one Common Share for an exercise price
of $.50 per share. The Rights will expire on November 7, 2006, unless redeemed
earlier at one half cent per Right.
M. Quarterly Data (Unaudited)
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------------
March 31 December 31 September 30 June 30
-------- ----------- ------------ --------
<S> <C> <C> <C> <C>
Fiscal 2000
Net revenues..................... $190,092 $195,119 $198,602 $176,813
Gross profit..................... 55,731 87,081 90,601 82,012
Percentage of revenues........... 29% 45% 46% 46%
Net income (loss)................ $(24,193) $ 10,935 $ 14,408 $ 9,335
======== ======== ======== ========
Net income (loss) per share --
basic.......................... $ (0.36) $ 0.16 $ 0.21 $ 0.14
======== ======== ======== ========
Net income (loss) per share --
diluted........................ $ (0.36) $ 0.16 $ 0.21 $ 0.14
======== ======== ======== ========
Fiscal 1999
Net revenues..................... $226,917 $205,794 $191,125 $173,775
Gross profit..................... 101,239 96,534 89,504 81,314
Percentage of revenues........... 45% 47% 47% 47%
Net income....................... $ 28,763 $ 22,975 $ 18,771 $ 14,345
======== ======== ======== ========
Net income per share -- basic.... $ 0.42 $ 0.34 $ 0.27 $ 0.21
======== ======== ======== ========
Net income per share -- diluted.. $ 0.41 $ 0.33 $ 0.27 $ 0.20
======== ======== ======== ========
</TABLE>
Refer to Note I regarding a fourth-quarter fiscal 2000 charge.
Refer to Note G regarding a reduction of income tax accruals.
30
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ---------------------------- --------- -------- -------- ---------- ----------
Additions
-----------------
Charges
to Costs Charges Balance at
Beginning and to Other Deductions End of
Description of Period Expenses Accounts (1) Period
----------- --------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 2000
Deducted from asset
accounts:
Allowance for doubtful
accounts.................. $6,000 $3,034 $ 0 $2,987 $6,047
====== ====== ==== ====== ======
Year ended March 31, 1999
Deducted from asset
accounts:
Allowance for doubtful
accounts.................. $6,780 $ 379 $500 $1,659 $6,000
====== ====== ==== ====== ======
Year ended March 31, 1998
Deducted from asset
accounts:
Allowance for doubtful
accounts.................. $3,810 $3,561 $ 0 $ 591 $6,780
====== ====== ==== ====== ======
</TABLE>
- --------
(1) Uncollectible accounts written off, net of recoveries.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company incorporates herein by reference the information appearing under
the captions "Board of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" of the Company's definitive Proxy Statement to be filed
with the Securities and Exchange Commission on or about June 22, 2000.
Executive officers of the Company serve for a term of one year from the date
of election to the next organizational meeting of the Board of Directors and
until their respective successors are elected and qualified, except in the
case of death, resignation, or removal. Information concerning executive
officers of the Company is contained in Part I of this report under the
caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The Company incorporates herein by reference the information appearing under
the caption "Compensation of Executive Officers" of the Company's definitive
Proxy Statement to be filed with the Securities and Exchange Commission on or
about June 22, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company incorporates herein by reference the information appearing under
the caption "Ownership of Voting Securities" of the Company's definitive Proxy
Statement to be filed with the Securities and Exchange Commission on or about
June 22, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company incorporates herein by reference the information appearing under
the caption "Compensation of Executive Officers" of the Company's definitive
Proxy Statement to be filed with the Securities and Exchange Commission on or
about June 22, 2000.
31
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
LIST OF CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
(a) (1) The following consolidated financial statements of STERIS
Corporation and subsidiaries are included in Item 8:
Consolidated Balance Sheets -- March 31, 2000 and 1999.
Consolidated Statements of Income -- Years ended March 31, 2000, 1999,
and 1998.
Consolidated Statements of Cash Flows -- Years ended March 31, 2000,
1999, and 1998.
Consolidated Statements of Shareholders' Equity -- Years ended March
31, 2000, 1999, and 1998.
Notes to Consolidated Financial Statements -- Years Ended March 31,
2000 and 1999.
(a) (2) The following consolidated financial statement schedule of STERIS
Corporation and subsidiaries is included in Item 8:
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore, have been
omitted.
(a) (3) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
3.1 1992 Amended Articles of Incorporation of STERIS Corporation, as
amended on May 14, 1996, November 6, 1996, and August 6, 1998.
3.2 1992 Amended Regulations of STERIS Corporation (filed as Exhibit 3.2
to Form 10-K filed for the fiscal year ended March 31, 1998, and
incorporated herein by reference).
4.1 Specimen Form of Common Stock Certificate.
4.2 Amended and Restated Rights Agreement, dated as of January 21, 1999,
between STERIS Corporation and National City Bank, as successor Rights
Agent (filed as Exhibit 4.2 to the Registration Statement on Form 8-A
filed April 16, 1999, and incorporated herein by reference).
10.1 Amended Non-Qualified Stock Option Plan (filed as Exhibit 10.4 to
Amendment No. 1 to the Registration Statement on Form S-1 filed April
23, 1992, and incorporated herein by reference).*
10.2 STERIS Corporation 1994 Equity Compensation Plan (filed as Exhibit 99
to the Registration Statement on Form S-8 filed April 21, 1995, and
incorporated herein by reference).*
10.3 STERIS Corporation 1994 Nonemployee Directors Equity Compensation Plan
(filed as Exhibit 10.3 to Form 10-K filed for the fiscal year ended
March 31, 1997, and incorporated herein by reference).*
10.4 Amsco International, Inc. Stock Option Plan (incorporated by reference
to Exhibit 4.1 to the Registration Statement of Amsco International,
Inc. on Form S-8, Registration No. 33-79566, filed on June 2, 1994).*
10.5 Form of grant of Incentive Stock Option under Amsco International,
Inc. Stock Option Plan (filed as Exhibit 10.6 to Form 10-K filed for
the fiscal year ended March 31, 1997, and incorporated herein by
reference).*
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.6 Form of grant of Non-Qualified Stock Option under the Amsco
International, Inc. Stock Option Plan (filed as Exhibit 10.7 to Form
10-K filed for the fiscal year ended March 31, 1997, and incorporated
herein by reference).*
10.7 STERIS Corporation 1997 Stock Option Plan (filed as Exhibit 10.14 to
Form 10-K filed for the fiscal year ended March 31, 1998, and
incorporated herein by reference).*
10.8 STERIS Corporation 1998 Long-Term Incentive Stock Plan (filed as
Exhibit 10.8 to Form 10-K for the fiscal year ended March 31, 1999,
and incorporated herein by reference).*
10.9 Credit Agreement, dated January 26, 1999, among STERIS Corporation,
various financial institutions and KeyBank National Association, as
Agent (filed as Exhibit 10.1 to Form 10-Q filed for the quarter ended
December 31, 1998, and incorporated herein by reference).
10.10 First Amendment Agreement, dated January 25, 2000, among STERIS
Corporation, various financial institutions and KeyBank National
Association, as Agent (filed as Exhibit 10.1 to Form 10-Q filed for
the quarter ended December 31, 1999, and incorporated herein by
reference).
10.11 Assignment and Acceptance Agreement, dated January 24, 2000, between
The Bank of New York, as Assignor, and KeyBank National Association,
as Assignee (filed as Exhibit 10.2 to Form 10-Q filed for the quarter
ended December 31, 1999, and incorporated herein by reference).
10.12 Tranche B Note, dated January 24, 2000, between STERIS Corporation and
KeyBank National Association (filed as Exhibit 10.3 to Form 10-Q filed
for the quarter ended December 31, 1999, and incorporated herein by
reference).
10.13 Management Incentive Compensation Plan FY 2000.*
10.14 Management Incentive Compensation Plan (first effective in fiscal year
2001).*
10.15 Senior Executive Management Incentive Compensation Plan (filed as
Exhibit 10.11 to Form 10-K for the fiscal year ended March 31, 1999,
and incorporated herein by reference).*
10.16 Promissory Note (filed as Exhibit 10.12 to Form 10-K filed for the
fiscal year ended March 31, 1998, and incorporated herein by
reference).
10.17 Change of Control Agreement between STERIS Corporation and Mr. Sanford
(filed as Exhibit 10.1 to Form 10-Q filed for the quarter ended June
30, 1999, and incorporated herein by reference).*
10.18 Change of Control Agreement between STERIS Corporation and Mr.
Vinney.*
10.19 Form of Change of Control Agreement between STERIS Corporation and the
executive officers of STERIS Corporation other than Messrs. Sanford
and Vinney (filed as Exhibit 10.2 to Form 10-Q filed for the quarter
ended June 30, 1999, and incorporated herein by reference).*
10.20 Employment Agreement between STERIS Corporation and Mr. Sanford.*
10.21 Employment Agreement between STERIS Corporation and Mr. Vinney.*
10.22 Letter Agreement between STERIS Corporation and Mr. Keresman.*
10.23 Letter Agreement between STERIS Corporation and Mr. Magulski.*
10.24 Credit Agreement, dated June 19, 2000, among STERIS Corporation,
various financial institutions and KeyBank National Association, as
Agent.
21.1 Subsidiaries of STERIS Corporation.
23.1 Consent of Independent Auditors.
24.1 Power of Attorney.
27.1 Financial Data Schedules.
</TABLE>
- --------
* A management contract or compensatory plan or arrangement required to be
filed as an exhibit hereto.
33
<PAGE>
STERIS or its subsidiaries are parties to several indentures relating to
long-term debt instruments, which, individually or in the aggregate, do not
exceed 10% of the total assets of STERIS and its subsidiaries on a
consolidated basis. STERIS will furnish a copy of any such indenture to the
Securities and Exchange Commission upon request.
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed by STERIS during the fourth
quarter of fiscal 2000.
(c) Exhibits
The response to this portion of item 14 is submitted as a separate section
of this report.
(d) Financial Statement schedules
The response to this portion of item 14 is submitted as a separate section
of this report.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 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, on the date
indicated.
STERIS Corporation
(Registrant)
/s/ Laurie Brlas
_____________________________________
Laurie Brlas
Senior Vice President and
Chief Financial Officer
June 22, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
BILL R. SANFORD, Chairman of the Board of Directors and Chief Executive
Officer; LES C. VINNEY, President, Chief Operating Officer, and Director;
LAURIE BRLAS, Senior Vice President and Chief Financial Officer; RAYMOND A.
LANCASTER, Director; J.B. RICHEY, Director; JERRY E. ROBERTSON, Director;
FRANK E. SAMUEL, JR., Director; and LOYAL W. WILSON, Director.
STERIS Corporation
(Registrant)
/s/ David C. Dvorak
_____________________________________
David C. Dvorak
Attorney-in-Fact
June 22, 2000
35
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>1992 AMENDED ARTICLES OF INCORPORATION OF STERIS
<TEXT>
<PAGE>
EXHIBIT 3.1 1992 Amended Articles of Incorporation of Steris Corporation (as
further amended on May 14, 1996, November 6, 1996, and August 6, 1998)
FIRST. The name of the Corporation is Steris Corporation.
SECOND. The place in the State of Ohio where the principal office
of the Corporation is located in the City of Mentor, in Lake County.
THIRD. The purpose or purposes for which the Corporation is
formed are to engage in any lawful act or activity for which corporations may be
formed under Chapter 1701 of the Ohio Revised Code.
FOURTH. The authorized number of shares of the Corporation is 303
million, of which 300 million shall be Common Shares, without par value (the
"Common Shares"), and 3 million shall be Serial Preferred Shares, without par
value (the "Serial Preferred Shares").
EXPRESS TERMS OF THE SERIAL PREFERRED SHARES
SECTION 1. Series.
------
The Serial Preferred Shares may be issued from time to time in
series. All Serial Preferred Shares shall be of equal rank and the express terms
thereof shall be identical, except in respect of the terms that may be fixed by
the Board of Directors as hereinafter provided, and each share of each series
shall be identical with all other shares of such series, except that in the case
of series on which dividends are cumulative the dates from which dividends are
cumulative may vary to reflect differences in the dates of issue. Subject to the
provisions of Sections 2 through 7, inclusive, of these Express Terms of Serial
Preferred Shares, which shall apply to all Serial Preferred Shares, the Board of
Directors is hereby authorized to cause Serial Preferred Shares to be issued in
one or more series and with respect to each such series to fix:
(a) The designation of the series, which may be by distinguishing
number, letter or title.
(b) The authorized number of shares of the series, which number the
Board of Directors may, except to the extent otherwise provided in the
creation of the series, from time to time, increase or decrease, but not
below the number of shares thereof then outstanding.
(c) The dividend rate or rates (which may be fixed or adjustable) of
the shares of the series.
(d) The dates on which dividends, if declared, shall be payable, and
in the case of series on which dividends are cumulative, the dates from
which dividends shall be cumulative.
<PAGE>
(e) The redemption rights and price or prices, if any, for shares of
the series.
(f) The amount, terms, conditions and manner of operation of any
retirement or sinking fund to be provided for the purchase or redemption of
shares of the series.
(g) The amounts payable on shares of the series in the event of any
liquidation, dissolution or winding up of the affairs of the Corporation.
(h) Whether the shares of the series shall be convertible into Common
Shares or shares of any other series or class, and, if so, the
specification of such other class or series, the conversion price or prices
or rate or rates, any adjustment thereof, and all other terms and
conditions upon which such conversion may be made.
(i) The restrictions, if any, upon the issue of any additional shares
of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time
amendments to these articles of incorporation fixing, with respect to each
series, the matters described in Clauses (a) through (i), inclusive, of this
Section 1.
SECTION 2. Dividends.
---------
(a) The holders of Serial Preferred Shares of each series, in
preference to the holders of Common Shares and of any other class of shares
ranking junior to the Serial Preferred Shares, shall be entitled to receive out
of any funds legally available and when and as declared by the Board of
Directors dividends in cash at the rate for such series fixed in accordance with
the provisions of Section 1 of these Express Terms of Serial Preferred Shares
and no more, payable on the dividend payment dates fixed for such series. Such
dividends shall be cumulative, in the case of shares of a series on which
dividends are cumulative, from and after the date or dates fixed with respect to
such series. No dividend shall be paid upon or declared and set apart for any
series of the Serial Preferred Shares for any current dividend period unless:
(i) as to each series of Serial Preferred Shares entitled to
cumulative dividends, and any other class of shares entitled to cumulative
dividends, or series thereof, dividends for all past dividend periods shall
have been paid or shall have been declared and a sum sufficient for the
payment thereof set apart; and
(ii) as to all series of Serial Preferred Shares, and any other class
of shares, or series thereof, ranking on a parity with the Serial Preferred
Shares, dividends for the current dividend period shall have been paid or
be or have been declared and a sum sufficient for the payment thereof set
apart ratably in accordance with the amounts which would be payable as
dividends on those shares for the current dividend period if all dividends
for the current period were declared and paid in full.
<PAGE>
No dividend in respect of past dividend periods shall be paid upon or declared
and set apart for payment for any series of the Serial Preferred Shares entitled
to cumulative dividends unless there shall be or have been declared and set
apart for payment on all outstanding series of Serial Preferred Shares entitled
to cumulative dividends, and any other class of shares entitled to cumulative
dividends, or series thereof, ranking on a parity with the Serial Preferred
Shares, dividends for past dividend periods ratably in accordance with the
amounts which would be payable on those shares entitled to cumulative dividends
if all dividends due for all past dividend periods were declared and paid in
full.
(b) So long as any Serial Preferred Shares shall be outstanding, no
dividend, except a dividend payable in Common Shares or other shares ranking
junior to the Serial Preferred Shares, shall be paid or declared or any
distribution be made, except as aforesaid, on the Common Shares or any other
shares ranking junior to the Serial Preferred Shares, nor shall any Common
Shares or any other shares ranking junior to the Serial Preferred Shares, be
purchased, retired or otherwise acquired by the Corporation or any sinking fund
payment with respect to any other shares of the Corporation be made (except out
of the proceeds of the sale of Common Shares or any other shares ranking junior
to the Serial Preferred Shares received by the Corporation on or subsequent to
the date on which Serial Preferred Shares are first issued) unless, in each
case:
(i) all dividends as to all series of Serial Preferred Shares
entitled to cumulative dividends for past dividend periods shall have been
declared and paid or a sum sufficient for payment thereof set apart;
(ii) all dividends as to all series of Serial Preferred Shares for
the current dividend period shall have been declared and paid or a sum
sufficient for payment thereof set apart; and
(iii) there shall be no default with respect to the redemption of
Serial Preferred Shares of any series from, and no default with respect to
any required payment into, any sinking fund provided for shares of such
series in accordance with the provisions of Section 1 of these Express
Terms of Serial Preferred Shares.
SECTION 3. Redemption.
----------
(a) Subject to the express terms of each series of Serial
Preferred Shares, the Corporation may from time to time redeem all or any part
of the Serial Preferred Shares of any series at the time outstanding which is
redeemable (i) at the option of the Board of Directors at the applicable
redemption price for such series fixed in accordance with the provisions of
Section 1 of these Express Terms of Serial Preferred Shares, or (ii) in
fulfillment of the requirements of any sinking fund provided for shares of such
series at the applicable sinking fund redemption price fixed in accordance with
the provisions of Section 1 of these Express Terms of Serial Preferred Shares,
together in each case with (1) all then unpaid dividends upon such shares
payable on all dividend payment dates for such series occurring on or prior to
the redemption date, plus (2) if the redemption date is not a dividend payment
date for such series, a proportionate dividend, based upon the number of elapsed
days, for the period from the day following the most recent such dividend
payment date through the redemption date.
<PAGE>
(b) Notice of every such redemption shall be mailed, postage prepaid,
to the holders of record of the Serial Preferred Shares to be redeemed at their
respective addresses then appearing on the books of the Corporation, not less
than 30 days nor more than 60 days prior to the date fixed for such redemption.
At any time after notice has been given as above provided and before the date of
redemption specified in such notice, the Corporation may deposit the aggregate
redemption price of the Serial Preferred Shares to be redeemed, together with an
amount equal to the aggregate amount of the dividends payable upon such
redemption, with any bank or trust company in Cleveland, Ohio or New York, New
York having capital, surplus and undivided profits aggregating at least of more
than $50,000,000, named in such notice, and direct that such deposited amount be
paid to the respective holders of the Serial Preferred Shares so to be redeemed
upon surrender of the stock certificate or certificates held by such holders.
After the mailing of such notice and the making of such deposit of money such
holders shall cease to be shareholders with respect to such shares and shall
have no interest in or claim against the Corporation with respect to such
shares, except only the right to receive such money from such bank or trust
company without interest or to exercise, before the redemption date, any
unexpired privileges of conversion.
(c) In the event less than all of the outstanding shares of any
series of Serial Preferred Shares are to be redeemed, the Corporation shall
select pro rata or by lot the shares so to be redeemed in such manner as shall
be prescribed by the Board of Directors.
(d) If the holders of Serial Preferred Shares which shall have been
called for redemption shall not, within six years after such deposit, claim the
amount deposited for the redemption thereof, any such bank or trust company
shall, upon demand, pay over to the Corporation such unclaimed amounts and
thereupon such bank and the Corporation shall be relieved of all responsibility
in respect thereof and to such holders.
(e) Any Serial Preferred Shares (i) redeemed by the Corporation
pursuant to the provisions of this Section 3, (ii) purchased and delivered in
satisfaction of any sinking fund requirements provided for shares of any series
of Serial Preferred Shares, (iii) converted in accordance with the express terms
of any such series, or (iv) otherwise acquired by the Corporation, shall resume
the status of authorized and unissued Serial Preferred Shares without serial
designation.
SECTION 4. Liquidation.
-----------
(a) The holders of Serial Preferred Shares of any series shall, in
case of liquidation, dissolution or winding up of the affairs of the
Corporation, be entitled to receive in full out of the assets of the
Corporation, including its capital, before any amount shall be paid or
distributed among the holders of Common Shares or any other shares ranking
junior to the Serial Preferred Shares, the amounts fixed with respect to shares
of such series in accordance with Section 1 of these Express Terms of Serial
Preferred Shares, plus an amount equal to (i) all then unpaid dividends upon
such shares payable on all dividend payment dates for such series occurring on
or prior to the date of payment of the amount due pursuant to such liquidation,
dissolution or winding up, plus (ii) if such date is not a dividend payment date
for such series, a proportionate dividend, based on the number of elapsed days,
for the period from the day following the most recent such dividend payment date
through such date of payment of the amount due pursuant to such liquidation,
dissolution or winding
<PAGE>
up. In case the net assets of the Corporation legally available therefor are
insufficient to permit the payment upon all outstanding Serial Preferred Shares
of the full preferential amount to which they are respectively entitled, then
such assets shall be distributed ratably upon outstanding Serial Preferred
Shares and any other class of shares, or series thereof, on a parity with the
Serial Preferred Shares in proportion to the full preferential amount to which
each such share is entitled.
After payment to holders of Serial Preferred Shares of the full
preferential amounts as aforesaid, holders of Serial Preferred Shares as such
shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation with or
into any other corporation, or the merger of any other corporation into it, or
the sale, lease, or conveyance of all or substantially all the property or
business of the Corporation shall not be deemed to be a dissolution, liquidation
or winding up for the purposes of this Section 4.
SECTION 5. Voting Rights.
-------------
(a) The holders of Serial Preferred Shares shall be entitled to one
vote for each Serial Preferred Share held by them, respectively, on each matter
properly submitted to shareholders for their vote, consent, waiver, release or
other action; and, except as otherwise provided in this Section 5 or required by
law, the holders of Serial Preferred Shares and holders of Common Shares shall
vote together as one class on all matters.
(b) The affirmative vote or consent of the holders of at least a
majority of the then outstanding Serial Preferred Shares, given in person or by
proxy, either in writing or at a meeting called for the purpose at which the
holders of Serial Preferred Shares shall vote separately as a class, shall be
necessary to effect any one or more of the following (but so far as the holders
of Serial Preferred Shares are concerned, such action may be effected with such
vote or consent):
(i) Any amendment, alteration or repeal of any of the provisions of
these articles of incorporation or the regulations of the Corporation which
would be substantially prejudicial to the voting powers, rights or
preferences of the holders of Serial Preferred Shares; provided, however,
that for the purpose of this clause (i) only, neither the amendment of
these articles of incorporation to authorize or to increase the authorized
or outstanding number of shares of any class ranking junior to the Serial
Preferred Shares, nor the amendment of the regulations so as to change the
number of directors of the Corporation shall be deemed to be substantially
prejudicial to the voting powers, rights or preferences of the holders of
Serial Preferred Shares; and provided further that if such amendment,
alteration or repeal would be substantially prejudicial to the rights or
preferences of one or more but not all then outstanding series of Serial
Preferred Shares, only the affirmative vote or consent of the holders of at
least a majority of the then outstanding shares of the series so affected
shall be required;
<PAGE>
(ii) The authorization of, or the increase in the authorized number
of, any shares of any class ranking prior to or on a parity with the Serial
Preferred Shares;
(iii) The purchase or redemption for sinking fund purposes or
otherwise of less than all of the then outstanding Serial Preferred Shares
except in accordance with a purchase offer made to all holders of record of
Serial Preferred Shares, unless all dividends on all Serial Preferred
Shares then outstanding for all previous dividend periods shall have been
declared and paid or funds therefor set apart and all accrued sinking fund
obligations applicable thereto shall have been complied with; or
(iv) An increase in the authorized number of Serial Preferred
Shares.
SECTION 6. Preemptive Rights.
-----------------
No holder of Serial Preferred Shares shall be entitled as such
as a matter of right to subscribe for or purchase any part of any issue of
shares of the Corporation, of any class whatsoever, or any part of any issue of
securities convertible into shares of the Corporation, of any class whatsoever,
and whether issued for cash, property, services or otherwise.
SECTION 7. Definitions.
-----------
For the purposes of these Express Terms of Serial Preferred
Shares:
(a) Whenever reference is made to shares "ranking prior to the Serial
Preferred Shares," such reference shall mean and include all shares of the
Corporation in respect of which the rights of the holders thereof either as to
the payment of dividends or as to distribution in the event of a liquidation,
dissolution or winding up of the Corporation are given preference over the
rights of the holders of Serial Preferred Shares.
(b) Whenever reference is made to shares "on a parity with the Serial
Preferred Shares," such reference shall mean and include all shares of the
Corporation in respect of which the rights of the holders thereof as to the
payment of dividends or as to distributions in the event of a liquidation,
dissolution or winding up of the Corporation rank on an equality with the rights
of the holders of Serial Preferred Shares.
(c) Whenever reference is made to shares "ranking junior to the
Serial Preferred Shares," such reference shall mean and include all shares of
the Corporation in respect of which the rights of the holders thereof as to the
payment of dividends and as to distributions in the event of a liquidation,
dissolution or winding up of the Corporation are junior or subordinate to the
rights of the holders of Serial Preferred Shares.
<PAGE>
SECTION 8. Series A Preferred Shares.
-------------------------
(a) Of the 3,000,000 Serial Preferred Shares without par
value, 1,000,000 shall be Series A Preferred Shares. Series A Preferred Shares
may be issued in fractions of a share that shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and have the benefit of all
other rights of holders of Series A Preferred Shares. The express terms of
Series A Preferred Shares, in addition to those set forth in Sections 1 through
7 of this Article Fourth, shall be as hereinafter set forth in this Section 8.
(b) The holders of Series A Preferred Shares shall be entitled
to receive, out of any funds legally available and when and as declared by the
Board of Directors, dividends and other distributions of the same kind as, but
at a rate equal to one hundred (100) times the amount per share of, the
dividends or other distributions received by the holders of Common Shares,
subject to the provision for adjustment hereinafter set forth. The record date
and payment date of the dividends and other distributions payable to the holders
of the Series A Preferred Shares shall be the same as the record date and the
payment date of the dividends and other distributions payable to the holders of
the Common Shares. Dividends on the Series A Preferred Shares shall not accrue
or be cumulative. In the event the Corporation at any time declares or pays any
dividend on the Common Shares payable in Common Shares, or effects a subdivision
or combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in Common Shares)
into a greater or lesser number of Common Shares, then in each such case the
amount of dividends payable to holders of the Series A Preferred Shares under
this paragraph (b) shall be adjusted by multiplying the amount to which such
holders were entitled immediately prior to such event by a fraction, the
numerator of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares
outstanding immediately prior to such event.
(c) The outstanding Series A Preferred Shares shall not be
redeemable.
(d) The holders of Series A Preferred Shares shall, in case of
liquidation, dissolution, or winding up of the affairs of the Corporation, be
entitled to receive in full, out of the assets of the Corporation, including its
capital, an amount equal to one hundred (100) times the amount to be distributed
per share to holders of Common Shares, subject to the provision for adjustment
hereinafter set forth. In the event the Corporation at any time declares or pays
any dividend on the Common Shares payable in Common Shares, or effects a
subdivision or combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in Common Shares)
into a greater or lesser number of Common Shares, then in each such case the
amount to be distributed to holders of the Series A Preferred Shares under this
paragraph (d) shall be adjusted by multiplying amount to which such holders were
entitled immediately prior to such event by a fraction, the numerator of which
is the number of Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares outstanding immediately
prior to such event. Except as set forth above, the holders of Series A
Preferred Shares shall have the same rights and shall be treated in the same
manner with respect to any liquidation, dissolution or winding up as holders of
Common Shares.
<PAGE>
(e) In the event that the Corporation enters into any
consolidation, merger, combination or other stock transaction in which the
Common Shares are exchanged for or changed into other stock (and other
securities and assets, if any), then in any such case each Series A Preferred
Share shall at the same time be similarly exchanged or changed into an amount
per share, subject to the provision for adjustment hereinafter set forth, equal
to one hundred (100) times the aggregate amount of stock (and other securities
and assets, if any), as the case may be, into which or for which each Common
Share is changed or exchanged. In the event the Corporation at any time declares
or pays any dividend on the Common Shares payable in Common Shares, or effects a
subdivision or combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in Common Shares)
into a greater or lesser number of Common Shares, then in each such case the
amount to be distributed to holders of the Series A Preferred Shares under this
paragraph (e) shall be adjusted by multiplying amount to which such holders were
entitled immediately prior to such event by a fraction, the numerator of which
is the number of Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares outstanding immediately
prior to such event.
FIFTH. The Corporation, by action of its directors, and
without action of its shareholders, may purchase its own shares, of any class,
in accordance with the provisions of Chapter 1701 of the Ohio Revised Code. Such
purchases may be made either in the open market or at public or private sale, in
such manner and amounts, from such holder or holders of outstanding shares of
the Corporation, of any class, and at such prices as the directors shall from
time to time determine.
SIXTH. A director or officer of the Corporation shall not be
disqualified by his office from dealing or contracting with the Corporation as a
vendor, purchaser, employee, agent, or otherwise, nor shall any contract or
transaction be void or voidable with respect to the Corporation for the reason
that it is between the Corporation and one or more of its directors or officers,
or between the Corporation and any other person in which one or more of its
directors or officers are directors, trustees, or officers, or have a financial
or personal interest, or for the reason that one or more interested directors or
officers participate in or vote at the meeting of the directors or a committee
thereof that authorizes such contract or transaction, if in any such case (a)
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 directors or the
committee and the directors or committee, in good faith reasonably justified by
such facts, authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors constitute less than a quorum; or (b)
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 shareholders entitled
to vote thereon and the contract or transaction is specifically approved at a
meeting of the shareholders held for such purpose by the affirmative vote of the
holders of shares entitling them to exercise a majority of the voting power of
the Corporation held by persons not interested in the contract or transaction;
or (c) the contract or transaction is fair as to the Corporation as of the time
it is authorized or approved by the directors, a committee thereof, or the
shareholders.
SEVENTH. Notwithstanding any provision in Chapter 1701 of the
Ohio Revised Code requiring for any purpose the vote, consent, waiver, or
release of the holders of a designated proportion (but less than all) of the
voting shares or power of the Corporation, the vote, consent,
<PAGE>
waiver, or release of the holders of a majority of the voting shares of the
Corporation regardless of class shall be sufficient to constitute the required
authorization or approval for any such purpose. In the event that any provision
of these articles of incorporation, the regulations of the Corporation, or law
requires for any purpose the vote, consent, waiver, or release of the holders of
a designated proportion (but less than all) of the shares of the Corporation of
any particular class or classes acting separately as a class, the vote, consent,
waiver, or release of the holders of a majority of the shares of such class or
of each such classes, as the case may be, shall be sufficient to constitute the
required authorization or approval for any such purpose, notwithstanding any
contrary provision of Chapter 1701 of the Ohio Revised Code.
EIGHTH. No holder of shares of the Corporation, of any class,
as such, shall have any pre-emptive right to purchase or subscribe for shares of
the Corporation, of any class, or other securities of the Corporation, of any
class, whether now or hereafter authorized.
NINTH. These 1992 Amended Articles of Incorporation supersede the
1991 Amended Articles of Incorporation of the Corporation, as heretofore
amended.
TENTH. Section 1701.831 of the Ohio Revised Code shall not apply
to control share acquisitions of shares of the corporation. Notwithstanding
anything to the contrary in these Articles of Incorporation, to amend or add to
or repeal this Article TENTH shall require the affirmative vote at a meeting of
holders of shares entitled to exercise 75% of the voting power on such proposal,
unless such action is recommended by two-thirds of the members of the Board of
Directors.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>SPECIMEN FORM OF COMMON STOCK CERTIFICATE
<TEXT>
<PAGE>
EXHIBIT 4.1 SPECIMEN FORM OF COMMON STOCK CERTIFICATE.
TEMPORARY CERTIFICATE - EXCHANGEABLE FOR DEFINITIVE WHEN AVAILABLE
STERIS
NUMBER ("logo") SHARES
T
INCORPORATED UNDER THE LAWS OF THE STATE OF OHIO
STERIS CORPORATION
This certificate is transferable in Cleveland, OH or New York, NY
CUSIP 859152 10 0
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES, WITHOUT PAR VALUE, OF
STERIS CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned by the Transfer
Agent of the Corporation and registered by the Registrar.
WITNESS the facsimile signatures of the duly authorized officers of the
Corporation.
Dated
SECRETARY PRESIDENT
Countersigned and Registered:
NATIONAL CITY BANK
(Cleveland, OH)
Transfer Agent and Registrar,
BY
Authorized Signature
AMERICAN BANK NOTE COMPANY.
<PAGE>
STERIS CORPORATION
As required by Ohio law, the Corporation will mail to the record holder of
this certificate, without charge, within five (5) days after receipt of written
request therefor addressed to the Secretary of the Corporation at its principal
place of business, a copy of the express terms of the shares represented by this
certificate and of all other classes and series of shares which the Corporation
is authorized to issue.
The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the entireties ------ -------
JT TEN - as joint tenants with right (Cust) (Minor)
of survivorship and not as tenants under Uniform Gifts to Minors Act
in common
----------------------
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, HEREBY SELL, ASSIGN AND TRANSFER UNTO
-----------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- ------------------------------------------- ------------------------------------
OF THE SHARES
- -------------------------------------------------------------------
REPRESENTED BY THE WITHIN CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND
APPOINT
-------------------------------------------------------------------------
ATTORNEY TO TRANSFER THE SAID SHARES ON THE BOOKS OF THE WITHIN-NAMED
CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED 19
--------------------- ----
-----------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
- -----------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN
RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN STERIS CORPORATION AND HARRIS
TRUST AND SAVINGS BANK, AS SUCCESSOR RIGHTS AGENT, DATED AS OF OCTOBER 24, 1996
(THE "RIGHTS AGREEMENT"), AS SUCH RIGHTS AGREEMENT MAY BE AMENDED FROM TIME TO
TIME THEREAFTER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES
OF STERIS CORPORATION. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO
LONGER BE EVIDENCED BY THIS CERTIFICATE. STERIS CORPORATION WILL MAIL TO THE
HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT (AS IN EFFECT ON THE
DATE OF MAILING) WITHOUT CHARGE PROMPTLY AFTER RECEIPT OF A WRITTEN REQUEST
THEREFOR. UNDER CERTAIN CIRCUMSTANCES, RIGHTS WHICH ARE OR WERE BENEFICIALLY
OWNED BY ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>MANAGEMENT INCENTIVE COMPENSATION PLAN FY 2000
<TEXT>
<PAGE>
EXHIBIT 10.13
STERIS CORPORATION
Management Incentive Compensation Plan
FY 2000
PURPOSE
- -------
The purpose of the STERIS Corporation Management Incentive Compensation Plan
(MICP) is to encourage greater leadership, initiative, resourcefulness,
teamwork, efficiency, and urgency on the part of key management whose
performance and responsibilities directly affect Customer satisfaction,
achievement of business objectives, positive Associate relations, and
enhancement of shareholder value.
GENERAL PROVISIONS
- ------------------
The MICP for FY 2000 may be reviewed and revised at the Chief Executive
Officer's discretion within the guidelines established by the Compensation
Committee of the STERIS Corporation Board of Directors. Any incentive payouts
under the terms of this Plan will be in compliance with applicable governmental
regulations that are in effect at the time of such incentive payouts.
The incentive compensation fund available for disbursement to participants shall
be determined by achievement of key parameters of the approved Annual Business
Plan.
Management Incentive Compensation will be calculated after the close of each
quarter and will be cumulative and retroactive. Deficiencies in year-to-date
(YTD) performance can be made up by overachievement in subsequent quarters
during the fiscal year.
A portion of any earned Management Incentive Compensation will be paid on a
quarterly basis with another portion held in an escrow account to be paid on an
annual basis. An accrual funding schedule will be developed and maintained by
the Finance Department to reserve adequate funds for the payment of earned
Management Incentive Compensation.
KEY PARAMETERS
- --------------
MICP compensation is determined through achievement of a combination of Annual
Business Plan (ABP) parameters and Quarterly Individual Objectives (IO)
parameters. ABP parameters are the Net Revenue, Operating Income, and Net Income
objectives. IO parameters are approved quarterly personal objectives that are
brief, specific, measurable, and consistent with overall Company objectives.
<PAGE>
Management Incentive Compensation Plan - FY'00
Page two
ELIGIBILITY
- -----------
The management level classifications of individuals who may be eligible to
participate in the MICP include, but are not limited to the following:
President
Sr. Vice President
Vice President
Director
Manager
Supervisor/Professional
Unless otherwise specified, incumbents holding a key management position with
one of the above titles are immediately eligible for participation. An MICP
participant with a change in management level during a quarter will have MICP
compensation for that quarter at the management level held by the individual for
the majority of the quarter. New hires for an eligible position may begin
participation in the MICP during the first full fiscal quarter of employment
unless otherwise specified in the employment offer.
Termination of employment of a participant shall result in his or her forfeiture
of all unpaid incentive earnings.
MICP FY'00 PARTICIPANT BONUS SCHEDULE
- -------------------------------------
The bonus opportunity for each MICP participant upon 100% achievement of the
FY'00 Net Revenue, Operating Income, and Net Income objectives is based upon a
combination of management level, salary level, business unit (corporate, group,
division, department, etc.), local practice, and other relevant considerations.
