<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________to_______________________
Commission file number: 001-12229
DEPUY, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 35-1989795
(State or Other Jurisdiction of Incorporation (I.R.S. Employer Identification No.)
or Organization)
700 ORTHOPAEDIC DRIVE, WARSAW, INDIANA 46581-0988
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (219) 267-8143
</TABLE>
Indicate by check [X] whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of Common Stock, par value $.01 per share,
outstanding as of August 12, 1998 was 98,841,680.
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEPUY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30,
1998 December 31,
(Unaudited) 1997*
------------ -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 94,177 $ 215,567
Short-term investments 5,027 4,925
Accounts receivable, net of allowances
of $16,247 (1998) and $17,722 (1997) 175,799 132,204
Amounts receivable from affiliates 150 -
Inventories at lower of cost or market 213,898 169,735
Deferred income taxes 113,304 52,839
Prepaid expenses and other current assets 30,837 30,136
---------- ------------
Total current assets 633,192 605,406
========== ============
NONCURRENT ASSETS
Goodwill, net of accumulated amortization
of $82,432 (1998) and $74,570 (1997) 429,080 341,710
Other intangible assets, net of accumulated
amortization of $4,049 (1998) and $3,820 (1997) 151,674 3,528
Deferred income taxes 18,749 15,584
Investment in affiliate 331 1,610
Other assets 15,608 8,865
---------- ------------
615,442 371,297
Property, plant and equipment, net 113,383 103,954
---------- ------------
Total assets $1,362,017 $1,080,657
========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt payable to affiliates $ - $ 1,497
Short-term debt 83,370 23,696
Accounts payable 35,227 36,296
Dividends payable to shareholders - 11,836
Amounts payable to affiliates, net - 493
Income taxes payable 45,010 33,696
Accrued royalties 26,937 23,115
Accrued employee compensation 26,726 23,005
Other accrued expenses 69,767 48,532
---------- ------------
Total current liabilities 287,037 202,166
---------- ------------
NONCURRENT LIABILITIES
Long-term debt 263,398 68,189
Long-term employee benefits 20,739 20,097
Noncurrent deferred income taxes 67,796 8,243
Other noncurrent liabilities 21,725 14,458
---------- ------------
Total noncurrent liabilities 373,658 110,987
---------- ------------
CONTINGENCIES (NOTE 6)
MINORITY INTEREST 4,944 5,386
---------- ------------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value;
130,000,000 shares authorized; shares outstanding
of 98,816,286 (1998) and 98,679,874 (1997) 988 987
Additional paid-in capital 695,359 676,649
Retained earnings 50,858 128,058
Accumulated other comprehensive income (50,827) (43,576)
---------- ------------
Total shareholders' equity 696,378 762,118
---------- ------------
Total liabilities and shareholders' equity $1,362,017 $1,080,657
========== ============
</TABLE>
*The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date.
See accompanying notes to these Consolidated Financial Statements.
<PAGE>
DEPUY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1998 1997 1998 1997
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Net sales $219,178 $204,744 $426,509 $392,586
Cost of sales 65,802 67,439 126,370 123,440
-------- -------- -------- --------
Gross profit 153,376 137,305 300,139 269,146
-------- -------- -------- --------
Selling, general and administrative expenses 79,911 76,634 157,530 146,165
Research and development expenses 7,363 7,809 14,572 13,641
Amortization of goodwill and intangible assets 4,787 4,412 8,429 7,591
Special items, net (Note 3) - 7,551 23,996 8,459
Acquired in-process research and development (Note 2) 131,000 - 131,000 -
-------- -------- -------- --------
Operating (loss) income (69,685) 40,899 (35,388) 93,290
-------- -------- -------- --------
Interest expense, affiliate - 236 54 684
Interest expense, other 2,511 1,346 4,244 2,090
Other income, net 1,369 835 4,160 3,157
-------- -------- -------- --------
(Loss) income before taxes, minority interest expense and
equity in (loss) earnings of unconsolidated affiliate (70,827) 40,152 (35,526) 93,673
-------- -------- -------- --------
Provision for income taxes 24,378 7,617 40,500 29,928
Minority interest expense 695 595 1,358 968
Equity in (loss) earnings of unconsolidated affiliate (148) 556 184 984
-------- -------- -------- --------
Net (loss) income $(96,048) $ 32,496 $(77,200) $ 63,761
======== ======== ======== ========
Basic and diluted (loss) earnings per share $ (0.97) $ 0.33 $ (0.78) $ 0.65
======== ======== ======== ========
Weighted-average number of common shares outstanding 98,809 98,580 98,761 98,580
======== ======== ======== ========
</TABLE>
See accompanying notes to these Consolidated Financial Statements.
<PAGE>
DEPUY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------
1998 1997
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (77,200) $ 63,761
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization 17,665 16,891
Gain on sale of assets - (32,122)
Deferred income taxes (2,120) (22,091)
Capital contribution for Corange Service Awards 15,865 -
Acquired in-process research and development 131,000 -
Other, net (440) 1,233
Changes in operating assets and liabilities, net of effects
of acquisitions and divestitures:
Accounts receivable (25,069) (5,136)
Inventories (14,630) 6,996
Amounts payable to/or receivable from affiliates, net (606) (1,159)
Prepaid expenses and other current assets (189) 4,058
Other noncurrent assets 2,123 8,274
Accounts payable (2,192) (5,395)
Accrued employee compensation and other 12,480 12,157
Other noncurrent liabilities 868 14,501
Income taxes payable 8,707 14,720
--------- ---------
Net cash provided by operating activities 66,262 76,688
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (12,249) (12,331)
Business acquisitions, net of cash acquired (341,146) (144,417)
Purchases of short-term investments, net