The general guidelines for bonus funding are as follows:
Management Level Quarterly Funding*
------------------------- -----------------------
President 75% of Base Income
Senior Vice President 75% of Base Income
Vice President 50% of Base Income
Director 35% of Base Income
Manager 20% of Base Income
Supervisor/Professional $625
The Corporate Associate Relations department will maintain a current Participant
and Target Bonus Schedule of all MICP participants and individual target bonus
levels.
<PAGE>
*Guidelines only.
Management Incentive Compensation Plan - FY'00
Page three
BONUS POOL FUNDING
- ------------------
The funding of the bonus pool is determined quarterly on a YTD basis. Any
funding is dependent upon the YTD achievement of Net Revenue and Operating
Income objectives in the approved Annual Business Plan. The following weighting
factor applies to the qualification parameters:
Net Revenue 75% weighting (3x)
Operating Income 25% weighting (1x)
Funding occurs on a sliding scale basis from 80% to 120% of the Blended
Achievement Rate. The following is a calculation example based upon YTD
achievement of 104% of Net Revenue and 110% of Operating Income objectives of
the ABP.
104 x 3 = 312
110 x 1 = 110
---
422 / 4 = 105.5% - Blended Achievement Rate
During FY'00 the Company must have a minimum 80% Blended Achievement Rate for
MICP bonus eligibility. For business unit (group, division, profit center,
department, etc.) MICP bonus eligibility, the Company and the respective
business unit must each have a minimum 80% Blended Achievement Rate.
INDIVIDUAL OBJECTIVES (IO)
- --------------------------
Quantifiable Individual Objectives (IO) are developed and approved at the
beginning of each quarter for each MICP participant. An individual's performance
is evaluated at the end of each quarter and a percentage Individual Objectives
(IO) Achievement calculated. The Individual Objectives are consistent with the
quarterly and longer term objectives of the Company and the individual business
units. A maximum of three (3) equally weighted quarterly IOs is recommended.
BONUS CALCULATION
- -----------------
Individual participant bonuses and bonus payouts are determined as defined in
this bonus calculation section.
1. The bonus qualifier will be based on the Blended Achievement Percentage of
the applicable YTD Net Revenue and Operating Income objectives in the
Annual Business Plan.
<PAGE>
2. A weighting of 3X for Net Revenue and 1X for Operating Income will apply.
Management Incentive Compensation Plan - FY'00
Page four
3. Individual participant payout targets will be taken from the then current
Participant and Target Bonus Schedule.
4. The YTD Blended Achievement Percentage will be applied to the individual
Target Bonus to determine the quarterly MICP eligible bonus amount.
5. If bonus eligibility on a YTD quarterly basis has occurred, the individual
MICP eligible bonus amount is multiplied by the cumulative percentage
achievement of the quarterly Individual Objectives that have been approved
at the beginning of each quarter by the participant's direct supervisor and
the senior executive/business head of the individual's business unit.
Bonus calculation example:
Vice President
$80,000 Base Salary
50% Target Bonus
Year-to-Date ABP Achievement
104% Net Revenue
110% Op Income
104 x 3 = 312
110 x 1 = 110
---
422 / 4 = 105.5% - Blended Achievement Rate
Cumulative Individual Objectives (IO) Achievement
96%
Quarterly Target Bonus
$80,000 x 50% / 4 = $10,000
Sliding Scale Blended Target
$10,000 x 105.5% = $10,550
Eligible Individual Quarterly Bonus
$10,550 x 96% (IO) = $10,128
<PAGE>
Management Incentive Compensation Plan - FY'00
Page five
BONUS PAYMENT
- -------------
Seventy-five percent (75%) of the eligible individual quarterly bonus will be
paid following the end of each quarter. Twenty-five percent (25%) of the
eligible individual quarterly bonus will be held in a bonus escrow account and
will be paid following the end of the fiscal year only when the Corporation
-----------
meets or exceeds its Net Income objective for the full fiscal year. Should the
Corporation fail to meet or exceed its Net Income objective for the full fiscal
year, all funds in the bonus escrow account will be forfeited.
EFFECTIVE DATE
- --------------
The STERIS Management Incentive Compensation Plan is effective April 1, 1999,
through March 31, 2000.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.14
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>MANAGEMENT INCENTIVE COMPENSATION PLAN (2001)
<TEXT>
<PAGE>
EXHIBIT 10.14
STERIS CORPORATION
Management Incentive Compensation Plan
1. Objective. The objective of the STERIS Management Incentive Compensation
Plan (the "Plan") is to encourage greater initiative, resourcefulness, teamwork,
efficiency, and achievement of objectives on the part of key Associates whose
performance and responsibilities directly affect Company profits.
2. Eligibility. Participation in the Plan will be limited to those key
Associates that are selected for participation on an annual basis and will
normally include Associates at or above the rank of Manager in the various
Corporate Departments and in the Manufacturing Group as well as marketing and
senior management Associates in the Health Care Group and in the Scientific &
Industrial Group.
A key Associate will be a participant in the Plan for a particular year only if
he or she is selected by the Compensation Committee of the Board of Directors or
its designee (the "Committee") for participation in that year. Key Associates
selected for participation each year will be notified of their participation and
given the parameters for bonus calculations early in the fiscal year.
A participant will be entitled to receive a bonus earned under the Plan for a
particular fiscal year if and only if he or she remains in the employ of the
Company through the end of that fiscal year and thereafter through the date on
which bonuses are paid for the fiscal year.
3. Target Bonus. Each participant will be assigned a dollar amount target
bonus based upon his or her position and level within the Company. The target
bonus will range from 10% to 80% of the participant's base salary or
compensation range midpoint, as the Committee may determine.
4. Financial Goals. Each year the Committee will select a threshold net income
target for the Company, the attainment of which will be a prerequisite to the
payment of any bonuses under the Plan. In addition, the Committee will select
one or more measures of current year financial performance for the Company as a
whole, such as revenue growth, earnings before interest and taxes margins, and
net income, to be used as goals for determining the payment of bonuses under the
Plan. Each year the Committee may also select one or more such goals for any
one or more of the Company's operating groups to be used to determine payment of
bonuses under the Plan to participants in those groups. The Committee may also
determine that a participant's entitlement to a bonus will depend in part on
goals for the Company as a whole and in part on goals for one or more operating
groups. For each financial goal, the Committee will designate numerical
"threshold," "target," and "maximum" levels. The Committee may adjust the
threshold net income target and levels of such other goals it may have selected
if, during the course of a fiscal year, the Company records a special charge
that the Committee determines should be disregarded, either partially or in its
entirety, when calculating the amounts of bonuses to be paid under the Plan.
<PAGE>
5. Weighting of Goals. Each year during which the Committee selects more than
one goal to be applicable to any group of participants, the Committee will also
specify the weight to be given to each such goal. For example, the Committee
might determine to give 75% weight to revenue and 25% weight to EBIT margin.
6. Achievement Percentages. For each goal, a participant will be entitled to a
bonus (with respect to that goal) based on performance as follows:
a. If performance is at the threshold level, the bonus will be at 50% of
target.
b. If performance is at the target level, the bonus will be at 100% of
target.
c. If performance is at or above the maximum level, the bonus will be at
150% of target.
For performance at any level between these set points, the bonus amount will be
interpolated. For example, if performance is exactly half way between the target
and maximum levels, the bonus will be at 125% of target. If the threshold level
is not attained for any goal, no bonus will be earned with respect to that goal.
7. Calculation of Bonuses. No bonuses will be paid for a fiscal year unless
the net income of the Company is at least equal to the threshold net income
level selected by the Committee for the year. Assuming that criteria is met, a
participant's bonus will be determined by multiplying his or her target bonus by
the achievement percentages attained during the year, taking into account the
weighting of goals as appropriate. The actual bonus earned by any participant
during a fiscal year may range from zero (if performance is below threshold on
all goals) to 150% of the target bonus (if performance is at or above maximum on
all goals).
8. Payment of Earned Bonuses. Unless the Committee determines to pay all or
any part of bonuses under the Plan earlier or either of Sections 10 and 11
applies, bonuses earned under the Plan will be paid to participants not later
than 90 days after the end of the fiscal year in which they are earned.
9. Midyear Additions and Adjustments. An individual assuming a key position
during a fiscal year may, if selected by the Committee, be included in the Plan
and be eligible for such pro rata portion of a full year bonus as the Committee
may specify when selecting the individual for participation in the Plan. A
participant whose position or level within the Company changes during a fiscal
year may, if so determined by the Committee, be assigned an increased or
decreased target bonus for the year taking into account, on a pro rata basis,
the participant's new position and compensation.
10. Effect of Changes in Operations. If, during any fiscal year, the
operations of the Company are materially altered, whether by an acquisition of
substantial additional assets or one or more lines of business, disposition of
substantial existing assets or one or more existing lines of business, merger,
consolidation, or similar event, the Committee may, in its sole discretion,
adjust the parameters of the Plan for that fiscal year in such a manner as to
preserve to the participants the same relative prospects for earning a bonus
under the Plan as would have been the case if the material alteration had not
occurred. If the Company disposes of an entire
2
<PAGE>
operating division or line of business during a fiscal year, the Company shall
make to each participant, if any, who ceases to be employed by the Company as a
result of that disposition, an "Interim Payment" in the same amount, at the same
time, and with the same effect, as if the disposition constituted a Change of
Control as defined in Section 11 below.
11. Effect of a Change of Control. Within five days after the occurrence of
the first Change of Control (as defined below) to occur in any fiscal year, the
Company shall pay to each participant an interim lump-sum cash payment (the
"Interim Payment") with respect to his or her participation in the plan. The
amount of the Interim Payment shall be equal to the dollar amount of the
participant's target bonus for the entire fiscal year multiplied by a fraction,
the numerator of which is the number of months between the beginning of the
fiscal year and the end of the month in which the Change of Control occurs and
the denominator of which is 12. The making of the Interim Payment will not
reduce the obligation of the Company to make a final payment under the terms of
the Plan, but the amount of any Interim Payment shall be offset against any
later payment due under the Plan for the fiscal year in which the Change of
Control occurs. Except as an offset against a final payment as provided in the
immediately preceding sentence, the amount of the Interim Payment will not be
offset against any amount due to the participant from or on behalf of the
Company and a participant will not in any circumstances be required to refund
any portion of the Interim Payment to the Company.
For purposes of the Plan, a "Change of Control" shall be deemed to have occurred
if at any time or from time to time while this Agreement is in effect:
(a) Any person (other than STERIS Corporation ("STERIS"), any of its
subsidiaries, any employee benefit plan or employee stock ownership plan of
STERIS, or any person organized, appointed, or established by STERIS for or
pursuant to the terms of any such plan), alone or together with any of its
affiliates, becomes the beneficial owner of 15% or more (but less than 50%)
of the Common Shares then outstanding;
(b) Any person (other than STERIS, any of its subsidiaries, any employee
benefit plan or employee stock ownership plan of STERIS, or any person
organized, appointed, or established by STERIS for or pursuant to the terms
of any such plan), alone or together with any of its affiliates, becomes
the beneficial owner of 50% or more of the Common Shares then outstanding;
(c) Any person commences or publicly announces an intention to commence a
tender offer or exchange offer the consummation of which would result in
the person becoming the beneficial owner of 15% or more of the Common
Shares then outstanding;
(d) At any time during any period of 24 consecutive months, individuals who
were directors at the beginning of the 24-month period no longer constitute
a majority of the members of the Board of Directors of STERIS, unless the
election, or the nomination for election by STERIS's shareholders, of each
director who was not a director at the beginning of the period is approved
by at least a majority of the directors who (i) are in
3
<PAGE>
office at the time of the election or nomination and (ii) were directors at
the beginning of the period;
(e) A record date is established for determining shareholders entitled to
vote upon (i) a merger or consolidation of STERIS with another corporation
in which those persons who are shareholders of STERIS immediately before
the merger or consolidation are to receive or retain less than 60% of the
stock of the surviving or continuing corporation, (ii) a sale or other
disposition of all or substantially all of the assets of STERIS, or (iii)
the dissolution of STERIS;
(f) (i) STERIS is merged or consolidated with another corporation and those
persons who were shareholders of STERIS immediately before the merger or
consolidation receive or retain less than 60% of the stock of the surviving
or continuing corporation, (ii) there occurs a sale or other disposition of
all or substantially all of the assets of STERIS, or (iii) STERIS is
dissolved; or
(g) Any person who proposes to make a "control share acquisition" of
STERIS, within the meaning of Section 1701.01(Z) of the Ohio General
Corporation Law, submits or is required to submit an acquiring person
statement to STERIS.
Notwithstanding anything herein to the contrary, if an event described in clause
(b), clause (d), or clause (f) above occurs, the occurrence of that event will
constitute an irrevocable Change of Control. Furthermore, notwithstanding
anything herein to the contrary, if an event described in clause (c) occurs, and
the Board of Directors either approves such offer or takes no action with
respect to such offer, then the occurrence of that event will constitute an
irrevocable Change of Control. On the other hand, notwithstanding anything
herein to the contrary, if an event described in clause (a), clause (e), or
clause (g) above occurs, or if an event described in clause (c) occurs and the
Board of Directors does not either approve such offer or take no action with
respect to such offer as described in the preceding sentence, and a majority of
those members of the Board of Directors who were Directors prior to such event
determine, within the 90-day period beginning on the date such event occurs,
that the event should not be treated as a Change of Control, then, from and
after the date that determination is made, that event will be treated as not
having occurred. If no such determination is made, a Change of Control
resulting from any of the events described in the immediately preceding sentence
will constitute an irrevocable Change of Control on the 91/st/ day after the
occurrence of the event.
4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>CHANGE OF CONTROL AGREEMENT BETWEEN STERIS
<TEXT>
<PAGE>
EXHIBIT 10.18
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT ("Agreement") is made as of the 18th day of
March, 2000, between STERIS Corporation, an Ohio corporation ("STERIS"), and LES
C. VINNEY ("Executive"), and supercedes the prior such change of control
agreement dated July 16, 1999.
STERIS is entering into this Agreement in recognition of the importance of
Executive's services to the continuity of management of STERIS and based upon
its determination that it will be in the best interests of STERIS to encourage
Executive's continued attention and dedication to Executive's duties in the
potentially disruptive circumstances of a possible Change of Control of STERIS.
(As used in this Agreement, the term "Change of Control" and certain other
capitalized terms have the meanings ascribed to them in Section 7, at the end of
this Agreement.)
STERIS and Executive agree, effective as of the date first set forth above (the
"Effective Date"), as follows:
1. Basic Severance Benefits. The benefits described in the subsections of this
Section 1 are subject to the limitations set forth in Subsections 4.1 (regarding
withholding) and 4.2 (requiring the execution of a waiver and release by
Executive).
1.1 Lump Sum Severance Benefit if Employment is Terminated in Certain
Circumstances Within Two Years of a Change of Control. If, within two years
following the occurrence of a Change of Control, Executive's employment with
STERIS is terminated
(a) by STERIS for any reason other than Cause, Disability, or death,
(b) by Executive after a Reduction of Compensation or a Mandatory
Relocation has occurred, or
(c) by Executive following a determination in good faith by Executive that
as a result of a Change of Control he is unable to carry out the
authorities, power, functions, responsibilities, or duties that he had in
the positions and offices of STERIS held by Executive before the Change of
Control in the same manner, with the same discretion, and to the same
extent as he was able to carry out the authorities, powers, functions,
responsibilities, or duties attached to those positions as in effect before
the Change of Control.
STERIS shall pay to Executive, within 30 days after the Termination Date, a
lump sum severance benefit equal to three times the sum of
(x) one year's Base Salary (at the highest rate in effect at any time
during the one year period ending on the date of the Change of Control),
plus
(y) Executive's Average Annual Incentive Compensation.
1
<PAGE>
1.2 Accrued Base Salary and Vacation Pay. If Executive becomes entitled to
payment of a lump sum severance benefit under Subsection 1.1 above, STERIS
shall, within 10 days after the Termination Date, pay to Executive (a) all Base
Salary accrued through the Termination Date but not previously paid and (b) a
cash payment equal to the value of any vacation time accrued through the
Termination Date but not used by Executive (valued at a rate equal to
Executive's Base Salary at the highest rate in effect at any time during the one
year period ending on the date of the Change of Control).
1.3 Special Prior Year MICP Payments. If Executive becomes entitled to
payment of a lump sum severance benefit under Subsection 1.1 above and the
Termination Date occurs on the last day of or after the end of a Fiscal Year but
before STERIS makes final MICP payments with respect to that Fiscal Year, STERIS
shall pay to Executive, at the regularly scheduled time for such final MICP
payments (the "Regular Payment Date"), but in any event not later than 60 days
after the end of the Fiscal Year, as incentive compensation, the same amount or
amounts that STERIS would have paid to Executive as incentive compensation with
respect to that Fiscal Year at the Regular Payment Date if Executive's
employment had continued through the Regular Payment Date. This Subsection 1.4
is intended to override any provision of the MICP that would otherwise cause
Executive to forfeit any incentive compensation with respect to any Fiscal Year
that ends on or before the Termination Date because Executive does not remain in
the employ of STERIS through the Regular Payment Date with respect to that
Fiscal Year.
1.4 Special Pro-Rata MICP Payment. If Executive becomes entitled to payment
of a lump sum severance benefit under Subsection 1.1 above and the Termination
Date occurs on other than the last day of a Fiscal Year, in addition to the
payment, if any, provided for in Subsection 1.3 above, STERIS shall, within 60
days after the end of the calendar quarter in which the Termination Date occurs,
pay to Executive, as additional incentive compensation for the period from the
first day of the Fiscal Year in which the Termination Date occurs through the
Termination Date (the "Pre-Termination Part Year"), an amount equal to the
excess of:
(a) the product of the fraction specified in the last sentence of this
Subsection 1.4 and the higher of (i) Executive's Target Annual Incentive
Compensation and (ii) the dollar amount of the cumulative award that would
have been payable to Executive under the MICP for that entire Fiscal Year
had the level of relevant performance through the end of the Fiscal Year
equaled the level of relevant performance through the last calendar
quarter, if any, in that Fiscal Year that ended before the Termination
Date, over
(b) the amount of incentive compensation previously paid to Executive with
respect to that Fiscal Year.
The fraction to be used in calculating the amount to be paid under this
Subsection 1.4 shall have a numerator equal to the number of days in the
Pre-Termination Part Year and a denominator of 365.
1.5 Continued Health, Dental, and Lift Insurance Coverage. If Executive
becomes entitled to payment of a lump sump severance benefit under Subsection
1.1 above, STERIS shall, during the period from the Termination Date through the
third anniversary of the Termination Date, continue to provide Executive with
the same health, dental, and life insurance coverage and benefits that were
being provided to Executive immediately before the Change of Control. If
2
<PAGE>
Executive becomes entitled to payment of a lump sum severance benefit under
Subsection 1.2 above, STERIS shall, during the period from the Termination Date
through the second anniversary of the Termination Date, continue to provide
Executive with the same health. dental, and life insurance coverage and benefits
that were being provided to Executive immediately before the Change of Control.
Coverage and benefits to be provided under this Subsection 1.5 shall be provided
to Executive at the same cost, if any, to Executive as they were provided to
Executive immediately before the Change of Control.
2. Other Benefits.
2.1 Reimbursement of Certain Expenses After a Change of Control.
(a) From and after a Change of Control, STERIS shall pay, as incurred, all
expenses of Executive, including the reasonable fees of counsel engaged by
Executive, of defending any action brought to have this agreement declared
invalid or unenforceable.
(b) From and after a Change of Control, STERIS shall pay, as incurred, all
expenses of Executive, including the reasonable fees of counsel engaged by
Executive, of prosecuting any action to compel STERIS to comply with the
terms of this Agreement upon receipt from Executive of an undertaking to
repay STERIS for such expenses if, and only if, it is ultimately determined
by a court of competent jurisdiction that Executive had no reasonable
grounds for bringing that action (which determination need not be made
simply because Executive fails to succeed in the action).
(c) From and after a Change of Control, expenses (including attorney's
fees) incurred by Executive in defending any action, suit, or proceeding
commenced or threatened (whether before or after the Change of Control)
against Executive for any action or failure to act as an employee, officer,
or director of STERIS or any Subsidiary shall be paid by STERIS, as they
are incurred, in advance of final disposition of the action suit, or
proceeding upon receipt of an undertaking by or on behalf of Executive in
which Executive agrees to reasonably cooperate with STERIS or the
Subsidiary, as the case may be, concerning the action, suit, or proceeding
and (i) if the action, suit, or proceeding is commenced or threatened
against Executive for any action or failure to act as a director, to repay
the amount if it is proved by clear and convincing evidence in a court of
competent jurisdiction that Executive's action or failure to act involved
an act or omission undertaken with deliberate intent to cause injury to
STERIS or a Subsidiary or undertaken with reckless disregard for the best
interests of STERIS or a Subsidiary, or (ii) if the action, suit, or
proceeding is commenced or threatened against Executive for any action or
failure to act as an officer or employee, to repay the amount if it is
ultimately determined that Executive is not entitled to be indemnified.
2.2 Indemnification. From and after a Change of Control, STERIS shall
indemnify Executive, to the full extent permitted or authorized by the Ohio
General Corporation Law as it may from time to time be amended, if Executive is
(whether before or after the Change of Control) made or threatened to be made a
party to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, by reason of the fact
that Executive is or was a director, officer, or employee of STERIS or any
subsidiary, or is or was serving at the request of STERIS or any subsidiary as a
director, trustee, officer, or
3
<PAGE>
employee of a corporation, partnership, joint venture, trust, or other
enterprise. The indemnification provided by this Subsection 2.2 shall not be
deemed exclusive of any other rights to which Executive may be entitled under
the articles of incorporation or the regulations of STERIS or of any Subsidiary,
or any agreement, vote of shareholders or disinterested directors, or otherwise,
both as to action in Executive's official capacity and as to action in another
capacity while holding such office, and shall continue as to Executive after
Executive has ceased to be a director, trustee, officer, or employee and shall
inure to the benefit of the heirs, executors. and administrators of Executive.
2.3 Disability. If, after a Change of Control and prior to the Termination
Date. Executive is unable to perform services for STERIS for any period by
reason of disability. STERIS will pay and provide to Executive all compensation
and benefits to which Executive would have been entitled had Executive continued
to be actively employed by STERIS through the earliest of the following dates:
(a) the first date on which Executive is no longer so disabled to such an extent
that Executive is unable to perform services for STERIS, (b) the date on which
Executive becomes eligible for payment of long term disability benefits under a
long term disability plan generally applicable to executives of STERIS, (c) the
date on which STERIS has paid and provided 24 months of compensation and
benefits to Executive during Executive's disability, or (d) the date of
Executive's death.
2.4 Gross-Up of Payments Deemed to be Excess Parachute Payments.
(a) STERIS and Executive acknowledge that, following a Change of Control,
one or more payments or distributions to be made by STERIS to or for the
benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement, under some other
plan, agreement, or arrangement, or otherwise, and including, without
limitation, any income recognized by Executive upon exercise of an option
granted by STERIS to acquire Common Shares issued by STERIS) (a "Payment")
may be determined to be an "excess parachute payment" that is not
deductible by STERIS for federal income tax purposes and with respect to
which Executive will be subject to an excise tax because of Sections 280G
and 4999, respectively, of the Internal Revenue Code (hereinafter referred
to respectively as "Section 280G" and "Section 4999"). If Executive's
employment is terminated after a Change of Control occurs, the Accounting
Firm, which, subject to any inconsistent position asserted by the Internal
Revenue Service, shall make all determinations required to be made under
this Subsection 2.4, shall determine whether any Payment would be an excess
parachute payment and shall communicate its determination, together with
detailed supporting calculations, to STERIS and to Executive within 30 days
after the Termination Date or such earlier time as is requested by STERIS.
STERIS and Executive shall cooperate with each other and the accounting
Firm and shall provide necessary information so that the Accounting Firm
may make all such determinations. STERIS shall pay all of the fees of the
Accounting Firm for services performed by the Accounting Firm as
contemplated in this Subsection 2.4.
(b) If the Accounting Firm determines that any Payment gives rise, directly
or indirectly, to liability on the part of Executive for excise tax under
Section 4999 (and/or any penalties and/or interest with respect to any such
excise tax), STERIS shall make additional cash payments to Executive, from
time to time and at the same time as any
4
<PAGE>
Payment constituting an excess parachute payment is paid or provided to
Executive, in such amounts as are necessary to put Executive in the same
position, after payment of all federal, state, and local taxes (whether
income taxes, excise taxes under Section 4999, or otherwise, or other
taxes) and any and all penalties and interest with respect to any such
excise tax, as Executive would have been in after payment of all federal,
state, and local income taxes if the Payments had not given rise to an
excise tax under Section 4999 and no such penalties or interest had been
imposed.
(c) If the Internal Revenue Service determines that any Payment gives rise,
directly or indirectly, to liability on the part of Executive for excise
tax under Section 4999 (and/or any penalties and/or interest with respect
to any such excise tax) in excess of the amount, if any, previously
determined by the Accounting Firm, STERIS shall make further additional
cash payments to Executive not later than the due date of any payment
indicated by the Internal Revenue Service with respect to these matters, in
such amounts as are necessary to put Executive in the same position, after
payment of all federal, state, and local taxes (whether income taxes,
excise taxes under Section 4999, or otherwise, or other taxes) and any and
all penalties and interest with respect to any such excise tax, as
Executive would have been in after payment of all federal, state, and local
income taxes if the Payments had not given rise to an excise tax under
Section 4999 and no such penalties or interest had been imposed.
(d) If STERIS desires to contest any determination by the Internal Revenue
Service with respect to the amount of excise tax under Section 4999,
Executive shall, upon receipt from STERIS of an unconditional written
undertaking to indemnify and hold Executive harmless (on an after tax
basis) from any and all adverse consequences that might arise from the
contesting of that determination, cooperate with STERIS in that contest at
STERIS's sole expense. Nothing in this Paragraph (d) shall require
Executive to incur any expense other than expenses with respect to which
STERIS has paid to Executive sufficient sums so that after the payment of
the expense by Executive and taking into account the payment by STERIS with
respect to that expense and any and all taxes that may be imposed upon
Executive as a result of Executive's receipt of that payment. the net
effect is no cost to Executive. Nothing in this Paragraph (d) shall require
Executive to extend the statute of limitations with respect to any item or
issue in Executive's tax returns other than, exclusively, the excise tax
under Section 4999. If, as the result of the contest of any assertion by
the Internal Revenue Service with respect to excise tax under Section 4999,
Executive receives a refund of a Section 4999 excise tax previously paid
and/or any interest with respect thereto, Executive shall promptly pay to
STERIS such amount as will leave Executive, net of the repayment and all
tax effects, in the same position, after all taxes and interest, that he
would have been in if the refunded excise tax had never been paid.
3. No Set-Off No Obligation to Seek Other Employment or to Otherwise Mitigate
Damages; No Effect Upon Other Plans. STERIS's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim whatsoever that STERIS or any of its Subsidiaries may
have against Executive. Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or
5
<PAGE>
otherwise. Except as provided in the last sentence of this Section 3, neither
the amount of any payment provided for under this Agreement nor Executive's
right to any other benefit under this Agreement shall be reduced by any
compensation or benefits earned by Executive as the result of employment by
another employer or otherwise after the termination of Executive1s employment.
Neither the provisions of this Agreement, nor the execution of the waiver and
release referred to in Subsection 4.2 below, nor the making of any payment
provided for hereunder shall reduce any amounts otherwise payable, or in any way
diminish Executive's rights, under any incentive compensation plan, stock option
plan, retirement plan, disability or insurance plan, or other similar contract,
plan, or arrangement of STERIS, except that the payment of a pro-rata incentive
compensation benefit under Subsection 1.4 shall satisfy, to the extent of that
payment, any obligation STERIS might have to Executive for payments under the
MICP for the year in which the Termination Date occurs. STERIS's obligation to
provide continuing health, dental, and/or life insurance coverage and benefits,
as the case may be, shall be discontinued before the time otherwise specified in
Subsection 1.5 if, as, and when Executive becomes eligible to receive roughly
comparable health, dental, and/or life insurance coverage and benefits, as the
case may be, from a subsequent employer.
4. Certain Limitations on Benefits.
4.1 Taxes; Withholding of Taxes. Without limiting either the right of
STERIS to withhold taxes pursuant to this Subsection 4.1 or the obligation of
STERIS to make gross-up payments pursuant to Subsection 2.4, Executive shall be
responsible for all income, excise, and other taxes (federal, state, city, or
other) imposed on or incurred by Executive as a result of receiving the payments
provided in this Agreement, including, without limitation, the payments provided
under Section 1 of this Agreement. STERIS may withhold from any amounts payable
under this Agreement all federal, state, city, or other taxes as STERIS shall
determine to be required pursuant to any law or government regulation or ruling.
4.2 Waiver and Release. STERIS may condition the payment of any amounts
otherwise due under Section 1 of this Agreement upon (a) the execution by
Executive of a waiver and release in the form attached to this Agreement as
Exhibit A, with blanks appropriately filled and, in the case of clause (e)
contained therein, completed with the number of days that STERIS determines is
required under applicable law, but in no event more than 45 days, and (b) the
observation of such waiting periods, if any, before and after execution of the
waiver and release by Executive as are required by law, such as, for example,
the waiting periods required for a waiver and release to be effective with
respect to claims under the Age Discrimination in Employment Act, provided that
STERIS delivers to Executive such a waiver and release, appropriately completed,
within seven days of the Termination Date.
5. Term of this Agreement. This Agreement shall be effective as of the Effective
Date and shall thereafter apply to any Change of Control occurring on or before
March 31, 2002. Unless this Agreement is terminated earlier pursuant to
Subsection 5.1, on March 31, 2002 and on March 31 of each succeeding year
thereafter (a "Renewal Date"), the term of this Agreement shall be automatically
extended for an additional year unless either party has given notice to the
other, at least one year in advance of that Renewal Date, that the Agreement
shall not apply to any Change of Control occurring after that Renewal Date.
6
<PAGE>
5.1 Termination of Agreement Upon Termination of Employment Before a Change
of Control. This Agreement shall automatically terminate and cease to be of any
further effect on the first date occurring before a Change of Control on which
Executive is no longer employed by STERIS, except that, for purposes of this
Agreement, any termination of employment of Executive that is effected both (a)
during the one year period ending on the date of a Change of Control and (b) in
contemplation of a Change of Control shall be deemed to be a termination of
Executive's employment as of immediately after that Change of Control becomes
irrevocable (as provided in Subsection 7.4) and Executive shall be entitled to
payments and benefits under this Agreement as if Executive's employment had
continued through the day after the Change of Control became irrevocable and had
then been terminated.
5.2 No Termination of Agreement During Two Year Period Beginning on Date of
a Change of Control. After a Change of Control, this Agreement may not be
terminated. However, if Executive's employment with STERIS continues for more
than two years following the occurrence of a Change of Control, then, for all
purposes of this Agreement other than Subsections 2.1 and 2.2, that particular
Change of Control shall thereafter be treated as if it never occurred.
6. Miscellaneous.
6.1 Successor to STERIS. STERIS shall not consolidate with or merge into
any other corporation, or transfer all or substantially all of its assets to
another corporation or other entity, unless such other corporation or other
entity shall assume this Agreement in a signed writing and deliver a copy
thereof to Executive. Upon such assumption the successor corporation or other
entity shall become obligated to perform the obligations of STERIS under this
Agreement and the term "STERIS" as used in this Agreement shall be deemed to
refer to such successor corporation or other entity.
6.2 Notices. 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 (a) when delivered in person (to Executive in the
case of notices to Executive and to the Secretary of STERIS in the case of
notices to STERIS) or (b) on the date actually received when sent by United
States registered mail, return receipt requested, postage prepaid, and
addressed, in the case of notices to STERIS, as follows:
STERIS Corporation
5960 Heisley Road
Mentor, Ohio 44060
Attention: Secretary
and, in the case of notices to Executive, properly addressed to Executive at
Executive's most recent home address as shown on the records of STERIS, 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.
6.3 Employment Rights. Nothing expressed or implied in this Agreement shall
create any right or duty on the part of STERIS or Executive to have Executive
continue as an officer of STERIS or to remain in the employment of STERIS.
7
<PAGE>
6.4 Administration. STERIS shall be responsible for the general
administration of this Agreement and for making payments under this Agreement.
All fees and expenses billed by the Accounting Firm for services contemplated
under this Agreement shall be the responsibility of STERIS.
6.5 Source of Payments. All payments under this Agreement shall be made
solely from the general assets of STERIS (or from a grantor trust, if any,
established by STERIS for purposes of making payments under this Agreement and
other similar agreements), and Executive shall have the rights of an unsecured
general creditor of STERIS with respect thereto.
6.6 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement which shall remain in full force and effect.
6.7 Modification, Waiver, Etc. No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification, or discharge
is agreed to in a writing signed by Executive and STERIS. No waiver by either
party hereto at any time of any breach by the other party of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same time or at any prior or subsequent time. No agreement or
representation, oral or otherwise, express or implied, with respect to the
subject matter hereof has been made by either party that is not set forth
expressly in this Agreement. This Agreement supercedes and replaces in its
entirety the Agreement, dated July 16, 1999, between STERIS and Executive (the
"Early Agreement") and such Early Agreement is hereby terminated and of no
further force or effect. This Agreement shall inure to the benefit of and be
enforceable by Executive's personal representatives, executors, administrators,
successors, heirs, and designees. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
7. Definitions.
7.1 Accounting Firm. The term "Accounting Firm" means the independent
auditors of STERIS for the Fiscal Year preceding the year in which the Change of
Control occurred and such firm's successor or successors; provided, however, if
such firm is unable or unwilling to serve and perform in the capacity
contemplated by this Agreement, STERIS shall select another national accounting
firm of recognized standing to serve and perform in that capacity under this
Agreement, except that such other accounting firm shall not be the then
independent auditors for STERIS or any of its affiliates (as defined in Rule
12b-2 promulgated under the Securities Exchange Act of 1934, as amended).
7.2 Base Salary. The term "Base Salary" means the salary payable to
Executive from time to time before any reduction for voluntary contributions to
any 401(k) plan or any other voluntary deferral. Base Salary does not include
imputed income from any payment by STERIS of any noncash benefits.
7.3 Cause. The employment of Executive by STERIS or any of its Subsidiaries
shall have been terminated for "Cause" if the Executive's employment is
terminated and, prior to that termination of employment, any of the following
has occurred:
8
<PAGE>
(a) Executive shall have been convicted of a felony,
(b) Executive commits an act or series of acts of dishonesty in the course
of Executive's employment which are materially inimical to the best
interests of STERIS, all as determined in good faith by the vote of three
fourths of all of the members of the Board of Directors of STERIS (other
than Executive, if Executive is a Director of STERIS).
(c) after being notified in writing by the Board of Directors of STERIS of
the failure and having been given at least 30 days in which to cure the
failure, Executive continues to unreasonably neglect Executive's duties and
responsibilities as an executive of STERIS,
(d) after being notified in writing by the Board of Directors of STERIS to
cease any particular Competitive Activity, Executive intentionally
continues to engage in that Competitive Activity while Executive remains in
the employ of STERIS.
7.4 Change of Control. A "Change of Control" shall be deemed to have
occurred if at any time or from time to time while this Agreement is in
effect:
(a) any person (other than STERIS, any of its Subsidiaries, any employee
benefit plan or employee stock ownership plan of STERIS, or any person
organized, appointed, or established by STERIS for or pursuant to the terms
of any such plan), alone or together with any of its affiliates, becomes
the beneficial owner of 15% or more (but less than 50%) of the Common
Shares then outstanding;
(b) Any person (other than STERIS, any of its Subsidiaries, any employee
benefit plan or employee stock ownership plan of STERIS, or any person
organized, appointed, or established by STERIS for or pursuant to the terms
of any such plan), alone or together with any of its affiliates, becomes
the beneficial owner of 50% or more of the Common Shares then outstanding;
(c) Any person commences or publicly announces an intention to commence a
tender offer or exchange offer the consummation of which would result in
the person becoming the beneficial owner of 15% or more of the Common
Shares then outstanding;
(d) At any time during any period of 24 consecutive months, individuals who
were directors at the beginning of the 24-month period no longer constitute
a majority of the members of the Board of Directors of STERIS, unless the
election, or the nomination for election by STERIS's shareholders, of each
director who was not a director at the beginning of the period is approved
by at least a majority of the directors who (i) are in office at the time
of the election or nomination and (ii) were directors at the beginning of
the period;
(e) A record date is established for determining shareholders entitled to
vote upon (i) a merger or consolidation of STERIS with another corporation
in which those persons who are shareholders of STERIS immediately before
the merger or consolidation are to
9
<PAGE>
receive or retain less than 60% of the stock of the surviving or continuing
corporation, (ii) a sale or other disposition of all or substantially all
of the assets of STERIS, or (iii) the dissolution of STERIS;
(f) (i) STERIS is merged or consolidated with another corporation and those
persons who were shareholders of STERIS immediately before the merger or
consolidation receive or retain less than 60% of the stock of the surviving
or continuing corporation, (ii) there occurs a sale or other disposition of
all or substantially all of the assets of STERIS, or (iii) STERIS is
dissolved; or
(g) Any person who proposes to make a "control share acquisition" of
STERIS, within the meaning of Section 1701.01(Z) of the Ohio General
Corporation Law, submits or is required to submit an acquiring person
statement to STERIS.
Notwithstanding anything herein to the contrary, if an event described in clause
(b), clause (d), or clause (f) above occurs, the occurrence of that event will
constitute an irrevocable Change of Control. Furthermore, notwithstanding
anything herein to the contrary, if an event described in clause (c) occurs, and
the Board of Directors either approves such offer or takes no action with
respect to such offer, then the occurrence of that event will constitute an
irrevocable Change of Control. On the other hand, notwithstanding anything
herein to the contrary, if an event described in clause (a), clause (e), or
clause (g) above occurs, or if an event described in clause (c) occurs and the
Board of Directors does not either approve such offer or take no action with
respect to such offer as described in the preceding sentence, and a majority of
those members of the Board of Directors who were Directors prior to such event
determine, within the 90-day period beginning on the date such event occurs,
that the event should not be treated as a Change of Control, then, from and
after the date that determination is made, that event will be treated as not
having occurred. If no such determination is made, a Change of Control resulting
from any of the events described in the immediately preceding sentence will
constitute an irrevocable Change of Control on the 91st day alter the occurrence
of the event.
7.5 Competitive Activity. Executive shall be deemed to have engaged in
"Competitive Activity" if Executive engages, directly or indirectly and whether
as a director, officer, employee, agent, or independent contractor, in any
business or business activity in which STERIS or any of its Subsidiaries engages
(other than as a director, officer, or employee of STERIS or any of its
Subsidiaries).
7.6 Disability. For purposes of this Agreement, Executive's employment will
have been terminated by STERIS by reason of "Disability" of Executive only if
(a) as a result of bodily injury or sickness, Executive has been unable to
perform Executive's normal duties for STERIS for a period of 180 consecutive
days, and (b) Executive begins to receive payments under a long term disability
plan sponsored by STERIS not later than 30 days after the Termination Date.
7.7 Executive's Average Annual Incentive Compensation. Subject to the last
four sentences of this Subsection 7.7, the term "Executive's Average Annual
Incentive Compensation" means the highest of:
10
<PAGE>
(a) the average of the dollar amounts of incentive compensation paid or
payable to Executive under the MICP for each of the two Fiscal Years most
recently ended before the first Change of Control occurring after execution
of this Agreement,
(b) the average of the dollar amounts of incentive compensation paid or
payable to Executive under the MICP for each of the two Fiscal Years most
recently ended before the Termination Date, and
(c) the average dollar amount obtained by adding together (i) the amount of
incentive compensation paid or payable to Executive under the MICP for the
Fiscal Year most recently ended before the Termination Date and (ii)
Executive's Target Annual Incentive Compensation and dividing the sum so
obtained by two.
If Executive was not a participant in the MICP for any one or more of the Fiscal
Years referred to in this Subsection 7.7, the reference to that year shall be
ignored in determining the average under clause (a), (b), and/or (c) above, as
the case may be, and the "average," if any, determined under that clause shall
be the dollar amount of incentive compensation paid or payable to Executive
under the MICP for the other Fiscal Year referred to in that clause (or, in the
case of clause (c), the dollar amount of Executive's Target Annual Incentive
Compensation). Thus, for example, if Executive was not a participant in the MICP
for the second year preceding a Change of Control but was a participant in the
MICP for the year immediately preceding a Change of Control, the average
determined under clause (a) would be equal to the amount of incentive
compensation paid or payable to Executive under the MICP for the single year
immediately preceding the Change of Control. If Executive was a participant in
the MICP for only a part of one or more Fiscal Years referred to in this
Subsection 7.7, the dollar amount of incentive compensation paid or payable to
Executive under the MICP for that year, for purposes of determining the averages
referred to in clauses (a), (b), and/or (c), as the case may be, shall be
annualized. Thus, for example, if Executive was a participant in the MICP for
only three months of a particular Fiscal Year and was paid incentive
compensation under the MICP for that period equal to $3X, the annualized amount
of $12X would be used in determining the averages referred to in clauses (a),
(b), and/or (c), as the case may be.
7.8 Executive's Target Annual Incentive Compensation. The term
"Executive's Target Annual Incentive Compensation" means the higher of (a) the
dollar amount that would have been payable to Executive under the MICP or the
Fiscal Year in which the Termination Date occurs had all relevant levels of
performance (whether corporate, personal, or other) been exactly at target
levels and had Executive remained in the employ of STERIS through the date on
which incentive compensation for that Fiscal Year was paid in full, or (b) the
dollar amount that would have been payable to Executive under the MICP for the
last Fiscal Year that ended before the occurrence of a Change of Control had all
relevant levels of performance for that Fiscal Year been exactly at target
levels.
7.9 Fiscal Year. The term "Fiscal Year" means STERIS's fiscal year as in
effect from time to time.
7.10 Mandatory Relocation. A "Mandatory Relocation" shall have occurred if,
at any time after a Change of Control, Executive is notified that Executive's
principal place of employment for STERIS is to be relocated, without Executive's
written consent, more than 50
11
<PAGE>
miles from where Executive's principal place of employment was located
immediately before the Change of Control.
7.11 MICP. The term "MICP" means STERIS's Management Incentive Compensation
Plan as in effect for STERIS's 2000 Fiscal Year and any earlier or later year
and any similar plan in which Executive may have participated or that may be
implemented in place of the plan from time to time thereafter.
7.12 Reduction of Compensation. A "Reduction of Compensation" shall have
occurred if either or both of the following occur at any time after a Change of
Control:
(a) Executive's Base Salary is reduced or
(b) either
(i) the MICP, and/or Executive's level of participation in the MICP,
is altered for any year in such a way as to reduce Executive's
opportunity to earn incentive compensation under the MICP for that
year below the level of that opportunity as it existed immediately
before the Change of Control, or
(ii) the amount of incentive compensation paid to Executive for any
period after the Change of Control is below Executive's Target Annual
Incentive Compensation.
7.13 Subsidiary. A "Subsidiary" means any corporation, partnership, or
other entity a majority of the voting control of which is directly or indirectly
owned or controlled at the time in question by STERIS.
7.14 Termination Date. The term "Termination Date" means the date on which
Executive's employment with STERIS terminates.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
STERIS Corporation
By /s/ David C. Dvorak
-----------------------------------
Title: Senior Vice President and
General Counsel
"EXECUTIVE"
/s/ Les C. Vinney
-------------------------------------
LES C. VINNEY
12
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>7
<FILENAME>0007.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT BETWEEN STERIS AND SANFORD
<TEXT>
<PAGE>
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into by
and between BILL R. SANFORD, residing at 4745 Sherwin Road, Willoughby, Ohio
("Sanford" or "Employee") and STERIS CORPORATION, an Ohio corporation with its
principal place of business at 5960 Heisley Road, Mentor, Ohio ("Steris" or the
"Company") on the 19th day of June, 2000;
WITNESSETH:
WHEREAS, Sanford has served the Company prior to March 21, 2000 (the
"Effective Date") in the capacity of Chairman of the Board, President and Chief
Executive Officer; and
WHEREAS, Sanford's efforts over the last 13 years since he founded the
Company have contributed significantly to the success of the Company and
enhancement of shareholder value; and
WHEREAS, Sanford and Steris want to document an employment and
succession plan for the orderly transition of management responsibilities to
effectuate Sanford's eventual separation from the Company in accordance with
previous discussions and mutual understandings; and
WHEREAS, Steris is desirous of retaining Sanford in an appropriate
role, to further enhance shareholder value, based on his leadership abilities
and value to the Company; and
WHEREAS, Sanford and Steris entered into an Employment Agreement on
March 21, 2000 to set forth their agreement concerning an orderly succession
plan; and
WHEREAS, Sanford and Steris desire that this Agreement supercede the
Employment Agreement entered into on March 21, 2000 in order to provide for a
more accelerated succession plan.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, Sanford and Steris agree as follows:
1. Employment. (a) From the Effective Date until the Changeover
----------
Date (as defined below) (the "Transition Period"), Sanford shall remain as
Chairman of the Board and Chief Executive Officer of the Company at the base
salary of $500,000 and eligible to participate in the Company's Senior Executive
Management Incentive Compensation Plan (the "SEMICP"). Sanford's participation
in the SEMICP shall be prorated based on the number of calendar months
<PAGE>
of fiscal year 2001 prior to and including the month of the Changeover Date (so
that a partial month will be treated as a full month), provided that Sanford
shall receive for such months a fixed amount of $67,500 per month with respect
to the SEMICP. The SEMICP participation shall be calculated and paid as provided
in the SEMICP payable July 15, 2000, with respect to the second calendar
quarter, and August 15, 2000, with respect to the month of July. As Chairman of
the Board and Chief Executive Officer of the Company, Sanford shall do and
perform such reasonable executive and managerial responsibilities and duties as
may be assigned to him heretofore and hereafter from time to time by the Board
of Directors of the Company.
(b) On the date of the year 2000 annual meeting of the shareholders of
Steris, (the "Changeover Date"), the Board of Directors shall elect a new
Chairman of the Board and new Chief Executive Officer. Sanford will continue as
an employee serving as Executive Founder and Special Executive Advisor to the
Company ("Executive Founder") reporting to the Board of Directors of the
Company. The duration of Sanford's employment as Executive Founder shall
commence on the Changeover Date and terminate on the expiration of five (5)
years thereafter unless earlier terminated pursuant to Section 15 of this
Agreement ("Post-CEO Employment Period"). Sanford shall perform such duties as
Executive Founder as may from time to time be assigned by the Board of Directors
relating to specific studies, exploration of strategic alternatives, and/or
similar projects which do not unreasonably conflict with any other employment
responsibilities of Sanford. While an Executive Founder, the parties recognize
that Sanford may have full-time employment elsewhere. During the Post-CEO
Employment Period when Sanford serves as Executive Founder, his salary will be
$50,000 per year or, after such time as Sanford accepts full-time employment
elsewhere, $12,000 per year. On the Changeover Date, the Company shall pay to
Sanford the amount of $3,300,000; which amount shall be paid to the estate of
Sanford in the event of his death prior to the Changeover Date. All amounts
payable under this Agreement shall be subject to applicable tax and other
withholding and reporting as required by law.
(c) Sanford has resigned, effective on the Effective Date, his
position as President of the Company. In addition, Sanford has resigned,
effective the Changeover Date, his positions as Chairman of the Board and Chief
Executive Officer. Sanford has resigned, effective immediately, (i) from all
other offices of the Company to which he has been elected by the Board of
Directors of the Company (or to which he has otherwise been appointed), (ii)
from all offices of any entity that is a subsidiary of, or is otherwise related
to or affiliated with, the Company, (iii) from all administrative, fiduciary or
other positions he may hold with respect to arrangements or plans for, of or
relating to the Company or any subsidiary or other affiliate of the Company, and
(iv) from any other directorship, office, trustee or other position of any
corporation, partnership, joint venture, trust or other enterprise (each, an
"Other Entity") insofar as Sanford is serving in the directorship, office,
trustee or other position of the Other Entity at the request of the Company;
provided, however, that if such resignation results in noncompliance with any
statute, rule or regulation applicable to any entity, subsidiary, other
affiliate of the Company or Other Entity, such resignation shall be effective at
such time as the resignation would be in compliance with any such statute, rule
or regulation. Sanford will not (i) seek re-election as a Director of the
Company at the year 2000 annual meeting of shareholders or (ii) accept a
nomination for election as a Director of the Company at any annual or special
meeting of shareholders after the date hereof. The Company hereby consents to
and accepts such resignations.
-2-
<PAGE>
2. Put Option. During the period commencing on the first
----------
anniversary of the Changeover Date and ending on February 28, 2002, the Company
agrees that, upon the request of Sanford, it will repurchase up to 600,000
Common Shares of the Company which Sanford owns as of the date of this Agreement
for a price per share equal to $15.00 ("Stock Purchase Payment"), adjusted as
appropriate to reflect any stock splits, stock or extraordinary dividends,
recapitalizations or other similar changes in the Company's capital structure
between the Effective Date and the closing of the repurchase. The Company
agrees that Sanford may transfer this Put Option, in whole or in part, to any
transferee of his Common Shares, provided such transferee is Sanford's spouse,
lineal descendant, a trust or other entity whose beneficiaries are Sanford, his
spouse or lineal descendants or any combination thereof and such transfer is in
compliance with applicable federal or state securities laws.
3. Loan Repayment. As of the date hereof, Sanford has an
--------------
outstanding promissory note payable to the Company (the "Promissory Note")
bearing interest at 5.7% per annum, payable on February 28, 2002. In the event
that Sanford fully observes, performs and discharges all of his obligations
under this Agreement (except to the extent his earlier death or disability
precludes his performance of services hereunder), the Company will forgive the
Note on February 28, 2002; provided, however, that prior to forgiveness of such
Note Sanford, or his estate, provides the Company with funds in an amount
sufficient for the Company to satisfy any applicable tax requirements.
4. Stock Options. All of Sanford's stock options which are listed
-------------
on Exhibit A hereto shall remain outstanding to the extent of their original
term during the Transition Period and Post-CEO Employment Period, all in
accordance with the terms of the Amended Nonqualified Stock Option Plan, 1994
Equity Compensation Plan or the 1997 Stock Option Plan (the "Option Plans"), and
the applicable notice of grant or other option agreement. The Company confirms
that the Option Plans (or applicable notice of grant or other option agreement)
provided that all unvested options granted under Option Plans shall vest on the
occurrence of a Change in Control, as defined in the 1994 and 1997 Stock Option
Plans or in the case of the option agreement dated July 23, 1997 upon the
occurrence of similar corporate transactions described therein.
5. Continuation of Health Insurance and Other Employment Benefits.
--------------------------------------------------------------
During the Transition Period and the Post-CEO Employment Period until Sanford
accepts full-time employment elsewhere, (a) Sanford will be entitled to continue
to participate in Steris' insurance, retirement and other employment benefits
programs to the same extent as he participates prior to the date of this
Agreement and (b) in the event Sanford requires an office outside Steris, Steris
shall pay the cost of maintaining such office, but not an amount in excess of
$2,000 per month.
6. Other Benefits. Upon the Changeover Date, or as soon as
--------------
practicable thereafter, the Company agrees, at no cost to Sanford, to transfer
to Sanford all of its rights in: the Company's rights to the key-man universal
insurance policy on Sanford's life. Sanford agrees to be liable for costs of
such insurance policy, to the extent not previously paid by the Company. In
addition, for a period of three (3) years after the Changeover Date, Sanford
shall be entitled to have the Company continue to pay all membership dues at two
clubs. For a period of one (1)
-3-
<PAGE>
year after the Changeover Date, the Company shall provide Sanford with tax
preparation assistance and trust and estate planning assistance, but not an
amount in excess of $10,000 in the aggregate.
7. Attorneys' Fees. On or about the Effective Date, Steris shall
---------------
pay Sanford's counsel fees for legal services provided to Sanford in connection
with the negotiation and preparation of this Agreement and the prior Employment
Agreement, but not an amount in excess of $25,000.
8. Approval of Announcements/Disclosures. All announcements
-------------------------------------
promulgated by Steris, both internal and external, concerning Sanford shall be
reviewed and approved by Sanford prior to distribution and/or dissemination.
Except as required by applicable law, no press releases of any nature regarding
this Agreement shall be made by any party to this Agreement without approval of
the other party.
9. Personal Effects. After the execution and delivery of this
----------------
Agreement and prior to the Changeover Date, at no cost to Sanford, Sanford shall
be entitled to his office furniture and furnishings including, but not limited
to, his computers, printers, fax machines, portable phone, awards and other
personal possessions. Except as may be restricted and subject to Section 12 of
this Agreement, Steris shall transfer to Sanford all software currently
installed on such office computer.
10. Competition. (a) During the Transition Period and the Post-CEO
-----------
Employment Period, Sanford shall not, directly or indirectly, do or suffer to be
done any of the following: own, manage, control or participate in the ownership,
management, or control of, or be employed or engaged by or otherwise affiliated
or associated as a consultant, independent contractor or otherwise with any
other corporation, partnership, proprietorship, firm, association, or other
business entity, or otherwise engage in any business, which is in competition
with the Company's business; provided, however, that the ownership of not more
-------- ------
than two percent of any class of securities of any entity shall not be deemed a
violation of this Agreement. Sanford's continued service in the positions which
he currently holds with the approval of the Steris Board of Directors, which are
listed on Exhibit B to this Agreement, or on similar boards of directors or
trustees of institutional investors or nonprofit organizations, shall not be
deemed a violation of this Section 10; provided Sanford is not directly involved
in the management of any competitor. For purposes of this Agreement, the
"Company's business" shall mean any business in which the Company actively
engages now, and any business in which the Company has actively engaged in the
two (2) year period prior to the date hereof, including, without limitation,
providing infection prevention, contamination prevention, microbial reduction
and therapy support systems, products, services and technologies to health care,
scientific, research, food and industrial customers throughout the world.
(b) In the event Sanford shall violate any provision of this Section
10 as to which there is a specific time period during which he is prohibited
from taking certain actions or from engaging in certain activities as set forth
in such provision, then, in such event, such violation shall toll the running of
such time period from the date of such violation until such violation shall
cease. The foregoing shall in no way limit the Company's rights under Section
15 of this Agreement.
-4-
<PAGE>
(c) Sanford has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred upon the Company
under this Section 10 and this Agreement, and hereby acknowledges and agrees
that the same are reasonable in time and territory, are designed to eliminate
competition which otherwise would be unfair to the Company, do not stifle the
inherent skill and experience of Sanford, would not operate as a bar to
Sanford's sole means of support, are fully required to protect the legitimate
interests of the Company and do not confer a benefit upon the Company
disproportionate to the detriment to Sanford. Sanford further acknowledges that
his obligations in this Section 10 are made in consideration of, and are
adequately supported by the payments by the Company to Sanford described in this
Agreement.
11. No Solicitation of Employees. Sanford agrees that he will not:
----------------------------
(a) Employ, assist in employing, or otherwise associate in business
with any person who is, or has been in the 12 month period prior to such
individual's association with Sanford an employee, officer or agent of the
Company, or any of its affiliated, related or subsidiary entities, unless
such employee was involuntarily terminated by the Company or such employee
contacts Sanford after voluntarily terminating his employment in
circumstances which do not violate (b) of this Section 11.
(b) Induce any person who is an employee, officer or agent of the
Company, or any of its affiliated, related, or subsidiary entities to
terminate such relationship.
12. Confidential Information.
------------------------
(a) Sanford acknowledges and agrees that in the performance of his
duties as an officer and employee of the Company he was brought into frequent
contact with, had or may have had access to, and/or became informed of
confidential and proprietary information of the Company and/or information which
is a competitive asset of the Company (collectively, "Confidential Information")
and the disclosure of which would be harmful to the interests of the Company or
its subsidiaries. Confidential Information shall include, without limitation:
(a) customer and distributor information such as names, addresses, sales
histories, purchasing habits, credit status, pricing levels, etc., (b) certain
prospective customer and distributor information lists, etc., (c) product and
systems specifications, schematics, designs, concepts for new or improved
products and services and other products and services data, (d) product and
material costs, (e) suppliers' and prospective suppliers' names, addresses and
contracts, (f) future corporate planning data, (g) production methods and
equipment, (h) marketing strategies, (i) the Company's financial results and
business condition, and (j) any other information which constitutes a "trade
secret" under federal or state law. Such Confidential Information is more fully
described in Subsection (b) of this Section 12. Sanford acknowledges that the
Confidential Information of the Company gained by Sanford during his association
with the Company was developed by and/or for the Company through substantial
expenditure of time, effort and money and constitutes valuable and unique
property of the Company.
(b) Sanford will keep in strict confidence, and will not, directly or
indirectly, at any time, disclose, furnish, disseminate, make available, use or
suffer to be used in any manner any Confidential Information of the Company
without limitation as to when or how Sanford may
-5-
<PAGE>
have acquired such Confidential Information. Sanford specifically acknowledges
that Confidential Information includes any and all information, whether reduced
to writing (or in a form from which information can be obtained, translated, or
derived into reasonably usable form), or maintained in the mind or memory of
Sanford and whether compiled or created by the Company, which derives
independent economic value from not being readily known to or ascertainable by
proper means by others who can obtain economic value from the disclosure or use
of such information, that reasonable efforts have been put forth by the Company
to maintain the secrecy of confidential or proprietary or trade secret
information, that such information is and will remain the sole property of the
Company, and that any retention or use by Sanford of confidential or proprietary
or trade secret information after the termination of Sanford's employment with
and services for the Company shall constitute a misappropriation of the
Company's Confidential Information.
(c) Upon expiration of the Post-CEO Employment Period, Sanford will
immediately return to the Company (to the extent he has not already returned),
equipment, software, electronic files and all other property of the Company,
including, without limitation, property, documents and/or all other materials
(including copies, reproductions, summaries and/or analyses) which constitute,
refer or relate to Confidential Information of the Company.
(d) Sanford further acknowledges that his obligation of
confidentiality shall survive, regardless of any other breach of this Agreement
or any other agreement, by any party to this Agreement, until and unless such
Confidential Information of the Company shall have become, through no fault of
Sanford generally known to the public or Sanford is required by law (after
providing the Company with notice and opportunity to contest such requirement)
to make disclosure. Sanford's obligations under this Section 12 are in addition
to, and not in limitation or preemption of, all other obligations of
confidentiality which Sanford may have to the Company under general legal or
equitable principles or statutes.
13. Disclosure; Trading Restrictions.
--------------------------------
(a) From the date of this Agreement through the end of the Post-CEO
Employment Period, Sanford will communicate his role as Executive Founder and
the contents of Sections 10, 11, 12, 13 and 14 of this Agreement to any person,
firm, association, or corporation other than the Company, which he intends to be
employed by, associated in business with, or represent.
(b) Sanford shall take no action with respect to the Company's common
shares that is in violation of the Company's policies with respect to trading in
common shares, it being understood that exercise of the put option under Section
2 shall not be deemed in violation of these policies. The Company will not
prevent Sanford from making any sale of the Company's common shares or from
exercising any options for the Company's common shares on a cashless basis
during any part of any open window period.
14. Certain Activities. During the Transition Period and the Post-
------------------
CEO Employment Period, Sanford shall not, and shall cause his affiliates not to,
except within the terms of a specific written consent of the Chairman of the
Compensation Committee of the Board of Directors, propose, discuss or have any
communication with any other person, directly or
-6-
<PAGE>
indirectly, relating in any way to (i) any form of business combination,
acquisition or other transaction relating to the Company or any affiliate of the
Company and any other party or any affiliate of any other party, (ii) any form
of restructuring, recapitalization or similar transaction with respect to the
Company or any affiliate of the Company, or (iii) any demand, request or
proposal to (1) acquire, or offer, propose or agree to acquire, by purchase or
otherwise, any shares of common stock of the Company ("Voting Securities"), (2)
make, or in any way participate in, any solicitation of proxies with respect to
any such Voting Securities of the Company (including, without limitation, by the
execution of action by written consent), become a participant in any election
contest with respect to the Company or seek to influence any person with respect
to any such Voting Securities, (3) participate in or encourage the formation of
any partnership, syndicate or other group which owns or seeks or offers to
acquire beneficial ownership of any such Voting Securities or which seeks to
affect control of the Company or any affiliate of the Company or has the purpose
of circumventing any provision of this Agreement.
15. Breach.
------
(a) If Sanford breaches any of the provisions of this Agreement in any
material respect, then the Company may, at its sole option, following reasonable
notice to Sanford and opportunity to cure, terminate all remaining payments and
benefits described in this Agreement and obtain reimbursement from Sanford of
all payments and benefits already provided pursuant to Sections 1, 2, 4, 5 and 6
of this Agreement, plus any expenses and damages incurred as a result of the
breach (including, without limitation, reasonable attorneys' fees), with the
remainder of this Agreement, and all promises and covenants in this Agreement,
remaining in full force and effect.
(i) The Company will not terminate pursuant to (a) of this Section 15
any benefits in which Sanford had vested as of the end of the Transition
Period under the Company's 401(k) Savings Plan. Sanford's COBRA rights, if
any, will not be reduced by any action taken by the Company under (a) of
this Section 15.
(ii) Sanford may challenge any Company action under (a) of this
Section 15.
(b) Sanford acknowledges and agrees that the remedy at law available
to the Company for breach by Sanford of any of his obligations under Sections
10, 11, 12 and 14 of this Agreement would be inadequate and that damages flowing
from such a breach would not readily be susceptible to being measured in
monetary terms. Accordingly, Sanford acknowledges, consents and agrees that, in
addition to any other rights or remedies which the Company may have at law, in
equity or under this Agreement, upon adequate proof of Sanford's violation of
any provision of Sections, 10, 11, 12 and 14 of this Agreement, the Company
shall be entitled to immediate injunctive relief and may obtain a temporary
order restraining any threatened or further breach, without the necessity of
proof of actual damage.
(c) If the Company breaches any of the provisions of this Agreement in
any material respect, then Sanford may, following reasonable notice to the
Company and opportunity to cure, exercise all rights and remedies which Sanford
may have and the Company shall reimburse Sanford for any costs and expenses
(including, without limitation, attorneys' fees) reasonably incurred in
connection therewith.
-7-
<PAGE>
16. Release by Sanford.
------------------
a. Sanford for himself and his dependents, successors, assigns,
heirs, executors and administrators (and his and their legal representatives of
every kind), hereby releases, dismisses, remises and forever discharges the
Company from any and all arbitrations,, claims (including, without limitations,
claims for attorney's fees), demands, damages, suits, proceedings, actions
and/or causes of action of any kind and every description, whether known or
unknown, which Sanford now has or may have had for, upon, or by reason of any
cause whatsoever (except that this release shall not apply to the obligations of
the Company arising under this Agreement), against the Company ("claims"),
including but not limited to:
(i) any and all claims, directly or indirectly, arising out of or
relating to:
(A) Sanford's past employment or service with the Company; and (B)
Sanford's resignation as President and any other position described in
Section 1(e) of this Agreement.
(ii) any and all claims of discrimination, including but not limited
to, claims of discrimination on the basis of sex, race, age, national
origin, marital status, religion or disability, including, specifically,
but without limiting the generality of the foregoing, any claims under the
Age Discrimination in Employment Act, as amended (the "ADEA"). Title VII
of the Civil Rights Act of 1964, as amended, the Americans with
Disabilities Act of 1990, the Family and Medical leave Act of 1993 and Ohio
Revised Code Chapter 4112;
(iii) any and all claims of wrongful or unjust discharge or breach of
any contract or promise, express or implied; and
(iv) any and all claims under or relating to any and all employee
compensation, employee benefit, employee severance or employee incentive
bonus plans and arrangements, including with limitation, the STERIS
Corporation Health Care Plan, 401(k) Plan, STERIS Corporation 1997 Stock
Option Plan, STERIS Corporation 1994 Equity Compensation Plan, STERIS
Corporation Amended and Restated Non-Qualified Stock Option Plan and STERIS
Corporation Amended Non-Qualified Stock Option Plan, all of which Sanford
agrees are forfeited upon his resignation other than his rights which are
set forth in this Agreement, his right to his account balances under the
401(k) Plan and his right to receive payment under the SEMICP with respect
to the year ending March 31, 2000; provided that he shall remain entitled
to the amounts and benefits specified in Sections 4, 5 and 6 above.
Sanford agrees that he intends to release any and all worker compensation
claims he may have against the Company by this Agreement, and further
agrees to execute any documentation as may be reasonably required to
perfect such release when presented to him by the Company.
b. Sanford understands and acknowledges that the Company does not
admit any violation of law, liability or invasion of any of his rights and that
any such violation, liability or invasion is expressly denied. The
consideration provided under this Agreement is made for the purpose of settling
and extinguishing all claims and rights (and every other similar or dissimilar
matter) that Sanford ever had or now may have or ever will have against the
Company
-8-
<PAGE>
to the extent provided in this Section 16. Sanford further agrees and
acknowledges that no representations, promises or inducements have been made by
the Company other than as appear in this Agreement.
c. Sanford further understands and acknowledges that:
(i) The release provided for in this Section 16, including, without
limitation, claims under the ADEA to and including the date of this
Agreement, is in exchange for the additional consideration provided for in
this Agreement, to which consideration he was not heretofore entitled; and
(ii) He has been advised by the Company to consult with legal counsel
prior to executing this Agreement and the release provided for in this
Section 16, has had an opportunity to consult with and to be advised by
legal counsel of his choice, fully understands the terms of this Agreement,
and enters into this Agreement freely, voluntarily and intending to be
bound.
d. Sanford will not file a lawsuit or other complaint asserting any
claim that is released in this Section 16.
e. Sanford and the Company acknowledge that the terms and conditions
of this Agreement are made and are mutually agreed to by the Company and
Sanford, and that Sanford waives and releases any claim that he has or may
have to reemployment.
f. For purposes of the above provisions of this Section 16, the
"Company" shall include its predecessors, subsidiaries, divisions, related
or affiliated companies, officers, directors, stockholders, members,
employees, heirs, successors, assigns, representatives, agents and counsel.
17. Release by the Company.
----------------------
The Company, for itself and its successors and assigns, hereby
releases, dismisses, remises and forever discharges the Executive and his
dependents, successors, assigns, heirs, executors and administrators (and his
and their legal representatives of every kind) (collectively, the "Executive
Releasees") from any and all arbitrations, claims (including, without
limitation, claims for attorneys' fees), demands, damages, suits, proceedings,
actions and/or causes of action of any kind and every description, whether known
or unknown, which it now has or may hereafter have against the Executive
Releasees, on account of any matter which relates in any way, directly or
indirectly, to the past, present of future business or affairs of the Company,
whether known or unknown, relating to or arising out of the Executive's service
as an officer or employee with the Company.
18. Continued Availability and Cooperation.
--------------------------------------
(a) Sanford shall cooperate fully with the Company and with the
Company's counsel in connection with any present and future actual or threatened
litigation or administrative proceeding involving the Company that relates to
events, occurrences or conduct occurring (or
-9-
<PAGE>
claimed to have occurred) during the period of Sanford's employment by the
Company. This cooperation by Sanford shall include, but not be limited to:
(i) making himself reasonably available for interviews and
discussions with the Company's counsel as well as for depositions and trial
testimony;
(ii) if depositions or trial testimony are to occur, making himself
reasonably available and cooperating in the preparation therefor as and to
the extent that the Company or the Company's counsel reasonably requests;
(iii) refraining from impeding in any way the Company's prosecution
or defense of such litigation or administrative proceeding; and
(iv) cooperating fully in the development and presentation of the
Company's prosecution or defense of such litigation or administrative
proceeding.
(b) Sanford shall be reimbursed by the Company for reasonable travel,
lodging, telephone and similar expenses incurred in connection with such
cooperation, which the Company shall reasonably endeavor to schedule at times
not conflicting with the reasonable requirements of any employer of Sanford, or
with the requirements of any third party with whom Sanford has a business
relationship permitted hereunder that provides remuneration to Sanford. Sanford
shall not unreasonably withhold his availability for such cooperation.
(c) Upon the Changeover Date, Sanford will update the Company as to
the status of all pending matters for which he was responsible or otherwise
involved.
19. Mutual Nondisclosure of Agreement. Sanford and his heirs,
---------------------------------
executors, successors, assigns, representatives, and attorneys and the Company,
its officers, directors, employees, attorneys and advisors shall hold the terms
of this Agreement in strict confidence and shall not communicate, reveal, or
disclose the terms of this Agreement to any other persons except as required by
law or regulation and to Sanford's immediate family, to legal counsel, to tax
consultants, and to the Corporate Controller and the Human Resources Directors,
all of whom shall be instructed by Sanford and/or the Company similarly to hold
the terms of this Agreement in the strictest confidence, and as otherwise
required by law. Notwithstanding the foregoing, the parties acknowledge that
this Agreement will be required to be filed with the Securities and Exchange
Commission.
20. Warranties and Representations.
------------------------------
(a) Steris represents and warrants that the Board of Directors
of Steris has authorized the person whose signature appears below to
execute this Agreement to bind the Company to all provisions contained in
this Agreement.
(b) Steris warrants and represents to Sanford that he continues
to be insured by Steris' officers and directors liability insurance policy
("D&O Policy") for any current and/or future claims brought for any act
which occurred or may occur while he was or is an officer, director or
Special Advisor of Steris; and that
-10-
<PAGE>
he continues to be indemnified, pursuant to the regulations, bylaws and
resolutions of the Corporation for any claims against him arising out of
his duties as Chairman of the Board, President and Chief Executive Officer
and as Special Advisor.
21. Non-Disparagement. Neither party shall make any statements,
-----------------
written or oral, to any third party which disparages, criticizes, discredits or
otherwise operates to the detriment of Sanford or the Company, its officers,
directors and employees and their respective business reputation and/or
goodwill, except as required by law or regulation.
22. Invalidity. The invalidity or unenforceability of any one (1)
----------
provision or part of this Agreement shall not render any other provision(s) or
part(s) of this Agreement invalid or unenforceable and that such other
provision(s) or part(s) shall remain in full force and effect.
23. Entire Agreement. This Agreement contains the entire agreement
----------------
between the parties to this Agreement, and there are no understandings between
the parties other than those specifically and expressly set forth in this
Agreement. Upon the Effective Date of this Agreement, this Agreement replaces
and supersedes any prior employment agreements between Steris and Sanford
(including, without limitation, the Employment Agreement, dated as of March 21,
2000, between Sanford and STERIS), except that the Agreement, dated July 23,
1998, between the Company and Sanford shall continue until the Changeover Date
and then shall terminate and be of no further force or effect. Sanford agrees,
recognizes and acknowledges that any employment agreement is made null and void
by reason of this Agreement. This Agreement shall not be amended or modified in
any manner except upon written agreement by the parties. Notwithstanding the
foregoing, the Promissory Note shall remain in full force and effect until paid
or forgiven as provided in Section 3 of this Agreement, and each Stock Option
Award granted under the Option Plans between the parties shall remain in full
force and effect throughout the Transition Period and Post-CEO Employment
Period.
24. Originals. Four (4) copies of this Agreement shall be executed
---------
as "originals" so that both Sanford and Steris and their counsel may possess an
"original" fully-executed document. The parties to this Agreement expressly
agree and recognize that each fully-executed "original" shall be binding and
enforceable as an original document representing the agreements in this
Agreement.
25. Governing Laws. This Agreement shall be governed and interpreted
--------------
pursuant to the laws of the State of Ohio.
26. Successors to the Company. Except as otherwise provided in this
-------------------------
Agreement, this Agreement shall be binding upon and inure to the benefit of the
Company and any successor of the Company, including, without limitation, any
corporation which acquires directly or indirectly all or substantially all of
the assets of the Company whether by merger, consolidation, sale or otherwise
(and such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but shall not otherwise be assignable by the Company.
-11-
<PAGE>
27. Arbitration. In order to resolve any dispute which may arise out
-----------
of or be related to this Agreement, Sanford shall have the right, in addition to
all other rights and remedies provided by law, at his election, to seek
arbitration in Cleveland, Ohio, under the rules of the American Arbitration
Association, as to claims pursued by him, by serving a notice to arbitrate upon
the Company. Notwithstanding the foregoing, the parties shall have the same
rights of discovery under the Ohio Rules of Civil Procedure as if the dispute
had been filed as an original action in an Ohio court of original jurisdiction.
[REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
-12-
<PAGE>
IN WITNESS WHEREOF, Sanford and Steris have executed this Agreement
effective and binding as of the Effective Date of this Agreement.
/s/ Bill R. Sanford
-------------------
Bill R. Sanford
Dated: June 19, 2000
STERIS CORPORATION
By: /s/ David C. Dvorak
-----------------------
Title: Senior Vice President, General Counsel,
and Secretary
Dated: June 19, 2000
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>8
<FILENAME>0008.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT BETWEEN STERIS AND VINNEY
<TEXT>
<PAGE>
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (this "Agreement") is made as of March 21, 2000
(the "Effective Date"), between STERIS Corporation, an Ohio Corporation
("STERIS"), and Les C. Vinney ("Executive").
In consideration of the mutual covenants contained in this Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
in this Agreement acknowledged, the parties to this Agreement agree as follows:
A. President and Chief Operating Officer
-------------------------------------
1. Position and Duties.
-------------------
(a) Effective March 18, 2000, Executive shall serve as the Chief
Operating Officer of STERIS and shall have the normal duties, responsibilities
and authority of an executive serving in such position, subject to the power of
the STERIS Board of Directors (the "Board") to expand or limit such duties,
responsibilities and authority, either generally or in specific instances.
Executive shall have the title President of STERIS, subject to the power of the
Board to change such title from time to time. On or prior to the date of this
Agreement, Executive shall have been elected by the Board to fill the current
vacancy on Class I of the Board pursuant to Article II, Section 2 of the Amended
and Restated Regulations of STERIS.
(b) Executive shall devote his best efforts and his full business time
and attention (except for permitted vacation periods, reasonable periods of
illness or other incapacity, and provided such activities do not have more than
a de minimis effect on Executive's performance of his duties under this
-- -------
Agreement, participation in charitable and civic endeavors and management of
Executive's personal investments and business interests) to the business and
affairs of STERIS. Executive shall perform his duties and responsibilities to
the best of his abilities in a diligent, trustworthy, businesslike and efficient
manner.
(c) Executive shall perform his duties and responsibilities
principally in the Cleveland metropolitan area, and shall not be required to
travel outside that area any more extensively than required in the ordinary
course of the business of STERIS.
2. Compensation and Benefits.
-------------------------
(a) Base Salary. Effective April 1, 2000, STERIS agrees to pay
-----------
Executive a base salary of $400,000.00 per annum. Executive's base salary may be
increased by the Board from time to time. Until April 1, 2000, Executive shall
be paid
<PAGE>
the base salary outlined in his July 13, 1999 letter agreement with STERIS.
Executive shall also receive the $75,000 bonus for the quarter ending March 31,
2000.
(b) Annual Bonus. Effective April 1, 2000, Executive will be a
------------
participant in the STERIS Management Incentive Compensation Plan ("MICP").
Executive shall have the opportunity for the achievement of the full year bonus
target level of $320,000 based upon the overall corporate target established by
the Board for fiscal year 2001. Executive's entitlement to bonus compensation
for fiscal years after 2001 shall be pursuant to the MICP and may be increased
by the Board from time to time.
(c) Stock Options. Executive will be eligible for a non-qualified
-------------
stock option grant of not less than 250,000 common shares at the next such date
that other STERIS executives are granted options. Executive shall be eligible
for other option grants consistent with company practices. The option will be
evidenced by an agreement (The Stock Option Agreement) in the standard form of
option agreement used by STERIS.
(d) Expense Reimbursement. STERIS shall reimburse Executive for all
---------------------
reasonable expenses incurred by him in the course of performing his duties under
this Agreement which are consistent with STERIS' policies in effect from time to
time with respect to travel, entertainment and other business expenses, subject
to STERIS' requirements with respect to reporting and documentation of such
expenses.
(e) Standard Executive Benefits Package. In addition to the base
-----------------------------------
salary and any bonus payable to Executive pursuant to this Agreement, Executive
shall continue to be entitled to participate in and receive on the same basis
any and all benefits made available to other executives of STERIS. STERIS will
continue to work with its insurance benefits provider to coordinate Executive's
medical and dental coverage under Executive's current program with Executive's
former employer and shall reimburse Executive for his cost of membership at The
Union Club (or similar club) and a country club of his choice.
(f) Indemnification. With respect to Executive's acts or failures to
---------------
act during the Employment Period in his capacity as a director, officer,
employee or agent of STERIS, Executive shall be entitled to indemnification from
STERIS, and to liability insurance coverage, on the same basis as other
directors and officers of STERIS.
3. Change in Control Agreement. The Parties to this Agreement have
---------------------------
entered into a Change in Control Agreement effective March 21, 2000.
B. President and Chief Executive Officer
-------------------------------------
1. Effective Date. It is anticipated that Executive will be appointed to
--------------
serve as Chief Executive Officer of STERIS on or before the date of the year
2000 annual meeting of the shareholders of STERIS currently scheduled for July
21, 2000. On such
2
<PAGE>
appointment, Executive shall have the normal duties, responsibilities and
authority, of an executive serving in such position, subject to the power of the
Board to expand or limit such duties, responsibilities and authority, either
generally or in specific instances. Executive shall continue to act as President
of STERIS and shall maintain his position on the Board. From the effective date,
Executive's compensation will be as noted below.
2. Base Salary. Upon his appointment as Chief Executive Officer, STERIS
-----------
agrees to pay Executive a base salary of $575,000 per annum. Executive's base
salary may be increased by the Board from time to time.
3. Bonus. Upon Executive's appointment as Chief Executive Officer,
-----
Executive shall be a participant in the Senior Executive Management Incentive
Compensation Plan and shall have the opportunity for the achievement of the full
year bonus target level of $575,000, based upon overall corporate achievement
for fiscal year 2001. Executive's entitlement to bonus compensation for fiscal
years after 2001 shall be pursuant to the Senior Executive Management Incentive
Compensation Plan and may be increased by the Board from time to time.
4. Proration of Fiscal Year 2001 Bonus. For fiscal year 2001, the amount
-----------------------------------
of any bonus opportunity for Executive shall be prorated based upon a target
level of $320,000 for the number of days Executive serves as Chief Operating
Officer and on a target level of $575,000 for the number of days Executive
serves as Chief Executive Officer prior to April 1, 2001, both periods prorated
based on a 365 day year.
5. Stock Options. STERIS will grant Executive non-qualified stock options
-------------
to purchase additional shares of STERIS' common stock in accordance with the
customary business practices.
6. Benefits and Expenses Reimbursement. Upon Executive's appointment as
-----------------------------------
Chief Executive Officer, he shall continue to receive the benefits and expense
reimbursements he received as Chief Operating Officer.
7. Change of Control. The Change of Control Agreement signed by the
-----------------
parties on March 21, 2000, shall remain in effect upon Executive's appointment
as Chief Executive Officer.
8. Failure to Appoint by the Date of the Year 2000 Annual Meeting of
-----------------------------------------------------------------
Shareholders. If Executive has not been appointed Chief Executive Officer on or
- ------------
prior to the date of the year 2000 annual meeting of Shareholders, Executive
shall receive a lump sum payment of (i) two years of his annual base salary as
Chief Operating Officer plus (ii) the Chief Operating Officer target bonus
amount of $320,000 Additionally, Executive shall receive:
(a) For the 12 months following the date of the year 2000 annual
meeting of Shareholders, all benefits the Executive received as
Chief Operating Officer;
(b) The value of any accrued, but unused vacation.
3
<PAGE>
9. Miscellaneous. If the Executive is appointed Chief Executive Officer,
-------------
the parties will mutually agree to the terms of Executive's separation as STERIS
Corporation's Chief Executive Officer at a future date.
C. Notices
-------
Any notice provided for in this Agreement shall be in writing and shall be
either personally delivered, or by recognized delivery service, to the recipient
at the address below indicated:
Notices to Executive:
--------------------
Les C. Vinney
85 West Juniper Lane
Moreland Hills, Ohio 44022
Notices to STERIS:
-----------------
STERIS Corporation
5960 Heisley Road
Mentor, Ohio 44060
Attn: General Counsel
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when delivered.
D. Severability
------------
Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained in this
Agreement.
E. Complete Agreement
------------------
This Agreement, the Change of Control Agreement described in Paragraphs A.4
and B.7 and any Stock Option Agreement and the attached Non-Disclosure and
Non-Competition Agreement executed or to be executed in accordance with the
terms of this Agreement, embody the complete Agreement and understanding between
the parties with respect to the subject matter of this Agreement and effective
as of its date supersedes and preempts any prior understanding, agreements or
representations by or between the parties, written or oral, which may have
related to the subject matter of this agreement in any way.
4
<PAGE>
F. Counterparts
------------
This Agreement may be executed in separate counterparts, each of which
shall be deemed to be an original and both of which taken together shall
constitute one and the same agreement.
G. Successors and Assigns
----------------------
This Agreement shall bind and inure to the benefit of and be enforceable by
Executive, STERIS and their respective heirs, executors, personal
representatives, successors and assigns, except that neither party may assign
any of his or its rights or delegate any of his or its obligations hereunder
without the prior written consent of the other party. Executive hereby consents
to the assignment by STERIS of all of its rights and obligations hereunder to
any successor to STERIS by merger or consolidation or purchase of all or
substantially all of STERIS' assets; in each case provided such transferee or
successor assumes the liabilities of STERIS hereunder.
H. Choice of Law
-------------
This Agreement shall be governed by the internal law, and not the law of
conflicts, of the State of Ohio.
I. Amendment and Waiver
--------------------
The provisions of this Agreement may be amended or waived only with the
prior written consent of STERIS and Executive, and no course of conduct or
failure or delay in enforcing the provisions of this Agreement shall affect the
validity, binding effect or enforceability of this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first written above.
STERIS Corporation
By: /s/ David C. Dvorak
--------------------------------------
David C. Dvorak
Its: Senior Vice President and General
Counsel
/s/ Les C. Vinney
-----------------------------------------
LES C. VINNEY
5
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22
<SEQUENCE>9
<FILENAME>0009.txt
<DESCRIPTION>LETTER AGREEMENT BETWEEN STERIS AND KERESMAN
<TEXT>
<PAGE>
EXHIBIT 10.22
Personal and Confidential
August 23, 1999
Michael A. Keresman, III
7753 Rutland Drive
Mentor, OH 44060
Dear Mike:
This letter agreement sets forth the agreement we have reached regarding the
termination of your status as an officer of STERIS Corporation ("STERIS"), your
continued part-time employment with STERIS after the termination of your officer
status, the ultimate termination of your employment with STERIS, the
compensation and benefits to be paid to you pursuant to this Agreement, and the
waiver and release that is part of this Agreement. You should review this
Agreement with legal counsel of your choice to be certain that you understand
and agree with all of the provisions that are contained in this Agreement.
1. Cessation of Officer Status. Your last day of employment as an officer of
STERIS will be August23, 1999. By execution of this Agreement, you hereby resign
as an officer of STERIS and as an officer of each subsidiary or other affiliate
of STERIS as to which you have heretofore been an officer. After August 23,
1999, you will not be an officer of STERIS or of any subsidiary or affiliate of
STERIS and you will not have, nor will you hold yourself out as having, any
authority to bind STERIS or any of its subsidiaries or affiliates in any manner.
2. Part-Time Employment. STERIS hereby offers and, by signing this Agreement,
you hereby accept a part-time position as an employee of STERIS (but not as an
officer of STERIS) commencing on August 24, 1999. As a part-time employee of
STERIS you will report directly and only to Bill R. Sanford or such other
officer of STERIS as Mr. Sanford may designate and you shall perform such duties
as Mr. Sanford or his designee may from time to time assign to you. Unless
earlier terminated as provided in the last sentence of this paragraph, your
part-time employment with STERIS will continue through September 30, 2000, and
shall thereupon terminate without further action by either STERIS or you. Your
part-time employment with STERIS may be terminated by STERIS for cause (as
determined by STERIS in its sole discretion) upon 30 days advance notice.
3. Compensation. In consideration of your execution of this Agreement, your
part-time employment with STERIS, and your observance of all of the terms and
conditions set forth herein, STERIS will pay to you the following amounts:
a. Salary through September 30, 1999. Through September 30, 1999 (the end
of the second quarter of the fiscal year ending March 31, 2000),
STERIS will pay salary to you at the same rate and at the same times
as if you had remained an officer of STERIS through that date with the
same base salary that was in effect for you immediately before the
execution of this Agreement.
b. Bonus. STERIS will pay a bonus to you under the Management Incentive
Compensation Plan ("MICP") with respect to the second quarter of
fiscal 2000 on or about November 15, 1999, in
<PAGE>
Mr. Michael A. Keresman, III
August 23, 1999
Page 2
the same manner as it makes payments to other MICP participants on or
about that date (notwithstanding the fact that you are no longer
employed by STERIS as an officer on that date). You will receive no
further bonus payments after that second quarter payment.
c. Salary after September 30, 1999. Commencing on October 1, 1999, and
continuing thereafter for so long as you continue in its part-time
employ, STERIS will pay salary to you at the rate of $20,000 per
month, payable in accordance with STERIS's normal payroll procedures.
4. Medical Insurance Coverage. In further consideration of your execution of
this Agreement and your observance of all of the terms and conditions set forth
herein, STERIS will provide to you and your family full family medical insurance
coverage (at the same levels and on the same employee contribution basis as
applicable to full time associates of STERIS) through September 30, 2000. After
September 30, 2000, you will have such rights to continuing medical insurance
coverage as STERIS is required to provide under Part 6 of Title I of ERISA
(commonly referred to as "COBRA").
5. STERIS Equipment and Property. You agree to return to STERIS any and all
STERIS equipment and property of any kind whatsoever that you may have in your
possession by not later than August 25, 1999. You will be permitted access to
your former office at STERIS to obtain your personal effects through August 25,
1999, and you will return all STERIS equipment and property not later than that
time. In compliance with the requirements set forth above in this Section 5, you
will not remove from any STERIS facility or retain in your possession any
materials that contain any STERIS confidential or proprietary information, but
you will return any and all such materials to STERIS not later than August 25,
1999.
6. Termination of Change of Control Agreement. The Change of Control Agreement,
dated as of July 23, 1998, between you and STERIS (the "Change of Control
Agreement") is hereby terminated. From and after the date of execution of this
Agreement, you will have no rights whatsoever under the Change of Control
Agreement. You hereby waive and unconditionally release STERIS from any and all
claims whatsoever arising under or with respect to that Change of Control
Agreement.
7. Stock Options. You hold certain options issued under various STERIS stock
option plans for STERIS Common Shares. While you remain in the employ of STERIS,
your rights under those options that have not yet fully vested will continue to
vest in accordance with the terms of the relevant option agreements and plans.
Under the terms of the various option plans, you will be entitled to exercise
vested options while you are an employee of STERIS (including while you are a
part time employee of STERIS pursuant to this Agreement) and, provided your
employment is not terminated for cause, you will be entitled to exercise those
options, to the extent vested on your last day of employment, at any time within
three months of that last day of employment. However, under the terms of
STERIS's insider trading policy, you will be entitled to exercise those options
on a cashless basis only during an open window period. By signing this
Agreement, you acknowledge that you have received the summary of these
provisions that is attached to this Agreement as Exhibit A.
8. Stock Transfer Restrictions. Even though you will no longer be an officer of
STERIS or of any of its subsidiaries or other affiliates, you shall not take any
action with respect to STERIS Common Shares that is in violation of STERIS's
policies with respect to trading by STERIS officers in STERIS Common Shares.
STERIS will not prevent you from making any sale of STERIS Common Shares or from
<PAGE>
Mr. Michael A. Keresman, III
August 23, 1999
Page 3
exercising any options for STERIS Common Shares on a cashless basis during any
part of any open window period during which any officer of STERIS may sell
STERIS Common Shares. By signing this Agreement, you acknowledge that you have
received the summary of the application of those rules that is attached to this
Agreement as Exhibit B and agree that you will comply with all of the
restrictions and procedures reflected on Exhibit B.
9. Noncompetition and Nondisclosure. STERIS and you are parties to several
Nondisclosure and Noncompetition Agreements, entered into from time to time. By
signing this Agreement you acknowledge that those agreements are in full force
and effect and will remain in effect according to their respective terms both
during your part-time employment and after the termination of your employment
with STERIS.
10. Confidentiality, Cooperation. In consideration of the payments and benefits
to be provided to you by STERIS pursuant to this Agreement:
a. You acknowledge that as an employee of STERIS you possess confidential
and proprietary information relating to STERIS and you agree not to
use or to reveal to any other person or entity any confidential or
proprietary information of STERIS, except as may be required by law.
You agree that if you believe you are required by law to reveal any
such confidential or proprietary information, you will first afford
STERIS the opportunity to raise any objection that STERIS may have to
the purported requirement that you reveal such information.
b. You will not reveal any information regarding the substance of this
Agreement to any person or entity other than (i) your wife, (ii) your
personal accountant, and/or (iii) counsel retained by you in
connection with this Agreement and you will be responsible to see to
it that none of these listed individuals reveals any information
regarding the substance of this Agreement to any other person or
entity.
c. You will not disparage, attempt to discredit, or otherwise call into
disrepute STERIS, its affiliates, successors, assigns, officers,
directors, employees, agents (in their capacity as agents of STERIS),
or any of their systems, products, services or technologies in any
manner that would damage the business or reputation of STERIS or its
affiliates, successors, assigns, officers, directors, employees, or
agents. The prohibition in the immediately preceding sentence applies
to all statements that disparage, discredit, or call into disrepute,
without regard to the truth or falsehood of the statement.
d. You will not assist any party other than STERIS in any litigation or
investigation against STERIS or its affiliates, successors, assigns,
officers, directors, employees, or agents with respect to any facts or
circumstances existing at any time on or before the date of
termination of your employment, except as maybe required by law. You
agree that if you believe any such action is required by law, you will
use your best efforts to first afford STERIS the opportunity to raise
any objection that STERIS may have to the purported requirement that
such action be taken by you.
Your obligations under this Section 10 shall remain in effect without any
limitation as to time.
<PAGE>
Mr. Michael A. Keresman, III
August 23, 1999
Page 4
11. Release. In consideration for STERIS's agreement to provide the compensation
and benefits set forth in this Agreement:
a. For yourself, your heirs, executors, administrators, successors, and
assigns, you hereby release and discharge forever STERIS, its
affiliates, successors, assigns, officers, directors, employees, and
agents from any and all claims, demands, causes of action, losses, and
expenses of every nature whatsoever, whether known or unknown, arising
out of or in any way connected with any facts or circumstances
occurring before or existing on the date of this Agreement or arising
out of or in any way connected with your employment by STERIS,
including, without limitation, any matter related in any way to the
termination of your employment with STERIS, and further including,
without limitation, any breach of contract (express or implied),
promissory estoppel, wrongful discharge, intentional infliction of
emotional harm, defamation, libel, slander, or other tort, or
violation of any federal, state, or municipal statute or ordinance
relating to discrimination in employment, including but not limited to
Title VII of the Civil Rights Act of 1964(42 U.S.C.ss.2000(e) et
seq.), Ohio Revised Code Section 4112 et seq., Americans with
Disabilities Act of 1990, 42 U.S.C.ss.12101, and all state laws of
similar import.
b. You agree that by signing this Agreement, you are also knowingly and
voluntarily waiving any and all claims or causes of action you may
have under the Federal Age Discrimination in Employment Act of 1967
(29 U.S.C.ss.621 et seq.) and all state laws of similar import.
c. You agree not to bring any suit or action in any court or
administrative agency against any of the beneficiaries of this release
arising out of or relating to the subject matter of this release.
Nothing in this Section 11 shall release STERIS from its obligations under this
Agreement or prevent you from bringing an action to enforce or seek damages for
breach of this Agreement by STERIS.
12. Effect of Breach by You. If you breach any of the terms of this Agreement,
(a) STERIS will be relieved of its obligation to make any further payments or to
provide any further benefits to you under this Agreement and (b) you will be
required to repay to STERIS the full amount of any and all salary payments made
to you by STERIS after the date of this Agreement STERIS will also be entitled
to an injunction against further breach by you and to money damages suffered by
it or any of the beneficiaries of the release set forth in Section 11 above as a
result of any such breach by you.
13. Legal Fees If either party to this Agreement brings any suit or action to
enforce or seek damages for breach of this Agreement, the court shall have the
authority to award to the prevailing party recovery of his or its reasonable
legal fees and expenses incurred in the suit or action.
14. Governing Law; Venue. This Agreement will be governed by the laws of the
State of Ohio applicable to contracts made and to be performed entirely within
that state. Any suit, action, or other legal proceeding arising out of or
relating to this Agreement shall be brought in the Court of Common Pleas of Lake
County, Ohio. STERIS and you each (a) consent to the jurisdiction of that court
in any such suit, action, or proceeding and (b) waive, to the fullest extent
permitted by applicable law, any objection which either may have to the laying
of venue of any such suit, action, or proceeding in that court and any claim
that any such suit, action, or proceeding has been brought in an inconvenient
forum.
<PAGE>
Mr. Michael A. Keresman, III
August 23, 1999
Page 5
15. Withholding. All payments to be made by STERIS pursuant to this Agreement
are subject to applicable federal, state, and local tax withholding.
16. Entire Agreement, Binding Nature. This Agreement sets forth the entire
agreement between you and STERIS regarding the subject matter and supersedes all
prior agreements and understandings, whether oral or written, between you and
STERIS with respect to the subject matter hereof. This Agreement shall be
binding upon and inure to the benefit of you and your heirs, executors,
administrators, successors, and assigns and STERIS and its successor and
assigns.
Sincerely,
STERIS Corporation
By /s/ Bill R. Sanford
--------------------------------
Bill R. Sanford
Chairman, President and Chief
Executive Officer
I hereby accept and agree to all of the terms of the above Agreement.
/s/ Michael A. Keresman III
- ------------------------------------
MICHAEL A. KERESMAN, III
August 24, 1999
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23
<SEQUENCE>10
<FILENAME>0010.txt
<DESCRIPTION>LETTER AGREEMENT BETWEEN STERIS AND MAGULSKI
<TEXT>
<PAGE>
EXHIBIT 10.23
Personal and Confidential
- -------------------------
March 31, 2000
Mr. Thomas J. Magulski
24151 Fairway Drive
Kansasville, Wisconsin 53139
Dear Tom:
This letter agreement ("Agreement") summarizes the recent discussion with Bill
R. Sanford regarding your relationship with STERIS Corporation ("STERIS"), and
sets forth the agreement you have reached with STERIS regarding your resignation
as an officer of STERIS, your continued part-time employment with STERIS, the
ultimate termination of your employment relationship with STERIS, the benefits
STERIS will provide to you as consideration for the execution of this Agreement,
and the waiver and release that is part of this Agreement. You should review
this Agreement with legal counsel of your choice to be certain that you
understand and agree with all of the provisions that are contained in this
Agreement.
1. Officer Status. Your last day of employment as an officer of STERIS will be
March 31, 2000. As of that date, your resignation as an officer of STERIS
will be effective. After March 31, 2000, you will not have, nor will you
hold yourself out as having, any authority to bind STERIS or any of its
subsidiaries or affiliates in any manner.
2. Part-Time Employment. STERIS hereby offers and you hereby accept a
part-time position as an employee of STERIS commencing on April 1, 2000. As
a part-time employee you will report directly and only to David C. Dvorak,
or such other officer of STERIS as Mr. Dvorak may designate, and you shall
perform such duties as Mr. Dvorak or his designee may from time to time
assign to you that are consistent in nature with the duties that you
previously performed as an officer of STERIS. To the extent possible, all
such duties may be performed by you in your state of residence. Unless
earlier terminated as provided in the last sentence of this Section 2, your
part-time employment with STERIS will continue through September 30, 2001,
and shall thereupon terminate without further action or notice by either
STERIS or you. Your part-time employment with STERIS may be terminated by
STERIS for cause, as determined by STERIS in its sole discretion, upon
thirty (30) days advance notice.
3. Compensation. In consideration of your execution of this Agreement and the
Waiver and Release referenced in Section 12(b), your part-time employment
with STERIS, and your observance of the terms and conditions set forth
herein, STERIS will pay to you the following amounts:
a. Unpaid Salary. All unpaid base salary accrued through March 31, 2000.
b. Salary through September 30, 2001. Commencing on April 1, 2000 and
continuing thereafter for so long as you continue in STERIS's
part-time employ, STERIS will pay salary to you at the annual rate of
Two Hundred Twenty-Three Thousand Three Hundred Thirty-Four Dollars
($223,334), less applicable taxes and deductions, payable in
accordance with STERIS's normal payroll procedures on each regularly
scheduled payroll payment date for STERIS's executive officers.
<PAGE>
4. Relocation. STERIS will assist you with the relocation of you and your
family back to Milwaukee, Wisconsin, pursuant to STERIS's relocation policy
in effect as of the date of this Agreement.
5. Medical Insurance Coverage. In further consideration of your execution of
this Agreement and your observance of all of the terms and conditions set
forth herein, STERIS will provide to you and your family full family
medical insurance coverage (at the same levels and on the same employee
contribution basis as applicable to full time Associates of STERIS) for so
long as you continue in STERIS's part-time employ. After your part-time
employment is terminated, you will have such rights to continuing medical
insurance coverage as STERIS is required to provide under Part 6 of Title I
of ERISA (commonly referred to as "COBRA").
6. STERIS Equipment and Property. You agree to return to STERIS any and all
STERIS equipment and property of any kind whatsoever that you may have in
your possession.
7. Termination of Change of Control Agreement. The Change of Control
Agreement, dated as of January 4, 1999, between you and STERIS (the "Change
of Control Agreement") is hereby terminated. From and after the date of
execution of this Agreement, you will have no rights whatsoever under the
Change of Control Agreement. You hereby waive and unconditionally release
STERIS from any and all claims whatsoever arising under or with respect to
that Change of Control Agreement.
8. Stock Options. You hold certain options issued under various STERIS stock
option plans for STERIS Common Shares. Your rights under those options that
have not yet fully vested will continue to vest in accordance with the
terms of the relevant option agreements and plans. Under the terms of the
various option plans, you will be entitled to exercise vested options while
you are a part-time employee of STERIS and, provided your employment is not
terminated for cause, you will be entitled to exercise those options, to
the extent vested on your last day of employment, at any time within three
(3) months after that last day of employment. However, under the terms of
STERIS's Insider Trading Policy, you will be entitled to exercise those
options on a cashless basis only during an open window period. By signing
this Agreement, you acknowledge that you have received the summary of these
provisions that is attached to this Agreement as Exhibit A.
9. Stock-Transfer Restrictions. Even though you will no longer be an officer
of STERIS or of any of its subsidiaries or other affiliates, you shall not
take any action with respect to STERIS Common Shares that is in violation
of STERIS's policies with respect to trading by STERIS officers in STERIS
Common Shares so long as those polices apply to you. STERIS will not
prevent you from making any sale of STERIS Common Shares or from exercising
any options for STERIS Common Shares on a cashless basis during any part of
any open window period during which any officer of STERIS may sell STERIS
Common Shares. By signing this Agreement, you acknowledge that you have
received the summary of the application of those rules that is attached to
this Agreement as Exhibit B and agree that you will comply with all of the
restrictions and procedures reflected on Exhibit B.
10. Noncompetition and Nondisclosure. STERIS and you are parties to several
Nondisclosure and Noncompetition Agreements, entered into from time to
time. By signing this Agreement you acknowledge that those agreements are
in full force and effect and will remain in effect according to their
respective terms after the termination of your employment with STERIS.
Page 2
<PAGE>
11. Confidentiality, Cooperation. In consideration of the mutual covenants and
agreements set forth herein, including, without limitation, the payments
and benefits to be provided to you by STERIS pursuant to this Agreement:
a. You acknowledge that as an employee of STERIS you possess confidential
and proprietary information relating to STERIS and you agree not to
use or to reveal to any other person or entity any confidential or
proprietary information of STERIS, except as may be required by law
and except to counsel retained by you in connection with this
Agreement, and you will make reasonable efforts to see to it that such
counsel does not reveal any such confidential or proprietary
information. You agree that if you believe you are required by law to
reveal any such confidential or proprietary information, you will
first use best efforts to afford STERIS a reasonable opportunity to
raise any objection that STERIS may have to the purported requirement
that you reveal such information.
b. You will not reveal any information regarding the substance of this
Agreement to any persons or entities other than (i) your wife, (ii)
your personal accountant, and/or (iii) counsel retained by you in
connection with this Agreement, and you will make reasonable efforts
to see to it that none of these listed individuals reveals any
information regarding the substance of this Agreement to any other
person or entity. Likewise, STERIS will not reveal any information
regarding the substance of this Agreement to any persons or entities
except as specifically required for fiscal 2000 reporting purposes, or
other reporting purposes, by applicable Securities and Exchange
Regulations, or as otherwise required by law.
c. You will not disparage, attempt to discredit, or otherwise call into
disrepute STERIS, its affiliates, successors, assigns, officers,
directors, employees, agents (in their capacity as agents of STERIS),
or any of their systems, products, services or technologies in any
manner that would damage the business or reputation of STERIS or its
affiliates, successors, assigns, officers, directors, employees, or
agents. The prohibition in the immediately preceding sentence applies
to all statements that disparage, discredit, or call into disrepute,
without regard to the truth or falsehood of the statement. In
addition, you will refrain from communicating to any person or entity
(other than those listed in paragraph b above) any information
regarding your job experience at STERIS except to the extent
reasonably required to discuss your performance at STERIS for purpose
of securing future employment. You will make reasonable efforts to see
that (i) none of the individuals listed in Section 11(b) above
communicates any such information to any other person or entity, and
(ii) none of the individuals or entities referred to in the prior
sentence communicates any such information to any other person or
entity except to the extent related to your employment-seeking
activities. In addition, you will refrain from communicating to any
person or entity any information regarding the circumstances and
issues that were related to your resignation as an officer of STERIS.
Likewise, STERIS will not, and will not authorize any of its
affiliates, successors, assigns, officers, directors, employees, and
agents to disparage, attempt to discredit, or otherwise call into
disrepute you, your abilities, or your reputation. The prohibition in
the immediately preceding sentence applies to all statements that
disparage, discredit, or call into disrepute, without regard to the
truth or falsehood of the statement.
d. You will not assist any party other than STERIS in any litigation or
investigation against
Page 3
<PAGE>
STERIS or its affiliates, successors, assigns, officers, directors,
employees, or agents with respect to any facts or circumstances
existing at any time on or before the date of termination of your
employment, except as may be required by law. You agree that if you
believe any such action is required by law, you will use your best
efforts to first afford STERIS the opportunity to raise any objection
that STERIS may have to the purported requirement that such action be
taken by you.
The obligations of the parties under this Section 11 shall remain in effect
without any limitation as to time.
12. Release by You. In consideration for STERIS's agreement to provide the
compensation and benefits set forth in this Agreement:
a. For yourself, your heirs, executors, administrators, successors, and
assigns, you hereby release and discharge forever STERIS, its
affiliates, successors, assigns, officers, directors, employees, and
agents from any and all claims, demands, causes of action, losses, and
expenses of every nature whatsoever, whether known or unknown, arising
out of or in any way connected with any facts or circumstances
occurring before or existing on the date of this Agreement or arising
out of or in any way connected with your employment by STERIS,
including, without limitation, any matter related in any way to the
termination of your employment with STERIS, and further including,
without limitation, any breach of contract (express or implied),
promissory estoppel, wrongful discharge, intentional infliction of
emotional harm, defamation, libel, slander, or other tort, or
violation of any federal, state, or municipal statute or ordinance
relating to discrimination in employment, including but not limited to
Title VII of the Civil Rights Act of 1964 (42 U.S.C.ss. 2000, et
seq.), Ohio Revised Code Section 4412 et seq., the Americans with
Disabilities Act of 1990 (42 U.S.C.ss.12101, et seq.), the Family and
Medical Leave Act (29 U.S.C.ss.2601, et seq.), and all state laws of
similar import.
b. You agree that by signing this Agreement, you are knowingly and
voluntarily waiving any and all claims or causes of action you may
have under the Federal Age Discrimination in Employment Act of 1967
(29 U.S.C.ss.621, et seq.), and all state laws of similar import. The
full Waiver and Release attached hereto as Exhibit C is hereby
incorporated by reference.
c. You agree not to bring any suit or action in any court or
administrative agency against any of the beneficiaries of this release
arising out of or relating to the subject matter of this release.
Nothing in this Section 12 shall release STERIS from its obligations under this
Agreement or prevent you from bringing an action to enforce or seek damages for
breach of this Agreement by STERIS.
Page 4
<PAGE>
13. Release by STERIS. In consideration for your agreements and covenants set
forth in this Agreement:
a. For itself and its affiliates, successors, assigns, officers,
directors, employees and agents (in their capacity as agents of
STERIS), STERIS hereby releases and discharges forever you, your
heirs, executors, administrators, successors, and assigns from any and
all claims, demands, causes of action, losses, and expenses of every
nature whatsoever, whether known or unknown, arising out of or in any
way connected with any facts or circumstances occurring before or
existing on the date of this Agreement or arising out of or in any way
connected with your employment by STERIS, and further including,
without limitation, any breach of contract (express or implied),
promissory estoppel, defamation, libel, slander, or other tort.
b. Also, for itself and its affiliates, successors, assigns, officers,
directors, employees, and agents (in their capacity as agents of
STERIS), STERIS hereby agrees not to bring any suit or action in any
court of administrative agency against any of the beneficiaries of
this release arising out of or relating to the subject matter of this
release.
Nothing in this Section 13 shall release you from your obligations under
this Agreement or prevent STERIS from bringing an action to enforce or seek
damages for breach of this Agreement by you.
14. Effect of Breach by You. If you breach any of the terms of this Agreement,
(a) STERIS will be relieved of its obligation to make any further payments
or to provide any further benefits to you under this Agreement and (b) you
will be required to repay to STERIS the full amount of any and all salary
payments made to you by STERIS after the date of this Agreement. STERIS
will also be entitled to an injunction against further breach by you and to
money damages suffered by it or any of the beneficiaries of the release set
forth in Section 12 above as a result of any such breach by you.
15. Effect of Breach by STERIS. If STERIS breaches any of the terms of this
Agreement, you will be entitled to an injunction against further breach by
STERIS and to money damages suffered by you or any of the beneficiaries of
the release set forth in Section 13 above as a result of any breach by
STERIS.
16. Legal Fees. If either party to this Agreement brings any suit or action to
enforce or seek damages for breach of this Agreement, the court shall have
the authority to award to the prevailing party recovery of his or its
reasonable legal fees and expenses incurred in the suit or action.
17. Governing Law; Venue. This Agreement will be governed by the laws of the
State of Ohio applicable to contracts made and to be performed entirely
within that state. Any suit, action, or other legal proceeding arising out
of or relating to this Agreement shall be brought in the Court of Common
Pleas of Lake County, Ohio. STERIS and you each (a) consent to the
jurisdiction of that court in any such suit, action, or proceeding and (b)
waive, to the fullest extent permitted by applicable law, any objection
which either may have to the laying of venue of any such suit, action, or
proceeding in that court and any claim that any such suit, action, or
proceeding has been brought in an inconvenient forum.
18. Withholding. All payments to be made by STERIS pursuant to this Agreement
are subject to applicable federal, state, and local tax withholding.
19. Entire Agreement, Binding Nature. This Agreement sets forth the entire
agreement between you and
Page 5
<PAGE>
STERIS regarding the subject matter and you will not be entitled to any
other consideration or benefits, including, without limitation, incentive
compensation, 401(k) contributions, disability insurance, or life
insurance. This Agreement supersedes all prior agreements and
understandings, whether oral or written, between you and STERIS with
respect to the subject matter hereof. This Agreement shall be binding upon
and inure to the benefit of you and your heirs, executors, administrators,
successors, and assigns and STERIS and its successor and assigns.
Sincerely,
STERIS Corporation
/s/ Gerard J. Reis
- -------------------------------------
By: Gerard J. Reis
Senior Vice President
Associate and Business Relations
I hereby accept and agree to all of the terms of the above Agreement.
/s/ Thomas J. Magulski
- -------------------------------------
THOMAS J. MAGULSKI
Page 6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.24
<SEQUENCE>11
<FILENAME>0011.txt
<DESCRIPTION>CREDIT AGREEMENT DATED JUNE 19, 2000
<TEXT>
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 10.24
CREDIT AGREEMENT
dated as of June 19, 2000
among
STERIS CORPORATION,
as Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as Banks,
and
KEYBANK NATIONAL ASSOCIATION,
as Administrative Agent,
LASALLE BANK NATIONAL ASSOCIATION,
as Documentation Agent,
and
BANK ONE, MICHIGAN,
as Syndication Agent.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS .......................................................1
ARTICLE II. AMOUNT AND TERMS OF CREDIT........................................15
SECTION 2.1. AMOUNT AND NATURE OF CREDIT.................................15
SECTION 2.2. CONDITIONS TO LOANS.........................................17
SECTION 2.3. PAYMENT ON NOTES, ETC.......................................19
SECTION 2.4. PREPAYMENT..................................................19
SECTION 2.5. FACILITY AND OTHER FEES.....................................20
SECTION 2.6. REDUCTION OF COMMITMENTS....................................20
SECTION 2.7. COMPUTATION OF INTEREST AND FEES;
DEFAULT RATE................................................21
SECTION 2.8. MANDATORY PAYMENT...........................................21
SECTION 2.9. EXTENSION OF COMMITMENT.....................................21
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR LOANS;
INCREASED CAPITAL; TAXES.........................................21
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC.......................21
SECTION 3.2. TAX LAW, ETC................................................22
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE
OR INTEREST RATE UNASCERTAINABLE............................23
SECTION 3.4. INDEMNITY...................................................23
SECTION 3.5. CHANGES IN LAW RENDERING LIBOR LOANS
UNLAWFUL....................................................23
SECTION 3.6. FUNDING.....................................................24
SECTION 3.7. CAPITAL ADEQUACY............................................24
ARTICLE IV. CONDITIONS PRECEDENT.............................................25
SECTION 4.1. NOTES.......................................................25
SECTION 4.2. GUARANTIES OF PAYMENT OF DEBT...............................25
SECTION 4.3. PLEDGE AGREEMENT............................................25
SECTION 4.4. OFFICER'S CERTIFICATES, RESOLUTIONS,
ORGANIZATIONAL DOCUMENTS....................................25
SECTION 4.5. LEGAL OPINION...............................................25
SECTION 4.6. GOOD STANDING AND FULL FORCE AN EFFECT
CERTIFICATES................................................25
SECTION 4.7. CLOSING AND LEGAL FEES; AGENT FEE LETTER;
CLOSING FEE LETTER..........................................25
SECTION 4.8. LIEN SEARCHES...............................................26
SECTION 4.9. TERMINATION OF EXISTING CREDIT AGREEMENT....................26
i
<PAGE>
PAGE
----
SECTION 4.10. NO MATERIAL ADVERSE CHANGE..................................26
SECTION 4.11. MISCELLANEOUS...............................................26
ARTICLE V. COVENANTS..........................................................26
SECTION 5.1. INSURANCE...................................................26
SECTION 5.2. MONEY OBLIGATIONS...........................................26
SECTION 5.3. FINANCIAL STATEMENTS........................................27
SECTION 5.4. FINANCIAL RECORDS...........................................28
SECTION 5.5. FRANCHISES..................................................28
SECTION 5.6. ERISA COMPLIANCE............................................28
SECTION 5.7. FINANCIAL COVENANTS.........................................28
SECTION 5.8. BORROWING...................................................29
SECTION 5.9. LIENS.......................................................30
SECTION 5.10. REGULATIONS U and X.........................................31
SECTION 5.11. INVESTMENTS AND LOANS.......................................31
SECTION 5.12. MERGER AND SALE OF ASSETS...................................32
SECTION 5.13. ACQUISITIONS................................................33
SECTION 5.14. STOCK REPURCHASE............................................34
SECTION 5.15. CAPITAL EXPENDITURES........................................34
SECTION 5.16. NOTICE......................................................34
SECTION 5.17. ENVIRONMENTAL COMPLIANCE....................................34
SECTION 5.18. AFFILIATE TRANSACTIONS......................................35
SECTION 5.19. CORPORATE NAMES.............................................35
SECTION 5.20. USE OF PROCEEDS.............................................35
SECTION 5.21 SUBSIDIARY GUARANTIES.......................................35
SECTION 5.22 PLEDGE OF STOCK OF FOREIGN SUBSIDIARIES.....................36
SECTION 5.23 AMENDMENT OF ORGANIZATIONAL DOCUMENTS.......................36
ARTICLE VI. REPRESENTATIONS AND WARRANTIES..................................36
SECTION 6.1. CORPORATE EXISTENCE; FOREIGN QUALIFICATION;
SUBSIDIARIES................................................36
SECTION 6.2. CORPORATE AUTHORITY.........................................36
SECTION 6.3. COMPLIANCE WITH LAWS........................................37
SECTION 6.4. LITIGATION AND ADMINISTRATIVE PROCEEDINGS...................37
SECTION 6.5. TITLE TO ASSETS.............................................37
SECTION 6.6. LIENS AND SECURITY INTERESTS................................37
SECTION 6.7. TAX RETURNS.................................................38
SECTION 6.8. ENVIRONMENTAL LAWS..........................................38
SECTION 6.9. CONTINUED BUSINESS..........................................38
SECTION 6.10. EMPLOYEE BENEFITS PLANS.....................................38
ii
<PAGE>
SECTION 6.11. CONSENTS OR APPROVALS.......................................39
SECTION 6.12. SOLVENCY....................................................39
SECTION 6.13. FINANCIAL STATEMENTS........................................40
SECTION 6.14. REGULATIONS.................................................40
SECTION 6.15. MATERIAL AGREEMENT..........................................40
SECTION 6.16. INTELLECTUAL PROPERTY.......................................40
SECTION 6.17. ACCURATE AND COMPLETE STATEMENTS............................40
SECTION 6.18. YEAR 2000 COMPLIANCE........................................40
ARTICLE VII. EVENTS OF DEFAULT................................................41
SECTION 7.1. PAYMENTS....................................................41
SECTION 7.2. SPECIAL COVENANTS...........................................41
SECTION 7.3. OTHER COVENANTS.............................................41
SECTION 7.4. REPRESENTATIONS AND WARRANTIES..............................41
SECTION 7.5. CROSS DEFAULT...............................................41
SECTION 7.6. ERISA DEFAULT...............................................41
SECTION 7.7. CHANGE IN CONTROL...........................................41
SECTION 7.8. MONEY JUDGMENT..............................................41
SECTION 7.9. VALIDITY OF LOAN DOCUMENTS..................................42
SECTION 7.10. SOLVENCY....................................................42
ARTICLE VIII. REMEDIES UPON DEFAULT...........................................42
SECTION 8.1. OPTIONAL DEFAULTS...........................................42
SECTION 8.2. AUTOMATIC DEFAULTS..........................................43
SECTION 8.3. OFFSETS.....................................................43
SECTION 8.4. EQUALIZATION PROVISION......................................43
ARTICLE IX. THE AGENT.......................................................44
SECTION 9.1. APPOINTMENT AND AUTHORIZATION...............................44
SECTION 9.2. NOTE HOLDERS................................................44
SECTION 9.3. CONSULTATION WITH COUNSEL...................................44
SECTION 9.4. DOCUMENTS...................................................44
SECTION 9.5. AGENT AND AFFILIATES........................................44
SECTION 9.6. KNOWLEDGE OF DEFAULT........................................44
SECTION 9.7. ACTION BY AGENT.............................................44
SECTION 9.8. NOTICES, DEFAULT, ETC.......................................45
SECTION 9.9. INDEMNIFICATION OF AGENT....................................45
SECTION 9.10. SUCCESSOR AGENT.............................................45
ARTICLE X. MISCELLANEOUS...................................................46
SECTION 10.1. BANKS' INDEPENDENT INVESTIGATION............................46
SECTION 10.2. NO WAIVER; CUMULATIVE REMEDIES..............................46
iii
<PAGE>
Page
----
SECTION 10.3. AMENDMENTS, CONSENTS........................................46
SECTION 10.4. NOTICES.....................................................47
SECTION 10.5. COSTS, EXPENSES AND TAXES...................................47
SECTION 10.6. INDEMNIFICATION.............................................47
SECTION 10.7. OBLIGATIONS SEVERAL;
NO FIDUCIARY OBLIGATIONS....................................48
SECTION 10.8. EXECUTION IN COUNTERPARTS...................................48
SECTION 10.9. BINDING EFFECT; BORROWER'S ASSIGNMENT.......................48
SECTION 10.10. BANK ASSIGNMENTS/PARTICIPATIONS.............................48
SECTION 10.11. DESIGNATION.................................................51
SECTION 10.12. SEVERABILITY OF PROVISIONS; CAPTIONS........................52
SECTION 10.13. INVESTMENT PURPOSE..........................................52
SECTION 10.14. ENTIRE AGREEMENT............................................52
SECTION 10.15. GOVERNING LAW; SUBMISSION TO JURISDICTION...................52
SECTION 10.16. LEGAL REPRESENTATION OF PARTIES.............................52
SECTION 10.17. JURY TRIAL WAIVER...........................................53
SCHEDULE 1 BANKS AND COMMITMENTS.......................................55
SCHEDULE 2 GUARANTORS OF PAYMENT.......................................56
EXHIBIT A REVOLVING CREDIT NOTE.......................................57
EXHIBIT B SWING LINE NOTE.............................................59
EXHIBIT C COMPLIANCE CERTIFICATE......................................61
EXHIBIT D NOTICE OF LOAN..............................................62
EXHIBIT E REQUEST FOR EXTENSION.......................................64
EXHIBIT F FORM OF ASSIGNMENT AND ACCEPTANCE
AGREEMENT...................................................65
<PAGE>
This CREDIT AGREEMENT (as the same may from time to time be amended,
restated or otherwise modified, this "Agreement") is dated as of the 19/th/ day
of June, 2000, among STERIS CORPORATION, an Ohio corporation, 5960 Heisley Road,
Mentor, Ohio 44060 ("Borrower"), the banking institutions named on Schedule 1
----------
hereto (collectively,"Banks" and, individually, "Bank"), KEYBANK NATIONAL
ASSOCIATION, 127 Public Square, Cleveland, Ohio 44114-1306, as administrative
agent for the Banks under this Agreement ("Agent"), BANK ONE, MICHIGAN, 600
Superior Avenue, 4th Floor, Cleveland, Ohio 44114, as syndication agent under
this Agreement ("Syndication Agent"), and LASALLE BANK NATIONAL ASSOCIATION, 135
South LaSalle Street, Chicago, Illinois 60603, as documentation agent
("Documentation Agent"). As used in this Agreement, the term "Agent" shall not
include Syndication Agent or Documentation Agent.
WITNESSETH:
WHEREAS, Borrower and the Banks desire to contract for the establishment of
credits in the aggregate principal amounts hereinafter set forth, to be made
available to Borrower upon the terms and subject to the conditions hereinafter
set forth;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Acquisition" shall mean any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of any Person, or any business or
division of any Person, (b) the acquisition of in excess of fifty percent (50%)
of the Voting Power of any Person, or (c) the acquisition of another Person
(other than a Company) by a merger or consolidation or any other combination
with such Person.
"Advantage"shall mean any payment (whether made voluntarily or
involuntarily, by offset of any deposit or other indebtedness or otherwise)
received by any Bank in respect of the Debt, if such payment results in that
Bank having less than its pro rata share of the Debt then outstanding, than was
the case immediately before such payment.
Affiliate" shall mean any Person, directly or indirectly, controlling,
controlled by or under common control with a Company and "control" (including
the correlative meanings, 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 Company,
whether through the ownership of voting securities, by contract or otherwise.
"Agent Fee Letter" shall mean the Agent Fee Letter between Borrower and
Agent, dated as of the Closing Date.
<PAGE>
"Applicable Facility Fee Rate" shall mean:
(a) for the period from the Closing Date through August 31, 2000, fifty
(50) basis points; and
(b) commencing with the financial statements for the fiscal quarter ending
June 30, 2000, the number of basis points set forth in the following matrix,
based upon the result of the computation of the Leverage Ratio, shall be used to
establish the number of basis points that will go into effect on September 1,
2000 and thereafter:
- --------------------------------------------------------------------------------
Applicable
Leverage Ratio Facility Fee Rate
- --------------------------------------------------------------------------------
Greater than or equal to 2.50 to 1.00 50 basis points
- --------------------------------------------------------------------------------
Greater than or equal to 2.00 to 1.00, but less than 2.50 to 40 basis points
1.00
- --------------------------------------------------------------------------------
Greater than or equal to 1.50 to 1.00, but less than 2.00 to 35 basis points
1.00
- --------------------------------------------------------------------------------
Greater than or equal to 1.00 to 1.00, but less than 1.50 to 30 basis points
1.00
- --------------------------------------------------------------------------------
Less than 1.00 to 1.00 25 basis points
- --------------------------------------------------------------------------------
Changes to the Applicable Facility Fee Rate shall be effective on the first day
of the month following the date upon which Agent received, or, if earlier,
should have received, pursuant to Section 5.3(a) and (b) hereof, the financial
statements of the Companies. The above matrix does not modify or waive, in any
respect, the requirements of Section 5.7 hereof, the rights of the Banks to
charge the Default Rate, or the rights and remedies of the Banks pursuant to
Articles VII and VIII hereof.
"Applicable Margin" shall mean:
(a) for the period from the Closing Date through August 31, 2000, one
hundred (100) basis points for Base Rate Loans and one hundred seventy-five
(175) basis points for LIBOR Loans; and
(b) commencing with the financial statements for the fiscal quarter ending
June 30, 2000, the number of basis points (depending upon whether Loans are
LIBOR Loans or Base Rate Loans) set forth in the following matrix, based upon
the result of the computation of the Leverage Ratio, shall be used to establish
the number of basis points that will go into effect on September 1, 2000 and
thereafter:
2
<PAGE>
- --------------------------------------------------------------------------------
Applicable Basis Points Applicable Basis Points
Leverage Ratio for Base Rate Loans for LIBOR Loans
- --------------------------------------------------------------------------------
Greater than or equal to 2.50
to 1.00 100 basis points 175 basis points
- --------------------------------------------------------------------------------
Greater than or equal to 2.00
to 1.00, but less than 2.50 75 basis points 160 basis points
to 1.00
- --------------------------------------------------------------------------------
Greater than or equal to 1.50
to 1.00, but less than 2.00 50 basis points 140 basis points
to 1.00
- --------------------------------------------------------------------------------
Greater than or equal to 1.00
to 1.00, but less than 1.50 25 basis points 120 basis points
to 1.00
- --------------------------------------------------------------------------------
Less than 1.00 to 1.00 0 basis points 100 basis points
- --------------------------------------------------------------------------------
Changes to the Applicable Margin shall be effective on the first day of the
month following the date upon which Agent received, or, if earlier, should have
received, pursuant to Section 5.3(a) and (b) hereof, the financial statements of
the Companies. The above matrix does not modify or waive, in any respect, the
requirements of Section 5.7 hereof, the rights of the Banks to charge the
Default Rate, or the rights and remedies of the Banks pursuant to Articles VII
and VIII hereof.
"Assignment Agreement" shall mean an Assignment and Acceptance Agreement in
the form of the attached Exhibit G.
---------
"Base Rate" shall mean a rate per annum equal to the greater of (a) the
Prime Rate or (b) one-half of one percent (1/2%) in excess of the Federal Funds
Effective Rate. Any change in the Base Rate shall be effective immediately from
and after such change in the Base Rate.
"Base Rate Loan" shall mean a Loan described in Section 2.1 hereof on which
Borrower shall pay interest at a rate based on the Base Rate.
"Business Day" shall mean a day of the year on which banks are not required
or authorized to close in Cleveland, Ohio, and, if the applicable Business Day
relates to any LIBOR Loan, on which dealings are carried on in the London
interbank eurodollar market.
"Capital Distribution" shall mean a payment made, liability incurred or
other consideration given for the purchase, acquisition, redemption or
retirement of any capital stock or other equity interest of any Company or as a
dividend, return of capital or other distribution (other than any stock
dividend, stock split or other equity distribution payable only in capital stock
or other equity of the Company in question) in respect of any Company's capital
stock or other equity interest.
3
<PAGE>
"Change in Control" shall mean (a) the acquisition of, or, if earlier, the
shareholder or director approval of the acquisition of, ownership or voting
control, directly or indirectly, beneficially or of record, on or after the
Closing Date, by any Person or group (within the meaning of Rule 13d-3 of the
SEC under the Securities Exchange Act of 1934, as then in effect), of shares
representing more than forty percent (40%) of the aggregate ordinary Voting
Power represented by the issued and outstanding capital stock of Borrower; or
(b) the occupation of a majority of the seats (other than vacant seats) on the
board of directors of Borrower by Persons who were neither (i) nominated by the
board of directors of Borrower nor (ii) appointed by directors so nominated.
"Closing Date" shall mean June 19, 2000.
"Closing Fee Letter" shall mean the Closing Fee Letter from Borrower to
Agent and the Banks, dated as of the Closing Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended, together
with the rules and regulations promulgated thereunder.
"Commitment" shall mean the obligation hereunder of the Banks to make
Revolving Loans pursuant to the Revolving Credit Commitments and Agent to make
Swing Loans pursuant to the Swing Line Commitment, up to the Total Commitment
Amount during the Commitment Period.
"Commitment Percentage" shall mean, for each Bank, the percentage set forth
opposite such Bank's name under the column headed "Commitment Percentage" as
described in Schedule 1 hereto.
----------
"Commitment Period" shall mean the period from the Effective Date to June
29, 2003, or such earlier date on which the Commitment shall have been
terminated pursuant to Article VIII hereof.
"Company" shall mean Borrower or a Subsidiary.
"Companies" shall mean Borrower and all Subsidiaries.
"Compliance Certificate" shall mean a Compliance Certificate in the form of
the attached Exhibit C.
---------
"Computer System" shall mean a computer system and all related peripherals,
including, but not limited to, hardware, software, devices and systems.
"Consideration" shall mean, in connection with an Acquisition, the
aggregate consideration paid to the seller, including borrowed funds, cash, the
issuance of securities or notes, the assumption of indebtedness as part of the
purchase price of such Acquisition or incurring of liabilities (direct or
contingent), the payment of consulting fees or fees for a covenant not to
compete and any other consideration paid for the purchase.
4
<PAGE>
"Consolidated" shall mean the resultant consolidation of the financial
statements of Borrower and its Subsidiaries in accordance with GAAP, including
principles of consolidation consistent with those applied in preparation of the
consolidated financial statements referred to in Section 6.13 hereof.
"Consolidated Capital Expenditures" shall mean, for any period, the amount
of capital expenditures of Borrower, as determined on a Consolidated basis and
in accordance with GAAP.
"Consolidated Depreciation and Amortization Charges" shall mean, for any
period, the aggregate of all depreciation and amortization charges for fixed
assets, leasehold improvements and general intangibles (specifically including
goodwill) of Borrower for such period, as determined on a Consolidated basis and
in accordance with GAAP.
"Consolidated EBIT" shall mean, for any period, on a Consolidated basis,
(a) Consolidated Net Earnings for such period plus the aggregate amounts
deducted in determining such Consolidated Net Earnings in respect of (i) income
taxes, (ii) Consolidated Interest Expense and (iii) nonrecurring noncash charges
and losses, minus (b) nonrecurring noncash gains; provided, that:
(A) Consolidated EBIT for any period shall (1) include the appropriate
financial items (other than assumed operating synergies) for any Person or
business unit that has been acquired by a Company for any portion of such
period prior to the date of such Acquisition, and (2) exclude the
appropriate financial items (other than assumed operating synergies) for
any Person or business unit that has been disposed of by a Company, for the
portion of such period prior to the date of such disposition; and
(B) in calculating Consolidated EBIT, (1) for the fiscal quarter ended
March 31, 2000, Borrower may add a nonrecurring (actual) cash charge taken
by Borrower during such quarter in the amount of Ten Million Eight Hundred
Fifty-Three Thousand Dollars ($10,853,000), and (2) Borrower may add, for
the fiscal year ending March 31, 2001, any nonrecurring (actual) cash
charges taken by Borrower during such fiscal year that relate to Borrower's
restructuring, up to an aggregate amount of Thirty Million Dollars
($30,000,000).
"Consolidated EBITDA" shall mean, for any period, (a) Consolidated EBIT,
plus (b) Consolidated Depreciation and Amortization Charges; provided, that
Consolidated EBITDA for any period shall (i) include the appropriate financial
items (other than assumed operating synergies) for any Person or business unit
that has been acquired by a Company for any portion of such period prior to the
date of such Acquisition, and (ii) exclude the appropriate financial (other than
assumed operating synergies) items for any Person or business unit that has been
disposed of by a Company, for the portion of such period prior to the date of
such disposition.
"Consolidated Fixed Charges" shall mean, for any period, on a Consolidated
basis and in accordance with GAAP, the aggregate of (a) Consolidated Interest
Expense, (b) Consolidated Capital
5
<PAGE>
Expenditures, (c) actual cash expenditures for taxes, (d) scheduled principal
payments on long-term Funded Indebtedness, and (e) actual cash expenditures
relating to Capital Distributions.
"Consolidated Interest Expense" shall mean, for any period, interest
expense of Borrower for such period, as determined on a Consolidated basis and
in accordance with GAAP.
"Consolidated Net Earnings" shall mean, for any period, the net income
(loss) of Borrower for such period, as determined on a Consolidated basis and in
accordance with GAAP.
"Consolidated Net Worth" shall mean, at any date, the stockholders' equity
of Borrower, determined on a Consolidated basis and in accordance with GAAP.
"Controlled Group" shall mean a Company and each Person required to be
aggregated with a Company under Code Sections 414(b), (c), (m) or (o).
"Debt" shall mean, collectively, all Indebtedness incurred by Borrower to
the Banks pursuant to this Agreement and includes the principal of and interest
on all Notes and each extension, renewal or refinancing thereof in whole or in
part, the facility fees, other fees and any prepayment fees payable hereunder
and all reimbursement, indemnification and other obligations under the Loan
Documents.
"Default" shall mean an event or condition that constitutes, or with the
lapse of any applicable grace period or the giving of notice or both would
constitute, an Event of Default and that has not been waived by the Required
Banks in writing.
"Default Rate" shall mean a rate per annum equal to two percent (2%) in
excess of the Derived Base Rate from time to time in effect.
"Derived Base Rate" shall mean a rate per annum equal to the sum of the
Applicable Margin (from time to time in effect) plus the Base Rate.
"Derived LIBOR Rate" shall mean a rate per annum equal to the sum of the
Applicable Margin (from time to time in effect) plus the LIBOR Rate.
"Domestic Subsidiary" shall mean a Subsidiary that is not a Foreign
Subsidiary.
"Effective Date" shall mean June 29, 2000.
"Environmental Laws" shall mean all provisions of law, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by the government
of the United States of America or by any state or municipality thereof or by
any court, agency, instrumentality, regulatory authority or commission of any of
the
6
<PAGE>
foregoing concerning health, safety and protection of, or regulation of the
discharge of substances into, the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated pursuant thereto.
"ERISA Event" shall mean (a) the existence of any condition or event with
respect to an ERISA Plan that presents a risk of the imposition of an excise tax
or any other liability on a Company or of the imposition of a Lien on the assets
of a Company; (b) a Controlled Group member has engaged in a non-
exempt"prohibited transaction" (as defined under ERISA Section 406 or Code
Section 4975) or a breach of a fiduciary duty under ERISA that could result in
liability to a Company; (c) a Controlled Group member has applied for a waiver
from the minimum funding requirements of Code Section 412 or ERISA Section 302
or a Controlled Group member is required to provide security under Code Section
401(a)(29) or ERISA Section 307; (d) a Reportable Event has occurred with
respect to any Pension Plan as to which notice is required to be provided to the
PBGC; (e) a Controlled Group member has withdrawn from a Multiemployer Plan in a
"complete withdrawal" or a "partial withdrawal" (as such terms are defined in
ERISA Sections 4203 and 4205, respectively); (f) a Multiemployer Plan is in or
is likely to be in reorganization under ERISA Section 4241; (g) an ERISA Plan
(and any related trust) that is intended to be qualified under Code Sections 401
and 501 fails to be so qualified or any"cash or deferred arrangement" under any
such ERISA Plan fails to meet the requirements of Code Section 401(k); (h) the
PBGC takes any steps to terminate a Pension Plan or appoint a trustee to
administer a Pension Plan, or a Controlled Group member takes steps to terminate
a Pension Plan; (i) a Controlled Group member or an ERISA Plan fails to satisfy
any requirements of law applicable to an ERISA Plan; (j) a claim, action, suit,
audit or investigation is pending or threatened with respect to an ERISA Plan,
other than a routine claim for benefits; or (k) a Controlled Group member incurs
or is expected to incur any liability for post-retirement benefits under any
Welfare Plan, other than as required by ERISA Section 601, et. seq. or Code
--- ----
Section 4980B.
"ERISA Plan" shall mean an "employee benefit plan" (within the meaning of
ERISA Section 3(3)) that a Controlled Group member at any time sponsors,
maintains, contributes to, has liability with respect to or has an obligation to
contribute to such plan.
"Eurocurrency Reserve Percentage" shall mean, for any Interest Period in
respect of any LIBOR Loan, as of any date of determination, the aggregate of the
then stated maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves), expressed as a decimal, applicable to such
Interest Period (if more than one (1) such percentage is applicable, the daily
average of such percentages for those days in such Interest Period during which
any such percentage shall be so applicable) by the Board of Governors of the
Federal Reserve System, any successor thereto, or any other banking authority,
domestic or foreign, to which a Bank may be subject in respect to eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Federal Reserve Board) or in respect of any other category of liabilities,
including deposits by reference to which the interest rate on LIBOR Loans is
determined or any
7
<PAGE>
category of extension of credit or other assets that include the LIBOR Loans.
For purposes hereof, such reserve requirements shall include, without
limitation, those imposed under Regulation D of the Federal Reserve Board, and
the LIBOR Loans shall be deemed to constitute Eurocurrency Liabilities subject
to such reserve requirements without benefit of credits for proration,
exceptions or offsets that may be available from time to time to any Bank under
said Regulation D.
"Event of Default" shall mean an event or condition that constitutes an
event of default as defined in Article VII hereof.
"Federal Funds Effective Rate" shall mean, for any day, the rate per annum
(rounded upward to the nearest one one-hundredth of one percent (1/100 of 1%))
announced by the Federal Reserve Bank of New York (or any successor) on such day
as being the weighted average of the rates on overnight federal funds
transactions arranged by federal funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank (or any successor) in
substantially the same manner as such Federal Reserve Bank computes and
announces the weighted average it refers to as the "Federal Funds Effective
Rate" as of the Closing Date.
"Financial Covenants" shall mean, collectively, each of the financial
covenants as set forth in, and as calculated in accordance with, Section 5.7
hereof, and each thereof.
"Financial Officer" shall mean any of the following officers: chief
executive officer, president, chief financial officer or treasurer.
"Fixed Charge Coverage Ratio" shall mean the ratio of (a) Consolidated
EBITDA to (b) Consolidated Fixed Charges, based upon the financial statements of
the Companies for the most recently completed four (4) fiscal quarters.
"Foreign Subsidiary" shall mean a Subsidiary that is organized outside of
the United States.
"Funded Indebtedness" shall mean all Indebtedness for borrowed money and
capitalized leases, including, but not limited to, current, long-term and
Subordinated Indebtedness, if any.
"GAAP" shall mean generally accepted accounting principles as then in
effect, which shall include the official interpretations thereof by the
Financial Accounting Standards Board, applied on a basis consistent with the
past accounting practices and procedures of Borrower.
"Guarantor" shall mean a Person that pledges its credit or property in any
manner for the payment or other performance of the indebtedness, contract or
other obligation of another and includes (without limitation) any guarantor
(whether of payment or of collection), surety, co-maker, endorser or Person that
agrees conditionally or otherwise to make any purchase, loan or investment in
order thereby to enable another to prevent or correct a default of any kind.
8
<PAGE>
"Guarantor of Payment" shall mean each of the Companies set forth on
Schedule 2 hereof, that are each executing and delivering a Guaranty of Payment,
or any other Person that shall deliver a Guaranty of Payment to Agent subsequent
to the Closing Date.
"Guaranty of Payment" shall mean each of the Guaranties of Payment of Debt
executed and delivered on or after the Closing Date in connection herewith by
the Guarantors of Payment, as the same may from time to time be amended,
restated or otherwise modified.
"Hedge Agreement" shall mean any hedge agreement, interest rate swap,
currency swap agreement, cap, collar or floor agreement, or other interest rate
management device entered into by Borrower with any financial institution.
"Indebtedness" shall mean, for any Company (excluding in all cases trade
payables payable in the ordinary course of business by such Company), (a) all
obligations to repay borrowed money, direct or indirect, incurred, assumed, or
guaranteed, (b) all obligations for the deferred purchase price of capital
assets, (c) all obligations under conditional sales or other title retention
agreements, (d) all obligations (contingent or otherwise) under any letter of
credit, banker's acceptance, currency swap agreement, foreign currency
agreement, interest rate swap, cap, collar or floor agreement or other interest
rate management device, (e) all synthetic leases, (f) all lease obligations that
have been or should be capitalized on the books of such Company in accordance
with GAAP, (g) all obligations of such Company with respect to asset
securitization financing programs to the extent that there is recourse against
such Company or such Company is liable (contingent or otherwise) under any such
program, (h) all obligations to advance funds to, or to purchase assets,
property or services from, any other Person in order to maintain the financial
condition of such Person, and (i) any other transaction (including forward sale
or purchase agreements) having the commercial effect of a borrowing of money
entered into by such Company to finance its operations or capital requirements,
and (j) any guaranty of or other contingent liability with respect to any of the
foregoing.
"Interest Adjustment Date" shall mean the last day of each Interest Period.
"Interest Coverage Ratio" shall mean the ratio of (a) Consolidated EBIT to
(b) Consolidated Interest Expense, based upon the financial statements of the
Companies for the most recently completed four (4) fiscal quarters.
"Interest Period" shall mean, with respect to any LIBOR Loan, the period
commencing on the date such LIBOR Loan is made and ending on the last day of
such period, as selected by Borrower pursuant to the provisions hereof and,
thereafter, each subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of such period, as selected
by Borrower pursuant to the provisions hereof. The duration of each Interest
Period for any LIBOR Loan shall be one (1) month, two (2) months, three (3)
months or six (6) months, in each case as Borrower may select upon notice, as
set forth in Section 2.2 hereof, provided that: (a) if Borrower fails to so
select the duration of any Interest Period, Borrower shall be deemed to have
converted such LIBOR Loan to a Base Rate Loan at the end of the then current
Interest Period; and
9
<PAGE>
(b) Borrower may not select any Interest Period for a LIBOR Loan that ends after
any date when principal is due on such LIBOR Loan.
"Leverage Ratio" shall mean, at any time, on a Consolidated basis and in
accordance with GAAP, the ratio of (a) Funded Indebtedness (based upon the
financial statements of the Companies for the most recently completed fiscal
quarter) to (b) Consolidated EBITDA (based upon the financial statements of the
Companies for the most recently completed four (4) fiscal quarters).
"LIBOR Loan" shall mean a Loan described in Section 2.1 hereof on which
Borrower shall pay interest at a rate based upon the LIBOR Rate.
"LIBOR Rate" shall mean, for any Interest Period with respect to a LIBOR
Loan, the quotient (rounded upwards, if necessary, to the nearest one sixteenth
of one percent (1/16th of 1%)) of: (a) the per annum rate of interest,
determined by Agent in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) as of approximately 11:00 A.M.
(London time) two (2) Business Days prior to the beginning of such Interest
Period pertaining to such LIBOR Loan, as provided by Telerate Service,
Bloomberg's or Reuters (or any other similar company or service that provides
rate quotations comparable to those currently provided by such companies) as the
rate in the London interbank market for dollar deposits in immediately available
funds with a maturity comparable to such Interest Period, divided by (b) a
----------
number equal to 1.00 minus the Eurocurrency Reserve Percentage. In the event
-----
that such rate quotation is not available for any reason, then the rate (for
purposes of clause (a) hereof) shall be the rate, determined by Agent as of
approximately 11:00 A.M. (London time) two (2) Business Days prior to the
beginning of such Interest Period pertaining to such LIBOR Loan, to be the
average (rounded upwards, if necessary, to the nearest one sixteenth of one
percent (1/16th of 1%)) of the per annum rates at which dollar deposits in
immediately available funds in an amount comparable to such LIBOR Loan and with
a maturity comparable to such Interest Period are offered to the prime banks by
leading banks in the London interbank market. The LIBOR Rate shall be adjusted
automatically on and as of the effective date of any change in the Eurocurrency
Reserve Percentage.
"Lien" shall mean any mortgage, security interest, lien, charge,
encumbrance on, pledge or deposit of, or conditional sale or other title
retention agreement with respect to any property (real or personal) or asset.
"Loan" or "Loans" shall mean the credit extended to Borrower by the Banks
in accordance with Section 2.1A or B hereof.
"Loan Documents" shall mean this Agreement, each of the Notes, each of the
Guaranties of Payment, each of the Pledge Agreements and any other documents
relating to any of the foregoing, as any of the foregoing may from time to time
be amended, restated or otherwise modified or replaced.
10
<PAGE>
"Material Adverse Effect" shall mean (a) a material adverse effect on the
business, operations, property, condition (financial or otherwise) or prospects
of Borrower and its Subsidiaries taken as a whole, or (b) a material adverse
effect on the ability of Borrower or any Guarantor to perform or comply with any
of the material terms and conditions of any material Loan Document.
"Material Subsidiary" shall mean any Subsidiary, the total assets of which
are in excess of One Million Dollars ($1,000,000).
"Moody's" shall mean Moody's Investors Service, Inc., or any successor to
such company.
"Multiemployer Plan" shall mean a Pension Plan that is subject to the
requirements of Subtitle E of Title IV of ERISA.
"Negotiated Rate" shall mean a fixed rate of interest per annum quoted to
Borrower by Agent based upon Agent's cost of funds, and agreed to by Borrower.
"Note" shall mean any Revolving Credit Note, the Swing Line Note or any
other note delivered pursuant to this Agreement.
"Notice of Loan" shall mean a Notice of Loan in the form of the attached
Exhibit D.
- ---------
"Organizational Documents" shall mean, with respect to any Person (other
than an individual), such Person's Articles (Certificate) of Incorporation, or
equivalent formation documents, and Regulations (By-laws), or equivalent
governing documents, and any amendments to any of the foregoing.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or its
successor.
"Pension Plan" shall mean an ERISA Plan that is a "pension plan" (within
the meaning of ERISA Section 3(2)).
"Permitted Investment" shall mean an investment of a Company in the stock
(or other debt or equity instruments) of a Person (other than a Company), so
long as (a) the Company making the investment is Borrower or a Guarantor of
Payment; and (b) the aggregate amount of all such investments of all Companies
does not exceed, at any time, Twenty Million Dollars ($20,000,000).
"Permitted Stock Repurchase" shall mean, so long as no Default or Event of
Default shall exist or immediately thereafter begin to exist, (a) the purchase
by Borrower, on or before July 29, 2000, of up to Eighty-Five Thousand (85,000)
shares of Borrower's outstanding capital stock from the selling shareholders of
a Person acquired by Borrower, as disclosed to Agent and the Banks, in
accordance with the terms of certain put options granted to such selling
shareholders, up to an aggregate amount, for all such purchases, not to exceed
One Million Five Hundred Twenty-Five Thousand Dollars ($1,525,000), or (b) the
purchase by Borrower, on or after July 21, 2001 but prior
11
<PAGE>
to March 1, 2002, of up to Six Hundred Thousand (600,000) shares of Borrower's
outstanding capital stock from an officer of Borrower, as disclosed to Agent and
the Banks, up to an aggregate amount not to exceed Nine Million Dollars
($9,000,000).
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, unincorporated organization, corporation, limited liability company,
institution, trust, estate, government or other agency or political subdivision
thereof or any other entity.
"Pledge Agreement" shall mean any pledge agreement, in form and substance
satisfactory to Agent, executed and delivered by any Company to Agent, for the
benefit of the Banks, or any other Pledge Agreement executed and delivered by
any Person in connection with this Agreement, as any of the foregoing may from
time to time be amended, restated or otherwise modified.
"Prime Rate" shall mean the interest rate established from time to time by
Agent as Agent's prime rate, whether or not such rate is publicly announced; the
Prime Rate may not be the lowest interest rate charged by Agent for commercial
or other extensions of credit. Each change in the Prime Rate shall be effective
immediately from and after such change.
"Related Writing" shall mean each Loan Document and any other assignment,
mortgage, security agreement, guaranty agreement, subordination agreement,
financial statement, audit report or other writing furnished by Borrower, any
Subsidiary or any Guarantor of Payment, or any of their respective officers, to
the Banks pursuant to or otherwise in connection with this Agreement.
"Reportable Event" shall mean a reportable event as that term is defined in
Title IV of ERISA, except actions of general applicability by the Secretary of
Labor under Section 110 of such Act.
"Request for Extension" shall mean a Request for Extension in the form of
the attached Exhibit E.
---------
"Required Banks" shall mean the holders of at least sixty-six and two-
thirds percent (66-2/3%) of the Total Commitment Amount, or, if there is any
borrowing hereunder, the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the aggregate amount outstanding under the Notes (other than the
Swing Line Note).
"Revolving Credit Commitment" shall mean the obligation hereunder, during
the Commitment Period, of (a) each Bank to participate in the making of
Revolving Loans up to the aggregate amount set forth opposite such Bank's name
under the column headed "Revolving Credit Commitment Amount" as set forth on
Schedule 1 hereof (or such lesser amount as shall be determined pursuant to
- ----------
Section 2.6 hereof), and (b) Agent to make Swing Loans pursuant to the Swing
Line Commitment.
12
<PAGE>
"Revolving Credit Exposure" shall mean, at any time, the sum of (a) the
aggregate principal amount of all Revolving Loans outstanding, and (b) the
aggregate principal amount of all Swing Loans outstanding.
"Revolving Credit Note" shall mean any Revolving Credit Note executed and
delivered pursuant to Section 2.1A hereof.
"Revolving Loan" shall mean a Loan granted to Borrower by the Banks in
accordance with Section 2.1A hereof.
"SEC" shall mean the United States Securities and Exchange Commission.
"Standard & Poor's" shall mean Standard & Poor's Ratings Group, a division
of McGraw-Hill, Inc., or any successor to such company.
"Subordinated", as applied to Indebtedness, shall mean that the
Indebtedness has been subordinated (by written terms or written agreement being,
in either case, in form and substance satisfactory to Agent and the Required
Banks) in favor of the prior payment in full of the Debt.
"Subsidiary" of Borrower or any of its Subsidiaries shall mean (a) a
corporation more than fifty percent (50%) of the Voting Power of which is owned,
directly or indirectly, by Borrower or by one or more other subsidiaries of
Borrower or by Borrower and one or more subsidiaries of Borrower, (b) a
partnership or limited liability company of which Borrower, one or more other
subsidiaries of Borrower or Borrower and one or more subsidiaries of Borrower,
directly or indirectly, is a general partner or managing member, as the case may
be, or otherwise has the power to direct the policies, management and affairs
thereof, or (c) any other Person (other than a corporation) in which Borrower,
one or more other subsidiaries of Borrower or Borrower and one or more
subsidiaries of Borrower, directly or indirectly, has at least a majority
ownership interest or the power to direct the policies, management and affairs
thereof.
"Swing Line" shall mean the credit facility established by Agent in
accordance with Section 2.1B hereof.
"Swing Line Commitment" shall mean the commitment of Agent to make Swing
Loans to Borrower up to the maximum aggregate amount at any time outstanding of
Twenty-Five Million Dollars ($25,000,000) on the terms and conditions set forth
in Section 2.1B hereof.
"Swing Line Note" shall mean the Swing Line Note executed and delivered
pursuant to Section 2.1B hereof.
"Swing Loan" shall mean a Loan granted to Borrower by Agent in accordance
with Section 2.1B hereof.
13
<PAGE>
"Swing Loan Maturity Date" shall mean, with respect to any Swing Loan, the
earlier of (a) twenty-nine (29) days after the date such Swing Loan is made, or
(b) the last day of the Commitment Period.
"Total Commitment Amount" shall mean the principal amount of Three Hundred
Twenty-Five Million Dollars ($325,000,000) (or such lesser amount as shall be
determined pursuant to Section 2.5 hereof).
"Type I Acquisition" shall mean an Acquisition where the results of the
calculation of the Financial Covenants on a pro forma basis (taking into account
such Acquisition but without giving effect to any assumed operating synergies)
are the same as, or more financially positive than, the results of the
calculation of the Financial Covenants (as actually reported in the Compliance
Certificates delivered pursuant to Section 5.3 (c) hereof) for the most recently
completed four (4) fiscal quarters of the Companies, without giving effect to
such Acquisition.
"Type II Acquisition" shall mean an Acquisition where the results of the
calculation of the Financial Covenants on a pro forma basis (taking into account
such Acquisition but without giving effect to any assumed operating synergies)
are more financially negative than the results of the calculation of the
Financial Covenants (as actually reported in the Compliance Certificates
delivered pursuant to Section 5.3 (c) hereof) for the most recently completed
four (4) fiscal quarters of the Companies, without giving effect to such
Acquisition.
"Voting Power" shall mean, with respect to any Person, the exclusive
ability to control, through the ownership of shares of capital stock,
partnership interests, membership interests or otherwise, the election of
members of the board of directors or other similar governing body of such
Person, and the holding of a designated percentage of Voting Power of a Person
means the ownership of shares of capital stock, partnership interests,
membership interests or other interests of such Person sufficient to control
exclusively the election of that percentage of the members of the board of
directors or similar governing body of such Person.
"Welfare Plan" shall mean an ERISA Plan that is a "welfare plan" within the
meaning of ERISA Section 3(l).
"Wholly-Owned Subsidiary" shall mean, with respect to any Person, any
corporation, limited liability company or other entity all of the securities or
other ownership interest, of which having ordinary voting power to elect a
majority of the board of directors or other individuals performing similar
functions are at the time directly or indirectly owned by such Person.
"Year 2000 Compliant" shall mean that a Computer System will operate
accurately, without interruption and with no negative change in performance due
to the change of the millennium.
Any accounting term not specifically defined in this Article I shall have
the meaning ascribed thereto by GAAP.
14
<PAGE>
The foregoing definitions shall be applicable to the singular and plurals
of the foregoing defined terms.
ARTICLE II. AMOUNT AND TERMS OF CREDIT
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms and
conditions of this Agreement, each Bank will participate, to the extent
hereinafter provided, in making Loans to Borrower, in such aggregate amount as
Borrower shall request pursuant to the Commitment; provided, however, that in no
event shall the aggregate principal amount of all Loans outstanding under this
Agreement be in excess of the Total Commitment Amount.
Each Bank, for itself and not one for any other, agrees to participate in
Loans made hereunder during the Commitment Period on such basis that (a)
immediately after the completion of any borrowing by Borrower hereunder, the
aggregate principal amount then outstanding on the Notes (other than the Swing
Line Note) issued to such Bank shall not be in excess of the Revolving Credit
Commitment for such Bank, and (b) such aggregate principal amount outstanding on
the Notes (other than the Swing Line Note) issued to such Bank shall represent
that percentage of the aggregate principal amount then outstanding on all Notes
(other than the Swing Line Note) which is such Bank's Commitment Percentage.
Each borrowing (other than the Swing Loans) from the Banks hereunder shall
be made pro rata according to the Banks' respective Commitment Percentages. The
Loans may be made as Revolving Loans and Swing Loans as follows:
A. Revolving Loans.
Subject to the terms and conditions of this Agreement, during the
Commitment Period, the Banks shall make a Revolving Loan or Revolving Loans to
Borrower in such amount or amounts as Borrower may from time to time request,
but not exceeding in aggregate principal amount at any time outstanding
hereunder the Commitment, when such Revolving Loans are combined with the
Revolving Credit Exposure. Borrower shall have the option, subject to the terms
and conditions set forth herein, to borrow Revolving Loans, maturing on the last
day of the Commitment Period, by means of any combination of (a) Base Rate
Loans, or (b) LIBOR Loans.
Borrower shall pay interest on the unpaid principal amount of Base Rate
Loans outstanding from time to time from the date thereof until paid at the
Derived Base Rate from time to time in effect. Interest on such Base Rate Loans
shall be payable, commencing September 30, 2000, and on the last day of each
succeeding December, March, June and September thereafter and at the maturity
thereof.
15
<PAGE>
Borrower shall pay interest on the unpaid principal amount of each LIBOR
Loan outstanding from time to time, from the date thereof until paid, at the
Derived LIBOR Rate, fixed in advance for each Interest Period (but subject to
changes in the Applicable Margin) as herein provided for each such Interest
Period. Interest on such LIBOR Loans shall be payable on each Interest
Adjustment Date with respect to an Interest Period (provided that if an Interest
Period exceeds three (3) months, the interest must be paid every three (3)
months, commencing three (3) months from the beginning of such Interest Period).
At the request of Borrower to Agent, subject to the notice and other
provisions of Section 2.2 hereof, the Banks shall convert Base Rate Loans to
LIBOR Loans at any time and shall convert LIBOR Loans to Base Rate Loans on any
Interest Adjustment Date.
The obligation of Borrower to repay the Base Rate Loans and LIBOR Loans
made by each Bank and to pay interest thereon shall be evidenced by a Revolving
Credit Note of Borrower in the form of Exhibit A hereto, payable to the order of
---------
such Bank in the principal amount of its Revolving Credit Commitment, or, if
less, the aggregate unpaid principal amount of Revolving Loans made hereunder by
such Bank. Subject to the provisions of this Agreement, Borrower shall be
entitled under this Section 2.1A to borrow funds, repay the same in whole or in
part and re-borrow hereunder at any time and from time to time during the
Commitment Period.
B. Swing Loans.
Subject to the terms and conditions of this Agreement, during the
Commitment Period, Agent shall make a Swing Loan or Swing Loans to Borrower in
such amount or amounts as Borrower may from time to time request. Borrower
shall not request any Swing Loan under this Section 2.1B if, after giving effect
thereto, (a) the Revolving Credit Exposure would exceed the aggregate amount of
the Revolving Credit Commitments, or (b) the aggregate outstanding principal
amount of all Swing Loans would exceed the Swing Line Commitment. Each Swing
Loan shall be due and payable on the Swing Loan Maturity Date applicable
thereto.
Borrower shall pay interest, for the sole benefit of Agent (and any Bank
that has purchased a participation in such Swing Loan pursuant to this Section
2.1B), on the unpaid principal amount of each Swing Loan outstanding from time
to time from the date thereof until paid at the Negotiated Rate applicable to
such Swing Loan. Interest on each Swing Loan shall be payable on the Swing Loan
Maturity Date applicable thereto. Each Swing Loan shall bear interest for a
minimum of one (1) day.
The obligation of Borrower to repay the Swing Loans and to pay interest
thereon shall be evidenced by a Swing Line Note of Borrower substantially in the
form of Exhibit B hereto, and payable to the order of Agent in the principal
---------
amount of the Swing Line Commitment, or, if less, the aggregate unpaid principal
amount of Swing Loans made hereunder by Agent. Subject to the provisions of
this Agreement, Borrower shall be entitled under this Section 2.1B to borrow
funds, repay the same in whole or in part and reborrow hereunder at any time and
from time to time during
16
<PAGE>
the Commitment Period; provided that, without the prior written consent of
Agent, Borrower may not request that more than two (2) Swing Loans be
outstanding at any time.
On any day that a Swing Loan is outstanding (whether before or after the
maturity thereof), Agent shall have the right to request that each Bank purchase
a participation in such Swing Loan, and Agent shall promptly notify each Bank
thereof (by facsimile or telephone, confirmed in writing). Upon such notice, but
without further action, Agent hereby agrees to grant to each Bank, and each Bank
hereby agrees to acquire from Agent, an undivided participation interest in such
Swing Loan in an amount equal to such Bank's Commitment Percentage of the
aggregate principal amount of such Swing Loan. In consideration and in
furtherance of the foregoing, each Bank hereby absolutely and unconditionally
agrees, upon receipt of notice as provided above, to pay to Agent, for its sole
account, such Bank's ratable share of such Swing Loan (determined in accordance
with such Bank's Commitment Percentage). Each Bank acknowledges and agrees that
its obligation to acquire participations in Swing Loans pursuant to this Section
2.1B is absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the occurrence and continuance of a
Default or an Event of Default, and that each such payment shall be made
without any offset, abatement, recoupment, counterclaim, withholding or
reduction whatsoever and whether or not such Bank's Revolving Credit Commitment
shall have been reduced or terminated. Each Bank shall comply with its
obligation under this Section 2.1B by wire transfer of immediately available
funds.
If Agent so elects, by giving notice to Borrower and the Banks, Borrower
agrees that Agent shall have the right, in its sole discretion, to require that
any Swing Loan be refinanced as a Revolving Loan. Such Revolving Loan shall be
a Base Rate Loan unless and until converted by Borrower to a LIBOR Loan pursuant
to Section 2.1A and Section 2.2 hereof. Upon receipt of such notice by
Borrower, Borrower shall be deemed, on such day, to have requested a Revolving
Loan in the principal amount of the Swing Loan in accordance with Section 2.1A
and Section 2.2 hereof. Each Bank agrees to make a Revolving Loan on the date of
such notice, subject to no conditions precedent whatsoever. Each Bank
acknowledges and agrees that such Bank's obligation to make a Revolving Loan
pursuant to Section 2.1A when required by this Section 2.1B is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the occurrence and continuance of a Default or an
Event of Default, and that its payment to Agent, for the account of Agent, of
the proceeds of such Revolving Loan shall be made without any offset, abatement,
recoupment, counterclaim, withholding or reduction whatsoever and whether or not
such Bank's Revolving Credit Commitment shall have been reduced or terminated.
Borrower irrevocably authorizes and instructs Agent to apply the proceeds of any
borrowing pursuant to this paragraph to repay in full such Swing Loan.
SECTION 2.2. CONDITIONS TO LOANS. The obligation of the Banks to make,
convert or continue any Loan hereunder or of Agent to make any Swing Loan is
conditioned, in the case of each borrowing, conversion or continuation
hereunder, upon:
(a) all conditions precedent as listed in Article IV hereof shall have been
satisfied;
17
<PAGE>
(b) with respect to Base Rate Loans, receipt by Agent of a Notice of Loan,
such notice to be received by 11:00 A.M. (Cleveland, Ohio time) on the proposed
date of such borrowing or conversion, and, with respect to LIBOR Loans, by 11:00
A.M. (Cleveland, Ohio time) three (3) Business Days prior to the proposed date
of such borrowing, conversion or continuation. Agent shall notify each Bank of
the date, amount and initial Interest Period (if applicable) promptly upon the
receipt of such notice, and, in any event, by 1:00 P.M. (Cleveland, Ohio time)
on the date such notice is received. On the date such Loan is to be made, each
Bank shall provide Agent, not later than 3:00 P.M. (Cleveland, Ohio time), with
the amount in federal or other immediately available funds required of it. If
Agent elects to advance the proceeds of such Loan prior to receiving funds from
such Bank, Agent shall have the right, upon prior notice to Borrower, to debit
any account of Borrower or otherwise receive from Borrower, on demand, such
amount, in the event that such Bank fails to reimburse Agent;
(c) with respect to the making of any Swing Loan, receipt by Agent of a
Notice of Loan, such notice to be received by 11:00 A.M. (Cleveland, Ohio time)
on the proposed date of borrowing;
(d) each request of Borrower for (i) a Loan (other than a Swing Loan) shall
be in an amount of not less than Five Million Dollars ($5,000,000), increased by
increments of One Million Dollars ($1,000,000), and (ii) a Swing Loan shall be
in the amount of not less than One Million Dollars ($1,000,000), increased by
increments of Five Hundred Thousand Dollars ($500,000);
(e) the fact that no Default or Event of Default shall then exist or
immediately after the making, conversion or continuation of the Loan would
exist; and
(f) the fact that each of the representations and warranties contained in
Article VI hereof shall be true and correct in all material respects with the
same force and effect as if made on and as of the date of the making,
conversion, or continuation of such Loan, except to the extent that any thereof
expressly relate to an earlier date.
At no time shall Borrower request that LIBOR Loans be outstanding for more
than ten (10) different Interest Periods at any time, and, if Base Rate Loans
are outstanding, then LIBOR Loans shall be limited to nine (9) different
Interest Periods at any time.
Each request by Borrower for the making, conversion or continuation of a
Loan hereunder shall be deemed to be a representation and warranty by Borrower
as of the date of such request as to the facts specified in (e) and (f) above.
Each request for a LIBOR Loan, or notice of prepayment pursuant to Section
2.4(c) hereof, shall be irrevocable and binding on Borrower and Borrower shall
indemnify Agent and the Banks against any loss or expense incurred by Agent or
the Banks as a result of any failure by Borrower to consummate such transaction
including, without limitation, any loss (including loss of anticipated profits)
or expense incurred by reason of liquidation or re-employment of deposits or
other funds acquired by the Banks to fund such LIBOR Loan. A certificate as to
the amount of such loss or
18
<PAGE>
expense submitted by the Banks to Borrower shall be conclusive and binding for
all purposes, absent manifest error.
SECTION 2.3. PAYMENT ON NOTES, ETC.
(a) Unless otherwise provided, all payments of principal, interest and
facility and other fees shall be made to Agent in immediately available funds
for the account of the Banks. Agent, on the same Business Day, shall distribute
to each Bank its ratable share of the amount of principal, interest, and
facility and other fees received by it for the account of such Bank. Each Bank
shall record (a) any principal, interest or other payment, and (b) the principal
amount of the Base Rate Loans and the LIBOR Loans and all prepayments thereof
and the applicable dates with respect thereto, by such method as such Bank may
generally employ; provided, however, that failure to make any such entry shall
in no way detract from Borrower's obligations under each Note. The aggregate
unpaid amount of Loans set forth on the records of Agent shall be rebuttably
presumptive evidence of the principal and interest owing and unpaid on each
Note.
(b) All payments under this Agreement or any other Loan Document shall be
made absolutely net of, without deduction or offset for, and altogether free and
clear of, any and all present and future taxes, levies, deductions, charges and
withholdings and all liabilities with respect thereto, under the laws of the
United States of America or any foreign jurisdiction (or any state or political
subdivision thereof in which such Bank has an office), excluding income and
franchise taxes imposed on any Bank (and withholding relating thereto) under the
laws of the United States of America or any other foreign jurisdiction (or any
state or political subdivision thereof). If Borrower or any Guarantor of
Payment is compelled by law to deduct any such taxes or levies (other than such
excluded taxes) or to make any such other deductions, charges or withholdings,
then Borrower or such Guarantor of Payment, as the case may be, shall pay such
additional amounts as may be necessary in order that the net payments after such
deduction, and after giving effect to any United States or foreign jurisdiction
(or any state or political subdivision thereof) income taxes required to be paid
by the Banks in respect of such additional amounts, shall equal the amount of
interest provided in Section 2.1 hereof for each Loan plus any principal then
due.
(c) Whenever any payment to be made hereunder, including, without
limitation, any payment to be made on any Note, shall be stated to be due on a
day that is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall in each case be
included in the computation of the interest payable on such Note; provided,
however, that, with respect to any LIBOR Loan, if the next succeeding Business
Day falls in the succeeding calendar month, such payment shall be made on the
preceding Business Day and the relevant Interest Period shall be adjusted
accordingly.
SECTION 2.4. PREPAYMENT.
(a) Borrower shall have the right at any time or from time to time to
prepay, on a pro rata basis for all of the Banks (other than the Swing Line
Note), all or any part of the principal amount
19
<PAGE>
of the Notes then outstanding as designated by Borrower, plus interest accrued
on the amount so prepaid to the date of such prepayment. Borrower shall give
Agent notice of prepayment of any Base Rate Loan by not later than 11:00 A.M.
(Cleveland, Ohio time) on the Business Day such prepayment is to be made and
written notice of the prepayment of any LIBOR Loan not later than 1:00
P.M.(Cleveland, Ohio time) three (3) Business Days before the Business Day on
which such prepayment is to be made.
(b) Prepayments of Base Rate Loans and Swing Loans shall be without any
premium or penalty.
(c) In any case of prepayment of a LIBOR Loan prior to the last date of the
applicable Interest Period, Borrower agrees that if the reinvestment rate, as
quoted by the money desk of Agent (and determined by such money desk with
respect to its cost of funds for the remaining portion of the applicable
Interest Period) ("Reinvestment Rate"), shall be lower than the LIBOR Rate
applicable to the LIBOR Loan which is intended to be prepaid (hereinafter, "Last
LIBOR"), then Borrower shall, upon written notice by Agent, promptly pay to
Agent, for the benefit of the Banks, in immediately available funds, a
prepayment fee equal to the product of (a) a rate (the"Prepayment Rate") which
shall be equal to the difference between the Last LIBOR and the Reinvestment
Rate, times (b) the principal amount of the LIBOR Loan which is to be prepaid,
times (c) (i) the number of days remaining in the Interest Period of the LIBOR
Loan which is to be prepaid divided by (ii) three hundred sixty (360). In
addition, Borrower shall immediately pay directly to Agent, for the account of
the Banks, the amount of any additional costs or expenses (including, without
limitation, cost of telex, wires, or cables) incurred by Agent or the Banks in
connection with the prepayment, upon Borrower's receipt of a written statement
from Agent. Each prepayment of a LIBOR Loan shall be in the aggregate principal
amount of not less than Five Million Dollars ($5,000,000), except in the case of
a mandatory prepayment pursuant to Section 2.8 or Article III hereof.
SECTION 2.5. FACILITY AND OTHER FEES.
(a) Borrower shall pay to Agent, for the ratable account of the Banks, as a
consideration for the Commitment hereunder, a facility fee from the date hereof
until the last day of the Commitment Period equal to (i) the Applicable Fee Rate
in effect on the payment date, times (ii) the average daily Total Commitment
Amount in effect during such quarter. The facility fee shall be payable
quarterly, in arrears, commencing September 30, 2000, and on the last day of
each December, March, June and September thereafter and on the last day of the
Commitment Period.
(b) Borrower shall pay to Agent, for its sole benefit, all fees set forth
in the Agent Fee Letter.
SECTION 2.6. REDUCTION OF COMMITMENTS. Borrower may at any time or from
time to time permanently reduce in whole or ratably in part the Commitment of
the Banks hereunder to an amount not less than the aggregate principal amount of
the Revolving Loans and Swing Loans then outstanding. Borrower shall give Agent
not fewer than three (3) Business Days'
20
<PAGE>
notice of any such reduction, provided that any partial reduction shall be in an
aggregate amount for all of the Banks of Five Million Dollars ($5,000,000),
increased by increments of One Million Dollars ($1,000,000). Agent shall
promptly notify each Bank of the date of each such reduction and such Bank's
proportionate share thereof. After each such reduction, the facility fees
payable hereunder shall be calculated upon the amount of the Commitment as so
reduced. If Borrower reduces in whole the Commitment of the Banks, on the
effective date of such reduction (Borrower having prepaid in full the unpaid
principal balance, if any, of the appropriate Notes, together with all interest
and facility and other fees accrued and unpaid), all of the appropriate Notes
shall be delivered to Agent marked "Canceled" and Agent shall redeliver such
Notes to Borrower. Any partial reduction of the Commitment shall be effective
during the remainder of the Commitment Period.
SECTION 2.7. COMPUTATION OF INTEREST AND FEES; DEFAULT RATE. With the
exception of Base Rate Loans, interest on Loans and facility and other fees and
charges hereunder shall be computed on the basis of a year having three hundred
sixty (360) days and calculated for the actual number of days elapsed. With
respect to Base Rate Loans, interest shall be computed on the basis of a year
having three hundred sixty-five (365) days or three hundred sixty-six (366)
days, as the case may be, and calculated for the actual number of days elapsed.
Anything herein to the contrary notwithstanding, if an Event of Default shall
occur hereunder, the principal of each Note and the unpaid interest thereon
shall bear interest, until paid, at the Default Rate. In no event shall the
rate of interest hereunder exceed the maximum rate allowable by law.
SECTION 2.8. MANDATORY PAYMENT. If the Revolving Credit Exposure at any
time exceeds the Total Commitment Amount, Borrower shall, as promptly as
practicable, but in no event later than the next Business Day, prepay an
aggregate principal amount of the Revolving Loans sufficient to bring the
aggregate outstanding principal amount of all Loans within the Commitment of the
Banks. Any prepayment of a LIBOR Loan pursuant to this Section 2.8 shall be
subject to the prepayment fees set forth in Section 2.4 hereof.
SECTION 2.9. EXTENSION OF COMMITMENT. Upon receipt by Agent of a
Request for Extension during any fiscal year of Borrower, contemporaneously with
the delivery of the financial statements required pursuant to Section 5.3 (b)
hereof, Borrower may request that the Banks extend the maturity of the
Commitment for an additional year. Each such extension shall be in the sole
discretion of Agent and the Banks and shall require the unanimous written
consent of each of the Banks. In addition, Borrower shall pay any attorneys'
fees or other expenses of Agent in connection with the documentation of any such
extension, as well as such other fees as may be agreed upon between Borrower and
the Banks.
21
<PAGE>
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR
LOANS; INCREASED CAPITAL; TAXES.
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If, at any time, any
law, treaty or regulation (including, without limitation, Regulation D of the
Board of Governors of the Federal Reserve System) or the interpretation thereof
by any governmental authority charged with the administration thereof or any
central bank or other fiscal, monetary or other authority shall impose (whether
or not having the force of law), modify or deem applicable any reserve and/or
special deposit requirement (other than reserves included in the Eurocurrency
Reserve Percentage, the effect of which is reflected in the interest rate(s) of
the LIBOR Loan(s) in question) against assets held by, or deposits in or for the
amount of any LIBOR Loan by, any Bank, and the result of the foregoing is to
increase the cost (whether by incurring a cost or adding to a cost) to such Bank
of making or maintaining hereunder such LIBOR Loan or to reduce the amount of
principal or interest received by such Bank with respect to such LIBOR Loan,
then, upon demand by such Bank, Borrower shall pay to such Bank from time to
time on Interest Adjustment Dates with respect to such LIBOR Loan, as additional
consideration hereunder, additional amounts sufficient to fully compensate and
indemnify such Bank for such increased cost or reduced amount, assuming (which
assumption such Bank need not corroborate) such additional cost or reduced
amount was allocable to such LIBOR Loan. A certificate as to the increased cost
or reduced amount as a result of any event mentioned in this Section 3.1,
setting forth the calculations therefor, shall be promptly submitted by such
Bank to Borrower and shall, in the absence of manifest error, be conclusive and
binding as to the amount thereof. Notwithstanding any other provision of this
Agreement, after any such demand for compensation by any Bank, Borrower, upon at
least three (3) Business Days' prior written notice to such Bank through Agent,
may prepay any affected LIBOR Loan in full or convert such LIBOR Loan to a Base
Rate Loan regardless of the Interest Period thereof. Any such prepayment or
conversion shall be subject to the prepayment fees set forth in Section 2.4
hereof. Each Bank shall notify Borrower as promptly as practicable (with a copy
thereof delivered to Agent) of the existence of any event that will likely
require the payment by Borrower of any such additional amount under this
Section.
SECTION 3.2. TAX LAW, ETC. In the event that by reason of any law,
regulation or requirement or in the interpretation thereof by an official
authority, or the imposition of any requirement of any central bank whether or
not having the force of law, any Bank shall, with respect to this Agreement or
any transaction under this Agreement, be subjected to any tax, levy, impost,
charge, fee, duty, deduction or withholding of any kind whatsoever (other than
any tax imposed upon the total net income of such Bank) and if any such measures
or any other similar measure shall result in an increase in the cost to such
Bank of making or maintaining any LIBOR Loan or in a reduction in the amount of
principal, interest or facility fee receivable by such Bank in respect thereof,
then such Bank shall promptly notify Borrower stating the reasons therefor.
Borrower shall thereafter pay to such Bank, upon demand from time to time on
Interest Adjustment Dates with respect to such LIBOR Loan, as additional
consideration hereunder, such additional amounts as shall fully compensate such
Bank for such increased cost or reduced amount. A certificate as to any such
increased cost or reduced amount, setting forth the calculations therefor, shall
be submitted by such
22
<PAGE>
Bank to Borrower and shall, in the absence of manifest error, be conclusive and
binding as to the amount thereof.
If any Bank receives such additional consideration from Borrower pursuant
to this Section 3.2, such Bank shall use its best efforts to obtain the benefits
of any refund, deduction or credit for any taxes or other amounts on account of
which such additional consideration has been paid and shall reimburse Borrower
to the extent, but only to the extent, that such Bank shall receive a refund of
such taxes or other amounts together with any interest thereon or an effective
net reduction in taxes or other governmental charges (including any taxes
imposed on or measured by the total net income of such Bank) of the United
States or any state or subdivision thereof by virtue of any such deduction or
credit, after first giving effect to all other deductions and credits otherwise
available to such Bank. If, at the time any audit of such Bank's income tax
return is completed, such Bank determines, based on such audit, that it was not
entitled to the full amount of any refund reimbursed to Borrower as aforesaid or
that its net income taxes are not reduced by a credit or deduction for the full
amount of taxes reimbursed to Borrower as aforesaid, Borrower, upon demand of
such Bank, shall promptly pay to such Bank the amount so refunded to which such
Bank was not so entitled, or the amount by which the net income taxes of such
Bank were not so reduced, as the case may be.
Notwithstanding any other provision of this Agreement, after any such
demand for compensation by any Bank, Borrower, upon at least three (3) Business
Days' prior written notice to such Bank through Agent, may prepay any affected
LIBOR Loan in full or convert such LIBOR Loan to a Base Rate Loan regardless of
the Interest Period of any thereof. Any such prepayment or conversion shall be
subject to the prepayment fees set forth in Section 2.4 hereof.
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE
UNASCERTAINABLE. In respect of any LIBOR Loan, in the event that Agent shall
have determined that dollar deposits of the relevant amount for the relevant
Interest Period for such LIBOR Loan are not available to Agent in the applicable
eurodollar market or that, by reason of circumstances affecting such market,
adequate and reasonable means do not exist for ascertaining the LIBOR Rate
applicable to such Interest Period, as the case may be, Agent shall promptly
give notice of such determination to Borrower and (a) any notice of a new LIBOR
Loan (or conversion of an existing Loan to a LIBOR Loan) previously given by
Borrower and not yet borrowed (or converted, as the case may be) shall be deemed
a notice to make a Base Rate Loan, and (b) Borrower shall be obligated either to
prepay, or to convert to a Base Rate Loan, any outstanding LIBOR Loan on the
last day of the then current Interest Period with respect thereto.
SECTION 3.4. INDEMNITY. Without prejudice to any other provisions of
this Article III, Borrower hereby agrees to indemnify each Bank against any loss
or expense that such Bank may sustain or incur as a consequence of (a) any
default by Borrower in payment when due of any amount hereunder in respect of
any LIBOR Loan, or (b) the failure by Borrower to consummate the borrowing of
any LIBOR Loan after making a request therefor, including, but not limited to,
any loss of profit, premium or penalty incurred by such Bank in respect of funds
borrowed by it for the
23
<PAGE>
purpose of making or maintaining such LIBOR Loan, as determined by such Bank in
the exercise of its sole but reasonable discretion. A certificate as to any such
loss or expense shall be promptly submitted by such Bank to Borrower and shall,
in the absence of manifest error, be conclusive and binding as to the amount
thereof.
SECTION 3.5. CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL. If at any
time any new law, treaty or regulation, or any change in any existing law,
treaty or regulation, or any interpretation thereof by any governmental or other
regulatory authority charged with the administration thereof, shall make it
unlawful for any Bank to fund any LIBOR Loan that it is committed to make
hereunder with moneys obtained in the eurodollar market, the commitment of such
Bank to fund such LIBOR Loan shall, upon the happening of such event forthwith
be suspended for the duration of such illegality, and such Bank shall by written
notice to Borrower and Agent declare that its commitment with respect to such
LIBOR Loan has been so suspended and, if and when such illegality ceases to
exist, such suspension shall cease and such Bank shall similarly notify Borrower
and Agent. If any such change shall make it unlawful for any Bank to continue
in effect the funding in the applicable eurodollar market of any LIBOR Loan
previously made by it hereunder, such Bank shall, upon the happening of such
event, notify Borrower, Agent and the other Banks thereof in writing stating
the reasons therefor, and Borrower shall, on the earlier of (a) the last day of
the then current Interest Period or (b) if required by such law, regulation or
interpretation, on such date as shall be specified in such notice, either
convert such LIBOR Loan to a Base Rate Loan or prepay such LIBOR Loan to the
Banks in full. Any such prepayment or conversion shall be subject to the
prepayment fees described in Section 2.4 hereof.
SECTION 3.6. FUNDING. Each Bank may, but shall not be required to, make
LIBOR Loans hereunder with funds obtained outside the United States.
SECTION 3.7. CAPITAL ADEQUACY. If any Bank shall have determined, after
the Closing Date, that the adoption of any applicable law, rule, regulation or
guideline regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its lending office) with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Bank's capital (or
the capital of its holding company) as a consequence of its obligations
hereunder to a level below that which such Bank (or its holding company) could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's policies or the policies of its holding company with
respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time, within fifteen (15) days after demand by such Bank (with
a copy to Agent), Borrower shall pay to such Bank such additional amount or
amounts as shall compensate such Bank (or its holding company) for such
reduction. Each Bank shall designate a different lending office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. A certificate of any Bank claiming compensation under this Section and
setting forth the
24
<PAGE>
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods. Failure on the part of any Bank to
demand compensation for any reduction in return on capital with respect to any
period shall not constitute a waiver of such Bank's rights to demand
compensation for any reduction in return on capital in such period or in any
other period. The protection of this Section shall be available to each Bank
regardless of any possible contention of the invalidity or inapplicability of
the law, regulation or other condition that shall have been imposed.
ARTICLE IV. CONDITIONS PRECEDENT
The obligation of the Banks to make the first Revolving Loan and of Agent
to make the first Swing Loan is subject to Borrower satisfying each of the
following conditions:
SECTION 4.1. NOTES. Borrower shall have executed and delivered to each
Bank its Revolving Credit Note and shall have executed and delivered to Agent
the Swing Line Note.
SECTION 4.2. GUARANTIES OF PAYMENT OF DEBT. Each Guarantor of Payment
shall have executed and delivered to Agent a Guaranty of Payment.
SECTION 4.3. PLEDGE AGREEMENT. Each Company that has a Foreign
Subsidiary shall have executed and delivered to Agent, for the benefit of the
Banks, a Pledge Agreement, in form and substance satisfactory to Agent, pursuant
to which such Company shall pledge to Agent, for the benefit of the Banks,
sixty-five percent (65%) of the capital stock (or other equity interest) of each
such Foreign Subsidiary, and shall have taken all such actions necessary to
grant to Agent, for the benefit of the Banks, a first preferred security
interest in such stock (or other equity interest).
SECTION 4.4. OFFICER'S CERTIFICATE, RESOLUTIONS, ORGANIZATIONAL
DOCUMENTS. Borrower and each Guarantor of Payment shall have delivered to each
Bank an officer's certificate certifying the names of the officers of Borrower
or such Guarantor of Payment authorized to sign the Loan Documents, together
with the true signatures of such officers and certified copies of (a) the
resolutions of the board of directors of Borrower and each Guarantor of Payment
evidencing approval of the execution and delivery of the Loan Documents and the
execution of other Related Writings to which Borrower or such Guarantor of
Payment, as the case may be, is a party, and (b) the Organizational Documents
thereto of Borrower and each Guarantor of Payment.
SECTION 4.5. LEGAL OPINION. Borrower shall have delivered to Agent an
opinion of counsel for Borrower and each Guarantor of Payment, in form and
substance satisfactory to Agent and the Banks.
25
<PAGE>
SECTION 4.6. GOOD STANDING AND FULL FORCE AND EFFECT CERTIFICATES.
Borrower shall have delivered a good standing certificate or full force and
effect certificate, as the case may be, for Borrower and each Guarantor of
Payment, issued on or about the Closing Date by the Secretary of State in the
state where Borrower or such Guarantor of Payment is incorporated or formed and
in each state in which Borrower or such Guarantor of Payment is qualified as a
foreign entity.
SECTION 4.7. CLOSING AND LEGAL FEES; AGENT FEE LETTER; CLOSING FEE
LETTER. Borrower shall have (a) executed and delivered to Agent the Agent Fee
Letter and the Closing Fee Letter, (b) paid to Agent, for its sole benefit, the
fees described in the Agent Fee Letter, (c) paid to Agent, for the pro rata
benefit of the Banks, the fees described in the Closing Fee Letter, and (d) paid
all legal fees and expenses of Agent in connection with the preparation and
negotiation of the Loan Documents.
SECTION 4.8. LIEN SEARCHES. With respect to the property owned or leased
by Borrower and each Guarantor of Payment, Borrower shall have caused to be
delivered to Agent: (a) the results of U.C.C. lien searches, satisfactory to
Agent and the Banks, in such jurisdictions as may be requested by Agent; (b) the
results of federal and state tax lien and judicial lien searches, satisfactory
to Agent, in such jurisdictions as may be requested by Agent; and (c) U.C.C.
termination statements reflecting termination of all financing statements
previously filed by any party having a security interest not permitted under the
terms of this Agreement.
SECTION 4.9. TERMINATION OF EXISTING CREDIT AGREEMENT. Borrower shall
have terminated the Credit Agreement dated as of January 26, 1999, as amended,
among Borrower, KeyBank National Association, as agent, and the banking
institutions listed on Schedule 1 attached thereto, and the commitments
established thereunder, which termination shall be deemed to have occurred upon
payment in full of the "Debt", as defined therein.
SECTION 4.10. NO MATERIAL ADVERSE CHANGE. No material adverse change, in
the opinion of Agent, shall have occurred in the financial condition, operations
or prospects of the Companies since March 31, 2000.
SECTION 4.11. MISCELLANEOUS. Borrower shall have provided to Agent and
the Banks such other items and shall have satisfied such other conditions as may
be reasonably required by Agent or the Banks.
ARTICLE V. COVENANTS
Borrower agrees that so long as the Commitment remains in effect and
thereafter until all of the Debt shall have been paid in full, Borrower shall
perform and observe, and shall cause each other Company to perform and observe,
each of the following provisions:
26
<PAGE>
SECTION 5.1. INSURANCE. Each Company shall (a) maintain insurance to
such extent and against such hazards and liabilities as is commonly maintained
by Persons similarly situated; and (b) within ten (10) days of any Bank's
written request, furnish to such Bank such information about such Company's
insurance as that Bank may from time to time reasonably request, which
information shall be prepared in form and detail satisfactory to such Bank and
certified by a Financial Officer of such Company.
SECTION 5.2. MONEY OBLIGATIONS. Each Company shall pay in full (a) prior
in each case to the date when penalties would attach, all taxes, assessments and
governmental charges and levies (except only those so long as and to the extent
that the same shall be contested in good faith by appropriate and timely
proceedings and for which adequate reserves have been established in accordance
with GAAP) for which it may be or become liable or to which any or all of its
properties may be or become subject; (b) all of its wage obligations to its
employees in compliance with the Fair Labor Standards Act (29 U.S.C. 206-207) or
any comparable provisions; and (c) all of its other obligations calling for the
payment of money (except only those so long as and to the extent that the same
shall be contested in good faith and for which adequate reserves have been
established in accordance with GAAP) before such payment becomes overdue.
SECTION 5.3. FINANCIAL STATEMENTS. Borrower shall furnish to each Bank:
(a) within forty-five (45) days after the end of each of the first three
(3) quarter-annual periods of each fiscal year of Borrower, balance sheets of
Borrower as of the end of such period and statements of income (loss),
stockholders' equity and cash flow for the quarter and fiscal year to date
periods, all prepared on a Consolidated basis, in accordance with GAAP, and in
form and detail satisfactory to the Banks and certified by a Financial Officer
of Borrower;
(b) within ninety (90) days after the end of each fiscal year of Borrower,
an annual audit report of Borrower for that year prepared on a Consolidated
basis, in accordance with GAAP, and in form and detail satisfactory to the Banks
and certified by an independent public accountant satisfactory to the Banks,
which report shall include balance sheets and statements of income (loss),
stockholders' equity and cash-flow for that period, together with a certificate
by the accountant setting forth the Defaults and Events of Default coming to its
attention during the course of its audit or, if none, a statement to that
effect;
(c) concurrently with the delivery of the financial statements in (a) and
(b) above, a Compliance Certificate;
(d) within ninety (90) days after the end of each fiscal year of Borrower,
annual pro-forma projections of Borrower and its Subsidiaries for the then
current fiscal year and for each fiscal year thereafter up to and including the
fiscal year that includes the last day of the Commitment Period, to be in form
acceptable to Agent;
27
<PAGE>
(e) as soon as available, copies of all notices, reports, definitive proxy
or other statements and other documents sent by Borrower to its shareholders, to
the holders of any of its debentures or bonds or the trustee of any indenture
securing the same or pursuant to which they are issued, or sent by Borrower (in
final form) to any securities exchange or over the counter authority or system,
or to the SEC or any similar federal agency having regulatory jurisdiction over
the issuance of Borrower's securities; and
(f) within ten (10) days of any Bank's written request, such other
information about the financial condition, properties and operations of any
Company as such Bank may from time to time reasonably request, which information
shall be submitted in form and detail reasonably satisfactory to such Bank and
certified by a Financial Officer of the Company or Companies in question.
SECTION 5.4. FINANCIAL RECORDS. Each Company shall at all times maintain
true and complete records and books of account including, without limiting the
generality of the foregoing, appropriate reserves for possible losses and
liabilities, all in accordance with GAAP, and at all reasonable times (during
normal business hours and upon notice to the Company in question) permit the
Banks to examine that Company's books and records and to make excerpts therefrom
and transcripts thereof.
SECTION 5.5. FRANCHISES. Each Company shall preserve and maintain at all
times its existence, rights and franchises except as otherwise permitted
pursuant to Section 5.12 hereof.
SECTION 5.6. ERISA COMPLIANCE. No Company shall incur any material
accumulated funding deficiency within the meaning of ERISA, or any material
liability to the PBGC, established thereunder in connection with any ERISA Plan.
Borrower shall furnish to the Banks (a) as soon as possible and in any event
within thirty (30) days after any Company knows or has reason to know that any
Reportable Event with respect to any ERISA Plan has occurred, a statement of the
Financial Officer of such Company, setting forth details as to such Reportable
Event and the action that such Company proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event given to the PBGC if
a copy of such notice is available to such Company, and (b) promptly after
receipt thereof a copy of any notice such Company, or any member of the
Controlled Group may receive from the PBGC or the Internal Revenue Service with
respect to any ERISA Plan administered by such Company; provided, that this
latter clause shall not apply to notices of general application promulgated by
the PBGC or the Internal Revenue Service, except for ministerial errors or other
minor compliance errors. Borrower shall promptly notify the Banks of any
material taxes assessed, proposed to be assessed or that Borrower has reason to
believe may be assessed against a Company by the Internal Revenue Service with
respect to any ERISA Plan. As used in this Section "material" means the measure
of a matter of significance that shall be determined as being an amount equal to
five percent (5%) of the Consolidated Net Worth of Borrower. As soon as
practicable, and in any event within twenty (20) days, after any Company becomes
aware that an ERISA Event has occurred, such Company shall provide Bank with
notice of such ERISA Event with a certificate by a Financial Officer of such
Company setting forth the
28
<PAGE>
details of the event and the action such Company or another Controlled Group
member proposes to take with respect thereto. Borrower shall, at the request of
Agent or any Bank, deliver or cause to be delivered to Agent or such Bank, as
the case may be, true and correct copies of any documents relating to the ERISA
Plan of any Company.
SECTION 5.7. FINANCIAL COVENANTS.
(a) LEVERAGE RATIO. Borrower shall not suffer or permit at any time the
Leverage Ratio to be greater than 3.00 to 1.00.
(b) NET WORTH. Borrower shall not suffer or permit its Consolidated Net
Worth at any time, based upon the financial statements of the Companies for the
most recently completed fiscal quarter, to fall below the current minimum amount
required, which current minimum amount required shall be Three Hundred Seventy-
Eight Million Nine Hundred Eighty-Four Thousand Dollars ($378,984,000) on the
Closing Date through June 29, 2000, with such current minimum amount required to
be positively increased by the Increase Amount on June 30, 2000, and by an
additional Increase Amount on the last day of each fiscal quarter thereafter.
As used herein, the term "Increase Amount" shall mean an amount equal to (i)
fifty percent (50%) of the positive Consolidated Net Earnings of the Companies
for the fiscal quarter then ended, plus (ii) one hundred percent (100%) of the
proceeds from any equity offering by any Company.
(c) FIXED CHARGE COVERAGE RATIO. Borrower shall not suffer or permit at
any time the Fixed Charge Coverage Ratio to be less than (i) 1.10 to 1.00 on
March 31, 2001 through June 29, 2001, (ii) 1.15 to 1.00 on June 30, 2001 through
June 29, 2002, and (iii) 1.25 to 1.00 on June 30, 2002 and thereafter.
(d) INTEREST COVERAGE RATIO. Borrower shall not suffer or permit at any
time the Interest Coverage Ratio to be less than (i) 2.50 to 1.00 from the
Closing Date through December 30, 2000, (ii) 2.25 to 1.00 on December 31, 2000
through March 30, 2001, (iii) 2.75 to 1.00 on March 31, 2001 through June 29,
2001, and (iv) 3.00 to 1.00 on June 30, 2001 and thereafter.
SECTION 5.8. BORROWING. No Company shall create, incur or have
outstanding any Indebtedness of any kind; provided, that this Section shall not
apply to:
(a) the Loans or any other Indebtedness incurred to Agent or the Banks
pursuant to this Agreement;
(b) Indebtedness under any Hedge Agreement, so long as such Hedge Agreement
has not been entered into for speculative purposes;
(c) Indebtedness (including any capital lease obligation) secured by the
Liens described in Section 5.9(d) hereof, so long as the aggregate amount of all
such Indebtedness outstanding at any
29
<PAGE>
time for all Companies does not exceed an amount equal to ten percent (10%) of
the Consolidated Net Worth of Borrower, based upon the financial statements of
Borrower for the most recently completed fiscal quarter;
(d) loans to a Company from a Company so long as each such Company is
Borrower or a Guarantor of Payment;
(e) Indebtedness of Borrower or any Foreign Subsidiary (including any
contingent reimbursement obligations of Borrower in connection with such
Indebtedness) incurred in connection with letters of credit (or demand
guarantees), so long as the aggregate principal amount of all such Indebtedness
does not exceed Ten Million Dollars ($10,000,000) at any time;
(f) loans from Borrower to a Subsidiary that is not a Guarantor of Payment,
so long as (i) the aggregate amount of all such loans to such Subsidiary that is
not a Guarantor of Payment are not in excess of Fifteen Million Dollars
($15,000,000), and (ii) the aggregate amount of all such loans to all
Subsidiaries, that are not Guarantors of Payment, are not in excess of Fifty
Million Dollars ($50,000,000); or
(g) additional unsecured Indebtedness of Borrower or a Guarantor of
Payment, to the extent not otherwise permitted pursuant to subparts (a) through
(f) hereof, up to an aggregate amount, for all such Indebtedness of Borrower and
all Guarantors of Payment, not to exceed Thirty Million Dollars ($30,000,000) at
any time.
SECTION 5.9. LIENS. No Company shall create, assume or suffer to exist
any Lien upon any of its property or assets, whether now owned or hereafter
acquired; provided that this Section shall not apply to the following:
(a) Liens for taxes not yet due or that are being actively contested in
good faith by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP;
(b) other statutory Liens incidental to the conduct of its business or the
ownership of its property and assets that (i) were not incurred in connection
with the borrowing of money or the obtaining of advances or credit, and (ii) do
not in the aggregate materially detract from the value of its property or assets
or materially impair the use thereof in the operation of its business;
(c) Liens on property or assets of a Subsidiary to secure obligations of
such Subsidiary to Borrower or a Guarantor of Payment;
(d) purchase money Liens on real estate and fixed assets securing the loans
(and capitalized leases) pursuant to Section 5.8 (c) hereof, provided that such
Lien is limited to the purchase price or the amount of the capitalized lease and
only attaches to the property being acquired or leased;
30
<PAGE>
(e) the Liens set forth on Schedule 5.9 hereto;
------------
(f) any Lien granted to Agent, for the benefit of the Banks; or
(g) easements or other minor defects or irregularities in title of real
property not interfering in any material respect with the use of such property
in the business of any Company.
No Company shall enter into any contract or agreement (other than a contract or
agreement entered into in connection with Indebtedness permitted pursuant to
Sections 5.8 (b), (e) or (g) hereof) that would prohibit Agent or the Banks from
acquiring a security interest, mortgage or other Lien on, or a collateral
assignment of, any of the property or assets of a Company.
SECTION 5.10. REGULATIONS U and X. No Company shall take any action that
would result in any non-compliance of the Loans with Regulations U and X of the
Board of Governors of the Federal Reserve System.
SECTION 5.11. INVESTMENTS AND LOANS. No Company shall (a) create, acquire
or hold any Subsidiary, (b) make or hold any investment in any stocks, bonds or
securities of any kind, (c) be or become a party to any joint venture or other
partnership without the prior written consent of Agent and the Required Banks,
(d) make or keep outstanding any advance or loan to any Person, or (e) be or
become a Guarantor of any kind; provided, that this Section shall not apply to:
(i) any endorsement of a check or other medium of payment for deposit or
collection through normal banking channels or similar transaction in the normal
course of business;
(ii) any investment in direct obligations of the United States of America
or in certificates of deposit issued by a member bank of the Federal Reserve
System;
(iii) any investment in commercial paper or securities that at the time
of such investment is assigned the highest quality rating in accordance with the
rating systems employed by either Moody's or Standard & Poor's;
(iv) the holding of (including any investments existing on the Closing
Date in) Subsidiaries listed on Schedule 6.1 hereto;
------------
(v) loans to a Company from a Company or investments in a Company by a
Company so long as each such Company is Borrower or a Guarantor of Payment;
(vi) loans from Borrower to a Subsidiary that is not a Guarantor of
Payment, so long as (A) the aggregate amount of all such loans to such
Subsidiary that is not a Guarantor of Payment are not in excess of Fifteen
Million Dollars ($15,000,000), and (B) the aggregate amount of all such loans to
all Subsidiaries that are not Guarantors of Payment are not in excess of Fifty
Million Dollars ($50,000,000);
31
<PAGE>
(vii) guarantees of Indebtedness of the Companies incurred or permitted
pursuant to this Agreement (including any guaranty of the Indebtedness permitted
pursuant to Section 5.8 hereof);
(viii) any advance or loan to an officer or employee of a Company made
in the ordinary course of such Company's business, so long as all such advances
and loans from all Companies aggregate not more than the maximum principal sum
of Seven Million Five Hundred Thousand Dollars ($7,500,000) at any time
outstanding;
(ix) any Permitted Investment;
(x) the holding of any stock that has been acquired pursuant to an
Acquisition permitted by Section 5.13 hereof;
(xi) (A) the creation, acquisition or holding of any Domestic Subsidiary
so long as such Domestic Subsidiary, if required pursuant to Section 5.19
hereof, becomes a Guarantor of Payment in accordance with Section 5.19, and (B)
with the prior written consent of Agent and the Required Banks, the creation,
acquisition or holding of any Foreign Subsidiary so long as Borrower (or the
Domestic Subsidiary of Borrower that owns the stock of the Foreign Subsidiary,
as the case may be) executes and delivers a Pledge Agreement, in form and
substance satisfactory to Agent, with respect to any such Foreign Subsidiary; or
(xii) any investment by a Foreign Subsidiary in Borrower or any Domestic
Subsidiary.
SECTION 5.12. MERGER AND SALE OF ASSETS. No Company shall merge or
consolidate with any other Person or (except as specifically permitted pursuant
to Section 5.18 hereof) sell, lease or transfer or otherwise dispose of all or a
substantial part of its assets to any Person, except that if no Default or Event
of Default shall then exist or immediately thereafter shall begin to exist:
(a) any Subsidiary may merge or consolidate with (i) Borrower (provided
that Borrower shall be the continuing or surviving Person) or (ii) any one or
more Guarantors of Payment, provided that either (A) the continuing or surviving
Person shall be a Wholly-Owned Subsidiary that is a Guarantor of Payment, or (B)
after giving effect to any merger pursuant to this sub-clause (ii), Borrower
and/or one or more Wholly-Owned Subsidiaries that are Guarantors of Payment
shall own not less than the same percentage of the outstanding Voting Power of
the continuing or surviving Person as Borrower and/or one or more Wholly-Owned
Subsidiaries (that are Guarantors of Payment) owned of the merged Subsidiary
immediately prior to such merger;
(b) any Subsidiary may sell, lease, transfer or otherwise dispose of any of
its assets to (i) Borrower, (ii) any Wholly-Owned Subsidiary that is a Guarantor
of Payment, or (iii) any Guarantor of Payment, of which Borrower and/or one or
more Wholly-Owned Subsidiaries, which are Guarantors of Payment, shall own not
less than the same percentage of Voting Power as
32
<PAGE>
Borrower and/or one or more Wholly-Owned Subsidiaries (which are Guarantors of
Payment) then own of the Subsidiary making such sale, lease, transfer or other
disposition;
(c) any Company may sell (including any sale in connection with any sale-
leaseback transaction), lease, transfer or otherwise dispose of any of its
assets to any Person (in addition to any such sale, lease, transfer or disposal
to Borrower or a Guarantor of Payment) so long as the aggregate amount of all
such assets sold, leased, transferred or otherwise disposed of by all Companies
does not exceed Sixty Million Dollars ($60,000,000) for the period from the
Closing Date until the last day of the Commitment Period; or
(d) any Foreign Subsidiary may merge or consolidate with any other Foreign
Subsidiary.
SECTION 5.13. ACQUISITIONS. No Company shall effect an Acquisition
unless:
(a) no Default or Event of Default shall then exist or immediately
thereafter shall begin to exist;
(b) the Acquisition is made by (i) Borrower or a Guarantor of Payment and
Borrower or such Guarantor of Payment is the surviving entity of such
Acquisition (in the case of a merger, consolidation or other combination) or the
Person to be acquired becomes a Guarantor of Payment promptly after such
Acquisition (in the case of the acquisition of the stock (or other equity
interest) of a Person), or (ii) a Foreign Subsidiary;
(c) the Companies are in full compliance with the Loan Documents both prior
to and subsequent to such Acquisition;
(d) Borrower provides to Agent and the Banks, as early as possible and, in
any event, not fewer than five (5) days prior to the date of consummation of
such Acquisition, (i) written notice of such Acquisition, and (ii) historical
financial statements of such Person and a pro forma financial statement of the
Companies accompanied by a certificate of a Financial Officer of Borrower
showing pro forma compliance with Section 5.7 hereof, both before and after such
Acquisition, and showing whether such Acquisition qualifies as a Type I
Acquisition or a Type II Acquisition. For purposes of calculating pro forma
compliance with Section 5.7 hereof, Borrower shall exclude the value of any
assumed operating synergies; and
(e) Borrower provides evidence to Agent and the Banks, in form and
substance satisfactory to Agent and the Required Banks, that one (1) of the
following conditions is satisfied:
(i) (A) the Consideration for such Acquisition is less than Twenty-
Five Million Dollars ($25,000,000), and (B) such Acquisition
qualifies as a Type I Acquisition;
33
<PAGE>
(ii) (A) the Consideration for such Acquisition is greater than or
equal to Twenty-Five Million Dollars ($25,000,000) but less than
Fifty Million Dollars ($50,000,000), (B) such Acquisition
qualifies as a Type I Acquisition or a Type II Acquisition, and
(C) Borrower shall have maintained and can demonstrate
maintenance (1) for the two (2) most recently completed
consecutive fiscal quarters and (2) for the most recently
completed fiscal quarter on a pro forma basis after giving
effect to such Acquisition but without giving effect to any
assumed operating synergies of (x) a Fixed Charge Coverage Ratio
of no less than 1.25 to 1.00, and (y) an Interest Coverage Ratio
of no less than 2.50 to 1.00; or
(iii) Borrower shall have maintained and can demonstrate maintenance
(1) for the two (2) most recently completed consecutive fiscal
quarters and (2) for the most recently completed fiscal quarter
on a pro forma basis after giving effect to such Acquisition but
without giving effect to any assumed operating synergies of (A)
a Fixed Charge Coverage Ratio of no less than 1.25 to 1.00, and
(B) an Interest Coverage Ratio of no less than 3.00 to 1.00.
SECTION 5.14. STOCK REPURCHASE. Other than with respect to a Permitted
Stock Repurchase, Borrower shall not purchase any of its outstanding capital
stock ("Repurchase") unless:
(a) no Default or Event of Default shall then exist or immediately
thereafter shall begin to exist;
(b) Borrower shall have provided to Agent and the Banks, as early as
possible and, in any event, not fewer than five (5) days prior to the date of
such Repurchase, (i) written notice of such Repurchase, and (ii) a projected
financial statement of the Companies accompanied by a certificate of a Financial
Officer of Borrower showing projected compliance as of the end of the fiscal
quarter in which such Repurchase is to occur with (A) Section 5.7 hereof and (B)
subparts (c) or (d) of this Section 5.14;
(c) at the end of the most recently completed fiscal quarter, Borrower
shall have maintained both (i) a Fixed Charge Coverage Ratio of no less than
1.25 to 1.00, and (ii) an Interest Coverage Ratio of no less than 2.50 to 1.00;
and
(d) with respect to Repurchases in excess of the aggregate amount of Five
Million Dollars ($5,000,000) (aggregated for all such Repurchases since the
Closing Date), Borrower shall have maintained, for the two (2) most recently
completed fiscal quarters, both (i) a Fixed Charge Coverage Ratio of no less
than 1.25 to 1.00, and (ii) an Interest Coverage Ratio of no less than 3.00 to
1.00.
SECTION 5.15. CAPITAL EXPENDITURES. The Companies shall not invest in
Consolidated Capital Expenditures of more than an aggregate amount equal to
Seventy Million Dollars ($70,000,000) during the period from the Closing Date
through March 31, 2001, based upon
34
<PAGE>
the financial statements of the Companies for the most recently completed four
(4) fiscal quarters.
SECTION 5.16. NOTICE. Borrower shall cause a Financial Officer of
Borrower to promptly notify Agent and the Banks whenever any Default or Event of
Default may occur hereunder or any representation or warranty made in Article VI
hereof or elsewhere in this Agreement or in any Related Writing may for any
reason cease in any material respect to be true and complete.
SECTION 5.17. ENVIRONMENTAL COMPLIANCE. Each Company shall comply in all
material respects with any and all Environmental Laws including, without
limitation, all Environmental Laws in jurisdictions in which any Company owns or
operates a facility or site, arranges for disposal or treatment of hazardous
substances, solid waste or other wastes, accepts for transport any hazardous
substances, solid waste or other wastes or holds any interest in real property
or otherwise. Borrower shall furnish to the Banks, promptly after receipt
thereof, a copy of any notice any Company may receive from any governmental
authority, private Person or otherwise that any material litigation or
proceeding pertaining to any environmental, health or safety matter has been
filed or is threatened against such Company, any real property in which such
Company holds any interest or any past or present operation of such Company. No
Company shall allow the release or disposal of hazardous waste, solid waste or
other wastes on, under or to any real property in which any Company holds any
interest or performs any of its operations, in violation of any Environmental
Law. As used in this Section,"litigation or proceeding" means any demand,
claim, notice, suit, suit in equity action, administrative action, investigation
or inquiry whether brought by any governmental authority, private Person or
otherwise. Borrower shall defend, indemnify and hold Agent and the Banks
harmless against all costs, expenses, claims, damages, penalties and liabilities
of every kind or nature whatsoever (including attorneys' fees) arising out of or
resulting from the noncompliance of any Company with any Environmental Law.
Such indemnification shall survive any termination of this Agreement.
SECTION 5.18. AFFILIATE TRANSACTIONS. No Company shall, or shall permit
any Subsidiary to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
a Company on terms that are less favorable to such Company or such Subsidiary,
as the case may be, than those that might be obtained at the time in a
transaction with a non-Affiliate; provided, however, that the foregoing shall
not prohibit (a) the payment of customary and reasonable directors' fees to
directors who are not employees of a Company or any Affiliate of a Company; or
(b) any transaction between Borrower and a Subsidiary that Borrower reasonably
determines in good faith is beneficial to Borrower and its Affiliates as a whole
and that is not entered into for the purpose of hindering the exercise by Agent
or the Banks of their rights or remedies under this Agreement.
SECTION 5.19. CORPORATE NAMES. Neither Borrower nor any Guarantor of
Payment shall change its corporate name, unless, in each case, Borrower shall
provide Agent with written notice thereof.
35
<PAGE>
SECTION 5.20. USE OF PROCEEDS. Borrower's use of the proceeds of the Notes
shall be solely for working capital and other general corporate purposes of
Borrower and its Subsidiaries and for Acquisitions permitted pursuant to the
terms of this Agreement.
SECTION 5.21. SUBSIDIARY GUARANTIES. Each Subsidiary created, acquired
or held subsequent to the Closing Date, shall immediately execute and deliver to
Agent a Guaranty of Payment of all of the Debt, such agreement to be in form and
substance acceptable to Agent and the Required Banks, along with such corporate
governance and authorization documents and an opinion of counsel as may be
deemed necessary or advisable by Agent and the Required Banks; provided,
however, that a Subsidiary shall not be required to execute such Guaranty of
Payment if (a) (i) such Subsidiary is not a Material Subsidiary, and (ii) the
aggregate of the total assets of all such Subsidiaries that are not Material
Subsidiaries does not exceed the aggregate amount of Three Million Dollars
($3,000,000), or (b) such Subsidiary is a Foreign Subsidiary. Borrower shall
provide Agent and the Banks with prompt written notice in the event that any
Subsidiary (that is not already a Guarantor of Payment) becomes a Material
Subsidiary.
SECTION 5.22 PLEDGE OF STOCK OF FOREIGN SUBSIDIARIES. Each Company that
creates, acquires or holds a Foreign Subsidiary subsequent to the Closing Date,
shall immediately execute and deliver to Agent, for the benefit of the Banks, a
Pledge Agreement, in form and substance satisfactory to Agent, pursuant to which
such Company shall pledge to Agent, for the benefit of the Banks, sixty-five
percent (65%) of the capital stock (or other equity interest) of such Foreign
Subsidiary; provided, however, that no Foreign Subsidiary shall be required to
pledge the stock or other equity interest of any other Foreign Subsidiary.
SECTION 5.23. AMENDMENT OF ORGANIZATIONAL DOCUMENTS. Neither Borrower nor
any Guarantor of Payment shall amend its Organizational Documents in any manner
that would affect the validity or enforceability of any Loan Document without
the prior written consent of Agent and the Required Banks.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that the statements set forth in this
Article VI are true, correct and complete.
SECTION 6.1. CORPORATE EXISTENCE; FOREIGN QUALIFICATION; SUBSIDIARIES.
(a) Each Company is an entity duly organized, validly existing, and in good
standing under the laws of its state of organization and is duly qualified and
authorized to do business and is in good standing as a foreign entity in each
jurisdiction where the character of its property or its business activities
makes such qualification necessary, except where the failure to so qualify would
36
<PAGE>
not have a material adverse effect on the business, operations or condition
(financial or otherwise) of such Company.
(b) Schedule 6.1 hereto sets forth (i) the state of organization of
------------
Borrower, and (ii) each state or other jurisdiction in which Borrower is
qualified to do business as a foreign corporation.
(c) Schedule 6.1 hereto sets forth (i) each Subsidiary of Borrower and each
------------
Subsidiary of each Company, (ii) such Subsidiary's state of organization, (iii)
each state or other jurisdiction in which such Subsidiary is qualified to do
business as a foreign entity, and (iv) the direct or indirect ownership of
Borrower in such Subsidiary.
SECTION 6.2. CORPORATE AUTHORITY. Each Company has the right and power
and is duly authorized and empowered to enter into, execute and deliver the Loan
Documents to which it is a party and to perform and observe the provisions of
the Loan Documents. The Loan Documents to which each Company is a party have
been duly authorized and approved by such Company's Board of Directors and are
the valid and binding obligations of such Company, enforceable against such
Company in accordance with their respective terms. The execution, delivery and
performance of the Loan Documents will not conflict with nor result in any
breach in any of the provisions of, or constitute a default under, or result in
the creation of any Lien (other than Liens permitted under Section 5.9 hereof)
upon any assets or property of any Company under the provisions of, such
Company's Organizational Documents or any agreement.
SECTION 6.3. COMPLIANCE WITH LAWS. Each Company:
(a) holds permits, certificates, licenses, orders, registrations,
franchises, authorizations, and other approvals from federal, state, local, and
foreign governmental and regulatory bodies necessary for the conduct of its
business and is in compliance with all applicable laws relating thereto, except
where a failure to do so would not have a Material Adverse Effect;
(b) is in compliance with all federal, state, local, or foreign applicable
statutes, rules, regulations, and orders including, without limitation, those
relating to environmental protection, occupational safety and health, and equal
employment practices, except where a failure to so comply would not have a
Material Adverse Effect; and
(c) is not in violation of or in default under any agreement to which it is
a party or by which its assets are subject or bound, except where such violation
or default would not have a Material Adverse Effect.
SECTION 6.4. LITIGATION AND ADMINISTRATIVE PROCEEDINGS. Except as
disclosed on Schedule 6.4 hereto, there are (a) no lawsuits, actions,
------------
investigations, or other proceedings pending or threatened against any Company,
or in respect of which any Company may have any liability, in any court or
before any governmental authority, arbitration board, or other tribunal, (b) no
orders, writs, injunctions, judgments, or decrees of any court or government
agency
37
<PAGE>
or instrumentality to which any Company is a party or by which the property or
assets of any Company are bound, and (c) no grievances, disputes, or
controversies outstanding with any union or other organization of the employees
of any Company, or threats of work stoppage, strike, or pending demands for
collective bargaining which, as to subsections (a) through (c) hereof, would
have or would be reasonably expected to have a Material Adverse Effect.
SECTION 6.5. TITLE TO ASSETS. Each Company has good title to and
ownership of all property it purports to own, which property is free and clear
of all Liens, except those permitted under Section 5.9 hereto. All of the stock
of each Subsidiary of each Company has been duly authorized and validly issued,
and is fully paid and non-assessable.
SECTION 6.6. LIENS AND SECURITY INTERESTS. On and after the Closing
Date, except for Liens permitted pursuant to Section 5.9 hereof, (a) there is no
financing statement outstanding covering any personal property of any Company,
(b) there is no mortgage outstanding covering any real property of any Company
and (c) no real or personal property of any Company is subject to any security
interest or Lien of any kind. Except with respect to a contract or agreement
entered into in connection with Indebtedness permitted pursuant to Sections 5.8
(b), (e) or (g) hereof, no Company has entered into any contract or agreement
which exists on or after the Closing Date that would prohibit Agent or the Banks
from acquiring a security interest, mortgage or other Lien on, or a collateral
assignment of, any of the property or assets of any Company.
SECTION 6.7. TAX RETURNS. All federal, state and local tax returns and
other reports required by law to be filed in respect of the income, business,
properties and employees of each Company have been filed and all taxes,
assessments, fees and other governmental charges that are due and payable have
been paid, except as otherwise permitted herein or where the failure to do so
will not cause or result in a Material Adverse Effect. The provision for taxes
on the books of each Company is adequate for all years not closed by applicable
statutes and for the current fiscal year.
SECTION 6.8. ENVIRONMENTAL LAWS. Each Company is in compliance with any
and all Environmental Laws, including, without limitation, all Environmental
Laws in all jurisdictions in which any Company owns or operates, or has owned or
operated, a facility or site, arranges or has arranged for disposal or treatment
of hazardous substances, solid waste or other wastes, accepts or has accepted
for transport any hazardous substances, solid waste or other wastes or holds or
has held any interest in real property or otherwise, except where a failure to
so comply would not have a Material Adverse Effect. No litigation or proceeding
arising under, relating to or in connection with any Environmental Law is
pending or, to the best knowledge of each Company, threatened, against any
Company, any real property in which any Company holds or has held an interest or
any past or present operation of any Company which, if determined adversely,
would have a Material Adverse Effect. No release, threatened release or disposal
of hazardous waste, solid waste or other wastes is occurring, or has occurred
(other than those that are currently being cleaned up in accordance with
Environmental Laws), on, under or to any real property in which any Company
holds any interest or performs any of its operations, in violation of any
Environmental Law. As used in this Section, "litigation or proceeding" means any
demand, claim, notice, suit, suit in equity,
38
<PAGE>
action, administrative action, investigation or inquiry whether brought by any
governmental authority, private Person or otherwise.
SECTION 6.9. CONTINUED BUSINESS. There exists no actual, pending, or, to
Borrower's knowledge, any threatened termination, cancellation or limitation of,
or any modification or change in the business relationship of any Company and
any customer or supplier, or any group of customers or suppliers, whose
purchases or supplies, individually or in the aggregate, are material to the
business of any Company, and there exists no present condition or state of facts
or circumstances that would have a Material Adverse Effect or prevent a Company
from conducting such business or the transactions contemplated by this Agreement
in substantially the same manner in which it was previously conducted.
SECTION 6.10. EMPLOYEE BENEFITS PLANS. Schedule 6.10 hereto identifies
-------------
each ERISA Plan. No ERISA Event has occurred or is expected to occur with
respect to an ERISA Plan. Full payment has been made of all amounts which a
Controlled Group member is required, under applicable law or under the governing
documents, to have been paid as a contribution to or a benefit under each ERISA
Plan. The liability of each Controlled Group member with respect to each ERISA
Plan has been fully funded based upon reasonable and proper actuarial
assumptions, has been fully insured, or has been fully reserved for on its
financial statements. No changes have occurred or are expected to occur that
would cause a material increase in the cost of providing benefits under the
ERISA Plan. With respect to each ERISA Plan that is intended to be qualified
under Code Section 401(a): (a) the ERISA Plan and any associated trust
operationally comply with the applicable requirements of Code Section 401(a);
(b) the ERISA Plan and any associated trust have been amended to comply with all
such requirements as currently in effect, other than those requirements for
which a retroactive amendment can be made within the "remedial amendment period"
available under Code Section 401(b) (as extended under Treasury Regulations and
other Treasury pronouncements upon which taxpayers may rely); (c) the ERISA Plan
and any associated trust have received a favorable determination letter from the
Internal Revenue Service stating that the ERISA Plan qualifies under Code
Section 401(a), that the associated trust qualifies under Code Section 501(a)
and, if applicable, that any cash or deferred arrangement under the ERISA Plan
qualifies under Code Section 401(k), unless the ERISA Plan was first adopted at
a time for which the above-described "remedial amendment period" has not yet
expired; (d) the ERISA Plan currently satisfies the requirements of Code Section
410(b), without regard to any retroactive amendment that may be made within the
above-described "remedial amendment period"; and (e) no contribution made to the
ERISA Plan is subject to an excise tax under Code Section 4972. With respect to
any Pension Plan, the "accumulated benefit obligation" of Controlled Group
members with respect to the Pension Plan (as determined in accordance with
Statement of Accounting Standards No. 87, "Employers' Accounting for Pensions")
does not exceed the fair market value of Pension Plan assets. The aggregate
potential amount of liability that would result if all Controlled Group members
withdrew from all Multiemployer Plans in a "complete withdrawal" (within the
meaning of ERISA Section 4203) would not exceed One Million Dollars
($1,000,000).
39
<PAGE>
SECTION 6.11. CONSENTS OR APPROVALS. No consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority or any other Person is required to be obtained or
completed by any Company in connection with the execution, delivery or
performance of any of the Loan Documents to which such Company is a party, that
has not already been obtained or completed.
SECTION 6.12. SOLVENCY. Borrower has received consideration that is the
reasonable equivalent value of the obligations and liabilities that Borrower has
incurred to the Banks. Borrower is not insolvent as defined in any applicable
state or federal statute, nor will Borrower be rendered insolvent by the
execution and delivery of the Loan Documents to Agent and the Banks. Borrower is
not engaged or about to engage in any business or transaction for which the
assets retained by it are or will be an unreasonably small amount of capital,
taking into consideration the obligations to Agent and the Banks incurred
hereunder. Borrower does not intend to, nor does it believe that it will, incur
debts beyond its ability to pay such debts as they mature.
SECTION 6.13. FINANCIAL STATEMENTS. The Consolidated financial statements
of Borrower for the fiscal year ended March 31, 2000, furnished to Agent and the
Banks, are true and complete, have been prepared in accordance with GAAP, and
fairly present the Companies' financial condition as of the date of such
financial statements and the results of their operations for the period then
ended. Since the date of such statements, there has been no material adverse
change in any Company's financial condition, properties or business nor any
change in any Company's accounting procedures.
SECTION 6.14. REGULATIONS. Borrower is not engaged principally or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying any "margin stock" (within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System of the United States of
America). Neither the granting of any Loan (or any conversion thereof) nor the
use of the proceeds of any Loan will violate, or be inconsistent with, the
provisions of Regulation U or X of said Board of Governors.
SECTION 6.15. MATERIAL AGREEMENTS. Except as disclosed in Borrower's most
recent quarterly or annual statement required to be filed with the SEC, no
Company is a party to any material agreement which, if violated, breached, or
terminated for any reason, would have or would be reasonably expected to have a
Material Adverse Effect.
SECTION 6.16. INTELLECTUAL PROPERTY. Each Company owns, possesses, or has
the right to use all of the patents, patent applications, trademarks, service
marks, copyrights, licenses, and rights with respect to the foregoing necessary
for the conduct of its business without any known conflict with the rights of
others.
SECTION 6.17. ACCURATE AND COMPLETE STATEMENTS. Neither the Loan
Documents nor any written statement made by any Company in connection with any
of the Loan Documents contains any untrue statement of a material fact or omits
a material fact necessary to
40
<PAGE>
make the statements contained therein or in the Loan Documents not misleading.
After due inquiry by Borrower, there is no known fact that any Company has not
disclosed to Agent and the Banks that has or would have a Material Adverse
Effect.
SECTION 6.18. YEAR 2000 COMPLIANCE. Each Company's Computer Systems are
Year 2000 Compliant, except to the extent that noncompliance has not produced
and will not produce a Material Adverse Effect.
ARTICLE VII. EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default hereunder:
SECTION 7.1. PAYMENTS. If the principal of or interest on any Note or
any facility or other fee shall not be paid in full punctually when due and
payable.
SECTION 7.2. SPECIAL COVENANTS. If any Company or any Guarantor of
Payment shall fail or omit to perform and observe Sections 5.7, 5.8, 5.9, 5.12,
5.13, 5.14 or 5.15 hereof.
SECTION 7.3. OTHER COVENANTS. If any Company or any Guarantor of
Payment shall fail or omit to perform and observe any agreement or other
provision (other than those referred to in Sections 7.1 or 7.2 hereof) contained
or referred to in this Agreement or any Related Writing that is on such
Company's or Guarantor of Payment's part, as the case may be, to be complied
with, and that Default shall not have been fully corrected within thirty (30)
days after the giving of written notice thereof to Borrower by Agent or any Bank
that the specified Default is to be remedied.
SECTION 7.4. REPRESENTATIONS AND WARRANTIES. If any representation,
warranty or statement made in or pursuant to this Agreement or any Related
Writing or any other material information furnished by any Company or any
Guarantor of Payment to the Banks or any thereof or any other holder of any
Note, shall be false or erroneous in any material respect.
SECTION 7.5. CROSS DEFAULT. If any Company or any Guarantor of Payment
shall default in the payment of principal or interest due and owing upon any
other obligation (other than with respect to the Debt) for borrowed money in
excess of the aggregate, for all such obligations for all such Companies and
Guarantors of Payment, of One Million Dollars ($1,000,000) beyond any period of
grace provided with respect thereto or in the performance or observance of any
other agreement, term or condition contained in any agreement under which such
obligation is created, if the effect of such default is to allow the
acceleration of the maturity of such Indebtedness or to permit the holder
thereof to cause such Indebtedness to become due prior to its stated maturity.
41
<PAGE>
SECTION 7.6. ERISA DEFAULT. The occurrence of one or more ERISA Events
that (a) the Required Banks determine could have a Material Adverse Effect, or
(b) results in a Lien on any of the assets of any Company.
SECTION 7.7. CHANGE IN CONTROL. If any Change in Control shall occur.
SECTION 7.8. MONEY JUDGMENT. A final judgment or order for the payment
of money shall be rendered against any Company or any Guarantor of Payment by a
court of competent jurisdiction, that remains unpaid or unstayed and
undischarged for a period (during which execution shall not be effectively
stayed) of thirty (30) days after the date on which the right to appeal has
expired, provided that the aggregate of all such judgments for all such
Companies and Guarantors of Payment shall exceed Two Million Dollars
($2,000,000).
SECTION 7.9. VALIDITY OF LOAN DOCUMENTS. (a) Any material provision, in
the reasonable opinion of Agent, of the Credit Agreement, any Note or any
Guaranty of Payment shall at any time for any reason cease to be valid and
binding and enforceable against Borrower or any Guarantor of Payment; (b) the
validity, binding effect or enforceability of any Loan Document against Borrower
or any Guarantor of Payment shall be contested by any Company; (c) Borrower or
any Guarantor of Payment shall deny that it has any or further liability or
obligation thereunder; or (d) any Loan Document shall be terminated, invalidated
or set aside, or be declared ineffective or inoperative or in any way cease to
give or provide to Agent and the Banks the benefits purported to be created
thereby.
SECTION 7.10. SOLVENCY. If Borrower or any Guarantor of Payment shall (a)
discontinue business (except as expressly permitted pursuant to Section 5.12
hereof), (b) generally not pay its debts as such debts become due, (c) make a
general assignment for the benefit of creditors, (d) apply for or consent to the
appointment of a receiver, a custodian, a trustee, an interim trustee or
liquidator of all or a substantial part of its assets, (e) be adjudicated a
debtor or have entered against it an order for relief under Title 11 of the
United States Code, as the same may be amended from time to time, (f) file a
voluntary petition in bankruptcy or file a petition or an answer seeking
reorganization or an arrangement with creditors or seeking to take advantage of
any other law (whether federal or state) relating to relief of debtors, or admit
(by answer, by default or otherwise) the material allegations of a petition
filed against it in any bankruptcy, reorganization, insolvency or other
proceeding (whether federal or state) relating to relief of debtors, (g) suffer
or permit to continue unstayed and in effect for thirty (30) consecutive days
any judgment, decree or order entered by a court of competent jurisdiction, that
approves a petition seeking its reorganization or appoints a receiver,
custodian, trustee, interim trustee or liquidator of all or a substantial part
of its assets, or (h) take, or omit to take, any action in order thereby to
effect any of the foregoing.
ARTICLE VIII. REMEDIES UPON DEFAULT
Notwithstanding any contrary provision or inference herein or elsewhere,
42
<PAGE>
SECTION 8.1. OPTIONAL DEFAULTS. If any Event of Default referred to in
Section 7.1, 7.2., 7.3, 7.4, 7.5, 7.6, 7.7, 7.8 or 7.9 hereof shall occur, the
Required Banks shall have the right, in their discretion, by directing Agent,
on behalf of the Banks, to give written notice to Borrower, to:
(a) terminate the Commitment and the credits hereby established, if not
previously terminated, and, immediately upon such election, the obligations of
the Banks, and each thereof, to make any further Loan hereunder immediately
shall be terminated, and/or
(b) accelerate the maturity of all of the Debt (if the Debt is not already
due and payable), whereupon all of the Debt shall become and thereafter be
immediately due and payable in full without any presentment or demand and
without any further or other notice of any kind, all of which are hereby waived
by Borrower.
SECTION 8.2. AUTOMATIC DEFAULTS. If any Event of Default referred to in
Section 7.10 hereof shall occur:
(a) all of the Commitment and the credits hereby established shall
automatically and immediately terminate, if not previously terminated, and no
Bank thereafter shall be under any obligation to grant any further Loan
hereunder, and
(b) the principal of and interest then outstanding on all Notes, and all of
the Debt to the Banks, shall thereupon become and thereafter be immediately due
and payable in full (if the Debt is not already due and payable), all without
any presentment, demand or notice of any kind, which are hereby waived by
Borrower.
SECTION 8.3. OFFSETS. If there shall occur or exist any Event of Default
referred to in Section 7.10 hereof or if the maturity of the Notes is
accelerated pursuant to Section 8.1 or 8.2 hereof, each Bank (or any affiliate
of a Bank) shall have the right at any time to set off against, and to
appropriate and apply toward the payment of, any and all Debt then owing by
Borrower to that Bank (including, without limitation, any participation
purchased or to be purchased pursuant to Section 2.1B or 8.5 hereof), whether or
not the same shall then have matured, any and all deposit balances and all other
indebtedness then held or owing by that Bank (or any affiliate of such Bank) to
or for the credit or account of Borrower, all without notice to or demand upon
Borrower or any other Person, all such notices and demands being hereby
expressly waived by Borrower.
SECTION 8.4. EQUALIZATION PROVISION. Each Bank agrees with the other
Banks that if it, at any time, shall obtain any Advantage over the other Banks
or any thereof in respect of the Debt (except as to Swing Loans as set forth in
Section 2.1B hereof and except under Article III hereof), it shall purchase from
the other Banks, for cash and at par, such additional participation in the Debt
as shall be necessary to nullify the Advantage. If any such Advantage resulting
in the purchase of an additional participation as aforesaid shall be recovered
in whole or in part from the Bank receiving the Advantage, each such purchase
shall be rescinded, and the
43
<PAGE>
purchase price restored (but without interest unless the Bank receiving the
Advantage is required to pay interest on the Advantage to the Person recovering
the Advantage from such Bank) ratably to the extent of the recovery. Each Bank
further agrees with the other Banks that if it at any time shall receive any
payment for or on behalf of Borrower on any indebtedness owing by Borrower to
that Bank by reason of offset of any deposit or other indebtedness, it will
apply such payment first to any and all Debt owing by Borrower to that Bank
(including, without limitation, any participation purchased or to be purchased
pursuant to this Section or any other Section of this Agreement). Borrower
agrees that any Bank so purchasing a participation from the other Banks or any
thereof pursuant to this Section may exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Bank was a direct creditor of Borrower in the amount of such
participation.
ARTICLE IX. AGENT
The Banks authorize KeyBank National Association and KeyBank National
Association hereby agrees to act as agent for the Banks in respect of this
Agreement upon the terms and conditions set forth elsewhere in this Agreement,
and upon the following terms and conditions:
SECTION 9.1. APPOINTMENT AND AUTHORIZATION. Each Bank hereby irrevocably
appoints and authorizes Agent to take such action as agent on its behalf and to
exercise such powers hereunder as are delegated to Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. Neither Agent
nor any of its affiliates, directors, officers, attorneys or employees shall be
liable for any action taken or omitted to be taken by it or them hereunder or in
connection herewith, except for its or their own gross negligence or willful
misconduct.
SECTION 9.2. NOTE HOLDERS. Agent may treat the payee of any Note as the
holder thereof until written notice of transfer shall have been filed with it,
signed by such payee and in form satisfactory to Agent.
SECTION 9.3. CONSULTATION WITH COUNSEL. Agent may consult with legal
counsel selected by it and shall not be liable for any action taken or suffered
in good faith by it in accordance with the opinion of such counsel.
SECTION 9.4. DOCUMENTS. Agent shall not be under any duty to examine
into or pass upon the validity, effectiveness, genuineness or value of any Loan
Documents or any other Related Writing furnished pursuant hereto or in
connection herewith or the value of any collateral obtained hereunder, and Agent
shall be entitled to assume that the same are valid, effective and genuine and
what they purport to be.
SECTION 9.5. AGENT AND AFFILIATES. With respect to the Loans, Agent
shall have the same rights and powers hereunder as any other Bank and may
exercise the same as though
44
<PAGE>
it were not Agent, and Agent and its affiliates may accept deposits from, lend
money to and generally engage in any kind of business with any Company or any
affiliate thereof.
SECTION 9.6. KNOWLEDGE OF DEFAULT. It is expressly understood and agreed
that Agent shall be entitled to assume that no Default or Event of Default has
occurred and is continuing, unless Agent has been notified by a Bank in writing
that such Bank believes that an Default or Event of Default has occurred and is
continuing and specifying the nature thereof.
SECTION 9.7. ACTION BY AGENT. So long as Agent shall be entitled,
pursuant to Section 9.6 hereof, to assume that no Default or Event of Default
shall have occurred and be continuing, Agent shall be entitled to use its
discretion with respect to exercising or refraining from exercising any rights
that may be vested in it by, or with respect to taking or refraining from taking
any action or actions that it may be able to take under or in respect of, this
Agreement. Agent shall incur no liability under or in respect of this Agreement
by acting upon any notice, certificate, warranty or other paper or instrument
believed by it to be genuine or authentic or to be signed by the proper party or
parties, or with respect to anything that it may do or refrain from doing in the
reasonable exercise of its judgment, or that may seem to it to be necessary or
desirable in the premises.
SECTION 9.8. NOTICES, DEFAULT, ETC. In the event that Agent shall have
acquired actual knowledge of any Default or Event of Default, Agent shall
promptly notify the Banks and shall take such action and assert such rights
under this Agreement as the Required Banks shall direct and Agent shall inform
the other Banks in writing of the action taken. Agent may take such action and
assert such rights as it deems to be advisable, in its discretion, for the
protection of the interests of the holders of the Notes.
SECTION 9.9. INDEMNIFICATION OF AGENT. The Banks agree to indemnify
Agent (to the extent not reimbursed by Borrower), ratably according to their
respective Commitment Percentages from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by or asserted against Agent in its capacity as agent in any way
relating to or arising out of this Agreement or any Loan Document or any action
taken or omitted by Agent with respect to this Agreement or any Loan Document,
provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including attorneys' fees) or disbursements resulting from Agent's
gross negligence, willful misconduct or from any action taken or omitted by
Agent in any capacity other than as agent under this Agreement.
SECTION 9.10. SUCCESSOR AGENT. Agent may resign as agent hereunder by
giving not fewer than thirty (30) days prior written notice to Borrower and the
Banks. If Agent shall resign under this Agreement, then either (a) the Required
Banks shall appoint from among the Banks a successor agent ("Successor Agent")
for the Banks (with the consent of Borrower so long as an Event of Default has
not occurred and which consent shall not be unreasonably withheld), or (b) if
45
<PAGE>
a Successor Agent shall not be so appointed and approved within the thirty (30)
day period following Agent's notice to the Banks of its resignation, then Agent
shall appoint a Successor Agent that shall serve as agent until such time as the
Required Banks appoint a Successor Agent, provided, that, in the case of either
(a) or (b) above, Agent shall remain as agent hereunder until such Successor
Agent accepts the position as successor agent hereunder. Upon its appointment,
the Successor Agent shall succeed to the rights, powers and duties as agent, and
the term "Agent" shall mean such successor effective upon its appointment, and
the former agent's rights, powers and duties as agent shall be terminated
without any other or further act or deed on the part of such former agent or any
of the parties to this Agreement.
ARTICLE X. MISCELLANEOUS
SECTION 10.1. BANKS' INDEPENDENT INVESTIGATION. Each Bank, by its
signature to this Agreement, acknowledges and agrees that Agent has made no
representation or warranty, express or implied, with respect to the
creditworthiness, financial condition, or any other condition of any Company or
with respect to the statements contained in any information memorandum furnished
in connection herewith or in any other oral or written communication between
Agent and such Bank. Each Bank represents that it has made and shall continue to
make its own independent investigation of the creditworthiness, financial
condition and affairs of the Companies in connection with the extension of
credit hereunder, and agrees that Agent has no duty or responsibility, either
initially or on a continuing basis, to provide any Bank with any credit or other
information with respect thereto (other than such notices as may be expressly
required to be given by Agent to the Banks hereunder), whether coming into its
possession before the granting of the first Loans hereunder or at any time or
times thereafter.
SECTION 10.2. NO WAIVER; CUMULATIVE REMEDIES. No omission or course of
dealing on the part of Agent, any Bank or the holder of any Note in exercising
any right, power or remedy hereunder or under any of the Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder or under any of the
Loan Documents. The remedies herein provided are cumulative and in addition to
any other rights, powers or privileges held by operation of law, by contract or
otherwise.
SECTION 10.3. AMENDMENTS, CONSENTS. No amendment, modification,
termination, or waiver of any provision of any Loan Document nor consent to any
variance therefrom, shall be effective unless the same shall be in writing and
signed by the Required Banks (except that Agent may consent to the release of
any collateral or other property securing the Debt in an aggregate amount not to
exceed a fair market value of One Million Dollars ($1,000,000) during any fiscal
year of Borrower) and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. Anything herein
to the contrary notwithstanding, unanimous consent of the Banks shall be
required with respect to (a) any increase in the Commitment hereunder or any
part thereof, (b) the extension of maturity of the Notes, the
46
<PAGE>
payment date of interest thereunder, or the payment of facility or other fees or
amounts payable hereunder, (c) any reduction in the rate of interest on the
Notes, or in any amount of principal or interest due on any Note, or the payment
of facility or other fees hereunder or any change in the manner of pro rata
application of any payments made by Borrower to the Banks hereunder, (d) any
change in any percentage voting requirement, voting rights, or the Required
Banks definition in this Agreement, (e) the release of any Guarantor of Payment
or, except as set forth in the first sentence of this Section 10.3, of any
collateral securing the Debt or any part thereof, or (f) any amendment to this
Section 10.3 or Section 8.4 hereof. In addition, Section 10.11 hereof may not be
amended without the prior written consent of any Designating Bank, as defined in
Section 10.11 hereof, affected thereby. Notice of amendments or consents
ratified by the Banks hereunder shall immediately be forwarded by Borrower to
all Banks. Each Bank or other holder of a Note shall be bound by any amendment,
waiver or consent obtained as authorized by this Section 10.3 , regardless of
its failure to agree thereto.
SECTION 10.4. NOTICES. All notices, requests, demands and other
communications provided for hereunder shall be in writing and, if to Borrower,
mailed or delivered to it, addressed to it at the address specified on the
signature pages of this Agreement, if to a Bank, mailed or delivered to it,
addressed to the address of such Bank specified on the signature pages of this
Agreement, or, as to each party, at such other address as shall be designated by
such party in a written notice to each of the other parties. All notices,
statements, requests, demands and other communications provided for hereunder
shall be given by overnight delivery or first class mail with postage prepaid by
registered or certified mail, addressed as aforesaid, or sent by facsimile with
telephonic confirmation of receipt, except that all notices hereunder shall not
be effective until received.
SECTION 10.5. COSTS, EXPENSES AND TAXES. Borrower agrees to pay on demand
all costs and expenses of Agent, including, but not limited to, (a)
administration , travel and out-of-pocket expenses, including but not limited to
attorneys' fees and expenses, of Agent in connection with the preparation,
negotiation and closing of the Loan Documents and the administration of the Loan
Documents, the collection and disbursement of all funds hereunder and the other
instruments and documents to be delivered hereunder, (b) extraordinary expenses
of Agent in connection with the administration of the Loan Documents and the
other instruments and documents to be delivered hereunder, and (c) the
reasonable fees and out-of-pocket expenses of special counsel for the Banks,
with respect to the foregoing, and of local counsel, if any, who may be retained
by said special counsel with respect thereto. Borrower also agrees to pay on
demand all costs and expenses of Agent or any Bank, including reasonable
attorneys' fees, in connection with the restructuring or enforcement of the
Debt, this Agreement or any Related Writing. In addition, Borrower shall pay
any and all stamp and other taxes and fees payable or determined to be payable
in connection with the execution and delivery of the Loan Documents, and the
other instruments and documents to be delivered hereunder, and agrees to hold
Agent and each Bank harmless from and
47
<PAGE>
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes or fees.
SECTION 10.6. INDEMNIFICATION. Borrower agrees to defend, indemnify and
hold harmless Agent and the Banks (and their respective affiliates, officers,
directors, attorneys, agents and employees) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including attorneys' fees) or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by or asserted against Agent
or any Bank in connection with any investigative, administrative or judicial
proceeding (whether or not such Bank or Agent shall be designated a party
thereto) or any other claim by any Person relating to or arising out of any Loan
Document or any actual or proposed use of proceeds of the Loans or any of the
Debt, or any activities of any Company or any of their respective Affiliates;
provided that no Bank nor Agent shall have the right to be indemnified under
this Section for its own gross negligence or willful misconduct as determined by
a court of competent jurisdiction. All obligations provided for in this Section
10.6 shall survive any termination of this Agreement.
SECTION 10.7. OBLIGATIONS SEVERAL; NO FIDUCIARY OBLIGATIONS. The
obligations of the Banks hereunder are several and not joint. Nothing contained
in this Agreement and no action taken by Agent or the Banks pursuant hereto
shall be deemed to constitute the Banks a partnership, association, joint
venture or other entity. No default by any Bank hereunder shall excuse the other
Banks from any obligation under this Agreement; but no Bank shall have or
acquire any additional obligation of any kind by reason of such default. The
relationship among Borrower and the Banks with respect to the Loan Documents and
the Related Writings is and shall be solely that of debtor and creditors,
respectively, and neither Agent nor any Bank has any fiduciary obligation toward
Borrower with respect to any such documents or the transactions contemplated
thereby.
SECTION 10.8. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement.
SECTION 10.9. BINDING EFFECT; BORROWER'S ASSIGNMENT. This Agreement shall
become effective when it shall have been executed by Borrower, Agent and by each
Bank and thereafter shall be binding upon and inure to the benefit of Borrower,
Agent and each of the Banks and their respective successors and assigns, except
that Borrower shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of Agent and all of the Banks.
SECTION 10.10. BANK ASSIGNMENTS/PARTICIPATIONS.
48
<PAGE>
A. Assignments of Commitments. Each Bank shall have the right at any
time or times to assign to another financial institution, without recourse, all
or a percentage of all of the following: (a) that Bank's Commitment, (b) all
Loans made by that Bank, and (c) that Bank's Notes, and any participation
purchased pursuant to Section 2.1B or Section 8.5 hereof; provided, however, in
each such case, that the assignor and the assignee shall have complied with the
following requirements:
(i) Prior Consent. No assignment may be consummated pursuant to
this Section 10.10 without the prior written consent of Borrower and Agent
(other than an assignment by any Bank to (A) any affiliate of such Bank
which affiliate is either wholly-owned by such Bank or is wholly-owned by a
Person that wholly owns, either directly or indirectly, such Bank or (B)
another Bank), which consent of Borrower and Agent shall not be
unreasonably withheld; provided, however, that, Borrower's consent shall
not be required if, at the time of the proposed assignment, any Default or
Event of Default shall then exist. Anything herein to the contrary
notwithstanding, any Bank may at any time make a collateral assignment of
all or any portion of its rights under the Loan Documents to a Federal
Reserve Bank, and no such assignment shall release such assigning Bank from
its obligations hereunder;
(ii) Minimum Amount. Each such assignment shall be in a minimum
amount of the lesser of Five Million Dollars ($5,000,000) of the assignor's
Commitment and interest herein or the entire amount of the assignor's
Commitment and interest herein;
(iii) Assignment Fee; Assignment Agreement. Unless the assignment
shall be to an affiliate of the assignor or the assignment shall be due to
merger of the assignor or for regulatory purposes, either the assignor or
the assignee shall remit to Agent, for its own account, an administrative
fee of Three Thousand Five Hundred Dollars ($3,500). Unless the assignment
shall be due to merger of the assignor or a collateral assignment for
regulatory purposes, the assignor shall (A) cause the assignee to execute
and deliver to Borrower and Agent an Assignment Agreement, and (B) execute
and deliver, or cause the assignee to execute and deliver, as the case may
be, to Agent such additional amendments, assurances and other writings as
Agent may reasonably require; and
(iv) Non-U.S. Assignee. If the assignment is to be made to an
assignee which is organized under the laws of any jurisdiction other than
the United States or any state thereof, the assignor Bank shall cause such
assignee, at least five (5) Business Days prior to the effective date of
such assignment, (A) to represent to the assignor Bank (for the benefit of
the assignor Bank, Agent and Borrower) that under applicable law and
treaties no taxes will be required to be withheld by Agent, Borrower or the
assignor with respect to any payments to be made to such assignee in
respect of the Loans hereunder, (B) to furnish to the assignor (and, in the
case of any assignee registered in the Register (as defined below), Agent
and Borrower) either(1) U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue
49
<PAGE>
Service Form 1001 or (2) United States Internal Revenue Service Form W-8 or
W-9, as applicable (wherein such assignee claims entitlement to complete
exemption from U.S. federal withholding tax on all interest payments
hereunder), and (C) to agree (for the benefit of the assignor, Agent and
Borrower) to provide the assignor Bank (and, in the case of any assignee
registered in the Register, Agent and Borrower) a new Form 4224 or Form
1001 or Form W-8 or W-9, as applicable, upon the expiration or obsolescence
of any previously delivered form and comparable statements in accordance
with applicable U.S. laws and regulations and amendments duly executed and
completed by such assignee, and to comply from time to time with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.
Upon satisfaction of the requirements specified in clauses (i) through (iv)
above, Borrower shall execute and deliver (A) to Agent, the assignor and the
assignee, any consent or release (of all or a portion of the obligations of the
assignor) required to be delivered by Borrower in connection with the Assignment
Agreement, and (B) to the assignee, an appropriate Note or Notes. After
delivery of the new Note or Notes, the assignor's Note or Notes being replaced
shall be returned to Borrower marked "replaced".
Upon satisfaction of the requirements of set forth in (i) through (iv), and
any other condition contained in this Section 10.10A, (A) the assignee shall
become and thereafter be deemed to be a "Bank" for the purposes of this
Agreement, (B) in the event that the assignor's entire interest has been
assigned, the assignor shall cease to be and thereafter shall no longer be
deemed to be a "Bank" and (C) the signature pages hereto and Schedule 1 hereto
----------
shall be automatically amended, without further action, to reflect the result of
any such assignment.
Agent shall maintain at its address referred to in Section 10.4 hereof a
copy of each Assignment Agreement delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Banks and the
Commitment of, and principal amount of the Loans owing to, each Bank from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrower, Agent and the Banks may treat each financial
institution whose name is recorded in the Register as the owner of the Loan
recorded therein for all purposes of this Agreement. The Register shall be
available for inspection by Borrower or any Bank at any reasonable time and from
time to time upon reasonable prior notice.
B. Sale of Participations. Each Bank shall have the right at any time or
times, without the consent of Agent or Borrower, to sell one or more
participations or sub-participations to a financial institution, as the case
may be, in all or any part of (a) that Bank's Commitment, (b) that Bank's
Commitment Percentage, (c) any Loan made by that Bank, and (d) any Note
delivered to that Bank pursuant to this Agreement, and any participation, if
any, purchased pursuant to Section 2.1B or Section 8.5 hereof or this Section
10.10B.
50
<PAGE>
The provisions of Article III and Section 10.6 shall inure to the benefit
of each purchaser of a participation or sub-participation and Agent shall
continue to distribute payments pursuant to this Agreement as if no
participation has been sold.
If any Bank shall sell any participation or sub-participation, that Bank
shall, as between itself and the purchaser, retain all of its rights (including,
without limitation, rights to enforce against the Borrower the Loan Documents
and the Related Writings) and duties pursuant to the Loan Documents and the
Related Writings, including, without limitation, that Bank's right to approve
any waiver, consent or amendment pursuant to Section 10.3, except if and to the
extent that any such waiver, consent or amendment would:
(i) reduce any fee or commission allocated to the participation or sub-
participation, as the case may be,
(ii) reduce the amount of any principal payment on any Loan allocated to
the participation or sub-participation, as the case may be, or reduce the
principal amount of any Loan so allocated or the rate of interest payable
thereon, or
(iii) extend the time for payment of any amount allocated to the
participation or sub-participation, as the case may be.
No participation or sub-participation shall operate as a delegation of any
duty of the seller thereof. Under no circumstance shall any participation or
sub-participation be deemed a novation in respect of all or any part of the
seller's obligations pursuant to this Agreement.
SECTION 10.11. DESIGNATION.
(a) Notwithstanding anything in this Agreement to the contrary, any Bank (a
"Designating Bank") may grant to one or more special purpose funding vehicles
(each an "SPV"), identified in writing from time to time by such Designating
Bank to Agent and Borrower, the option to provide to Borrower all or any part of
any Loan that such Designating Bank would otherwise be obligated to make to
Borrower pursuant to this Agreement; provided that (i) nothing in this Section
shall constitute a commitment by any SPV to make any Loan, and (ii) if an SPV
designated by a Designating Bank to make Loans elects not to exercise such
option or otherwise fails to provide all or any part of such Loan, such
Designating Bank shall still be obligated to make such Loan pursuant to the
terms hereof. The making of a Loan by an SPV hereunder shall reduce the
availability under the Revolving Credit Commitment of the Designating Bank to
the same extent, and as if, such Loan were made by such Designating Bank.
(b) As to any Loans or portion thereof made by an SPV, each such SPV shall
have all of the rights that a Bank making such Loans or portion thereof would
have under this Agreement; provided, however, that each SPV shall have granted
its Designating Bank an irrevocable power of attorney to deliver and receive all
communications and notices under this Agreement and any other Loan Document and
to exercise, in its reasonable discretion, on behalf of such SPV, all of such
SPV's voting rights under this Agreement. No additional Note shall be required
to evidence the
51
<PAGE>
Loans or portion thereof made by an SPV and the Designating Bank shall be deemed
to hold its Note as agent for such SPV to the extent of the Loans or portion
thereof funded by such SPV. In addition, any payments for the account of any SPV
shall be paid to its respective Designating Bank as agent for such SPV.
(c) Agent, Borrower and the Banks agree that no SPV shall be liable for an
indemnity or payment under this Agreement for which a Bank would otherwise be
liable and the Designating Bank shall remain liable for its Commitment
Percentage of such indemnity or payment to the extent such Designating Bank
would otherwise be liable. In furtherance of the foregoing, Agent, Borrower and
each of the Banks hereby agree (which agreement shall survive the termination of
this Agreement) that, prior to the date that is one year and one day after the
payment in full of all of the outstanding commercial paper or other senior
indebtedness of any SPV, none of Agent, Borrower or any Bank shall institute
against, or join any other Person in instituting against, such SPV any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding
under the laws of the United States or any State thereof.
(d) In addition, notwithstanding anything to the contrary contained in this
Section 10.11, or otherwise in this Agreement, any SPV may (i) at any time and
without paying any processing fee therefor, assign (or grant a participation in)
all or a portion of its interest in any Loans to its Designating Bank or to any
financial institution providing liquidity and/or credit support to or for the
account of such SPV to support the funding or maintenance of Loans, and (ii)
disclose on a confidential basis any non-public information relating to the
Loans made by such SPV to any rating agency, commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancements to such SPV. This
Section 10.11 may not be amended without the prior written consent of any
Designating Bank affected thereby.
SECTION 10.12. SEVERABILITY OF PROVISIONS; CAPTIONS; ATTACHMENTS. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction. The several captions to Sections and subsections
herein are inserted for convenience only and shall be ignored in interpreting
the provisions of this Agreement. Each schedule or exhibit attached to this
Agreement shall be incorporated herein and shall be deemed to be a part hereof.
SECTION 10.13. INVESTMENT PURPOSE. Each of the Banks represents and
warrants to Borrower that it is entering into this Agreement with the present
intention of acquiring any Note issued pursuant hereto for investment purposes
only and not for the purpose of distribution or resale, it being understood,
however, that each Bank shall at all times retain full control over the
disposition of its assets.
SECTION 10.14. ENTIRE AGREEMENT. This Agreement, any Note and any other
Loan Document or other agreement, document or instrument attached hereto or
executed on or as of the Closing Date integrate all the terms and conditions
mentioned herein or incidental hereto and
52
<PAGE>
supersede all oral representations and negotiations and prior writings with
respect to the subject matter hereof.
SECTION 10.15. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement,
each of the Notes and any Related Writing shall be governed by and construed in
accordance with the laws of the State of Ohio and the respective rights and
obligations of Borrower and the Banks shall be governed by Ohio law, without
regard to principles of conflict of laws. Borrower hereby irrevocably submits to
the non-exclusive jurisdiction of any Ohio state or federal court sitting in
Cleveland, Ohio, over any action or proceeding arising out of or relating to
this Agreement, the Debt or any Related Writing, and Borrower hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such Ohio state or federal court. Borrower, on behalf of itself
and its Subsidiaries, hereby irrevocably waives, to the fullest extent permitted
by law, any objection it may now or hereafter have to the laying of venue in any
action or proceeding in any such court as well as any right it may now or
hereafter have to remove such action or proceeding, once commenced, to another
court on the grounds of FORUM NON CONVENIENS or otherwise. Borrower agrees that
a final, nonappealable judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
SECTION 10.16. LEGAL REPRESENTATION OF PARTIES. The Loan Documents were
negotiated by the parties with the benefit of legal representation and any rule
of construction or interpretation otherwise requiring this Agreement or any
other Loan Document to be construed or interpreted against any party shall not
apply to any construction or interpretation hereof or thereof.
[Remainder of page intentionally left blank.]
53
<PAGE>
SECTION 10.17. JURY TRIAL WAIVER. BORROWER, AGENT AND EACH OF THE BANKS
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE BANKS, OR
ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
Address: 5960 Heisley Road STERIS CORPORATION
Mentor, Ohio 44060
Attention: Chief Financial By: /s/ Laurie Brlas
Officer -----------------------------------
Laurie Brlas, Senior Vice President
and Chief Financial Officer
By: /s/ Les C. Vinney
-----------------------------------
Les C. Vinney, President and Chief
Operating Officer
Address: Key Tower KEYBANK NATIONAL ASSOCIATION,
127 Public Square as Agent and as a Bank
Cleveland, Ohio 44114
Attention: Large Corporate By: /s/ J.T. Taylor
Banking Division -----------------------------------
J.T. Taylor, Vice President
Address: 600 Superior Avenue BANK ONE, MICHIGAN
Cleveland, Ohio 44114-2650 as a Bank and as Syndication Agent
Attention:
Babette Casey Coerdt By: /s/ Babette Casey Coerdt
-----------------------------------
Babette Casey Coerdt,
Managing Director
Address: 135 South LaSalle Street LASALLE BANK NATIONAL ASSOCIATION,
Chicago, Illinois 60603 as a Bank and as Documentation Agent
Attention: Roy Hasbrook
By: /s/ Jeffrey L. Miller
-----------------------------------
Vice President
54
<PAGE>
Address: 1900 East Ninth Street NATIONAL CITY BANK
7th Floor, Locator: 2077
Cleveland, Ohio 44114
Attention: Large Corporate By: /s/ Robert S. Coleman
Group -----------------------------------
Robert S. Coleman, Vice President
and Senior Lending Officer
Address: One Cleveland Center PNC BANK, NATIONAL ASSOCIATION
1375 E. 9th Street, Ste. 1250
Cleveland, Ohio 44114
Attention: Corporate Banking By: /s/ Bryon A. Pike
-----------------------------------
Bryon A. Pike, Vice President
Address: One Wall Street THE BANK OF NEW YORK
8th Floor
NY, NY 10286 By: /s/ Jonathan Rollins
-----------------------------------
Attention: Corporate Banking Jonathan Rollins, Vice President
Address: 111 West Monroe HARRIS TRUST AND SAVINGS BANK
Floor 10W
Chicago, IL 60603
By: /s/ Kirby M. Law
----------------------------------
Attention: Corporate Banking Kirby M. Law, Vice President
55
<PAGE>
SCHEDULE 1
REVOLVING
CREDIT
COMMITMENT COMMITMENT
BANKING INSTITUTIONS PERCENTAGE AMOUNT
- -------------------- ----------- ------------
KeyBank National 27.69% $ 90,000,000
Association
Bank One, Michigan 18.46% $ 60,000,000
LaSalle Bank National Association 15.38% $ 50,000,000
National City Bank 10.77% $ 35,000,000
PNC Bank, National Association 10.77% $ 35,000,000
Harris Trust and Savings Bank 10.77% $ 35,000,000
The Bank of New York 6.16% $ 20,000,000
100.00%
Total Commitment Amount $325,000,000
56
<PAGE>
SCHEDULE 2
GUARANTORS OF PAYMENT
Medical & Environmental Designs, Inc., a Missouri corporation
Ecomed, Inc., an Indiana corporation
American Sterilizer Company, a Pennsylvania corporation
STERIS International Sales Corporation, a Delaware corporation
STERIS Europe, Inc., a Delaware corporation
STERIS Asia Pacific, Inc., a Delaware corporation
STERIS Latin America, Inc., a Delaware corporation
STERIS Inc., a Delaware corporation
STERIS USA Distribution Corporation, an Ohio corporation
HTD Holding Corp., a Delaware corporation
HSTD LLC, a Delaware limited liability company
Hausted, Inc., a Delaware corporation
Isomedix Inc., a Delaware corporation
Isomedix Operations Inc., a Delaware corporation
Isomedix (Puerto Rico), Inc., a Delaware corporation
Global Risk Management Insurance Company, Ltd., a Barbados corporation
STERIS FoodLabs, Inc., a Kansas corporation
57
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$ Cleveland, Ohio
--------- June 19, 2000
FOR VALUE RECEIVED, the undersigned, STERIS CORPORATION, an Ohio
corporation ("Borrower"), promises to pay on the last day of the Commitment
Period, as defined in the Credit Agreement (as hereinafter defined), to the
order of ("Bank") at the Main Office of KEYBANK NATIONAL
---------------
ASSOCIATION, as Agent, 127 Public Square, Cleveland, Ohio 44114-1306 the
principal sum of
....................................................................... DOLLARS
or the aggregate unpaid principal amount of all Revolving Loans made by Bank to
Borrower pursuant to Section 2.1A of the Credit Agreement, whichever is less, in
lawful money of the United States of America. As used herein,"Credit Agreement"
means the Credit Agreement dated as of June 19, 2000, among Borrower, the banks
named therein and KeyBank National Association, as Agent, as the same may from
time to time be amended, restated or otherwise modified. Capitalized terms used
herein shall have the meanings ascribed to them in the Credit Agreement.
Borrower also promises to pay interest on the unpaid principal amount of
each Revolving Loan from time to time outstanding, from the date of such
Revolving Loan until the payment in full thereof, at the rates per annum which
shall be determined in accordance with the provisions of Section 2.1A of the
Credit Agreement. Such interest shall be payable on each date provided for in
such Section 2.1A; provided, however, that interest on any principal portion
which is not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Base Rate Loans and LIBOR Loans, and payments of principal of any thereof, shall
be shown on the records of Bank by such method as Bank may generally employ;
provided, however, that failure to make any such entry shall in no way detract
from Borrower's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity occurs by
reason of lapse of time or by operation of any provision for acceleration of
maturity contained in the Credit Agreement, the principal hereof and the unpaid
interest thereon shall bear interest, until paid, at a rate per annum equal to
the Default Rate. All payments of principal of and interest on this Note shall
be made in immediately available funds.
This Note is one of the Revolving Credit Notes referred to in the Credit
Agreement. Reference is made to the Credit Agreement for a description of the
right of the undersigned to
58
<PAGE>
anticipate payments hereof, the right of the holder hereof to declare this Note
due prior to its stated maturity, and other terms and conditions upon which this
Note is issued.
Except as expressly provided in the Credit Agreement, Borrower expressly
waives presentment, demand, protest and notice of any kind.
JURY TRIAL WAIVER. BORROWER, AGENT AND EACH OF THE BANKS WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE BANKS, OR ANY THEREOF, ARISING
OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS NOTE OR ANY OTHER NOTE OR OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THE TRANSACTIONS RELATED THERETO.
STERIS CORPORATION
By:
---------------------------------
Title:
------------------------------
And:
--------------------------------
Title:
------------------------------
59
<PAGE>
EXHIBIT B
SWING LINE NOTE
$25,000,000 Cleveland, Ohio
June 19, 2000
FOR VALUE RECEIVED, the undersigned, STERIS CORPORATION, an Ohio
corporation ("Borrower"), promises to pay to the order of KEYBANK NATIONAL
ASSOCIATION ("Bank") at the Main Office of KEYBANK NATIONAL ASSOCIATION, as
Agent, 127 Public Square, Cleveland, Ohio 44114-1306 the principal sum of
TWENTY-FIVE MILLION AND 00/100 ......................................... DOLLARS
or, if less, the aggregate unpaid principal amount of all Swing Loans, as
defined in the Credit Agreement (as hereinafter defined) made by Bank to
Borrower pursuant to Section 2.1B of the Credit Agreement, in lawful money of
the United States of America on the earlier of the last day of the Commitment
Period, as defined in the Credit Agreement, or, with respect to each Swing Loan,
the Swing Loan Maturity Date applicable thereto. As used herein, "Credit
Agreement" means the Credit Agreement dated as of June 19, 2000, among Borrower,
the banks named therein and KeyBank National Association, as Agent, as the same
may from time to time be amended, restated or otherwise modified. Capitalized
terms used herein shall have the meanings ascribed to them in the Credit
Agreement.
Borrower also promises to pay interest on the unpaid principal amount of
each Swing Loan from time to time outstanding, from the date of such Swing Loan
until the payment in full thereof, at the rates per annum which shall be
determined in accordance with the provisions of Section 2.1B of the Credit
Agreement. Such interest shall be payable on each date provided for in Section
2.1B; provided, however, that interest on any principal portion which is not
paid when due shall be payable on demand.
The principal sum hereof from time to time and the payments of principal
and interest thereon of either hereof, shall be shown on the records of Bank by
such method as Bank may generally employ; provided, however, that failure to
make any such entry shall in no way detract from Borrower's obligations under
this Note.
If this Note shall not be paid at maturity, whether such maturity occurs by
reason of lapse of time or by operation of any provision for acceleration of
maturity contained in the Credit Agreement, the principal hereof and the unpaid
interest thereon shall bear interest, until paid, at a rate per annum equal to
the Default Rate. All payments of principal of and interest on this Note shall
be made in immediately available funds.
60
<PAGE>
This Note is the Swing Line Note referred to in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the right of the
undersigned to anticipate payments hereof, the right of the holder hereof to
declare this Note due prior to its stated maturity, and other terms and
conditions upon which this Note is issued.
Except as expressly provided in the Credit Agreement, Borrower expressly
waives presentment, demand, protest and notice of any kind.
JURY TRIAL WAIVER. BORROWER, AGENT AND EACH OF THE BANKS WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE BANKS, OR ANY THEREOF, ARISING
OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS NOTE OR ANY OTHER NOTE OR OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THE TRANSACTIONS RELATED THERETO.
STERIS CORPORATION
By:
-----------------------------
Title:
--------------------------
And:
----------------------------
Title:
--------------------------
61
<PAGE>
EXHIBIT C
COMPLIANCE CERTIFICATE
For Fiscal Quarter e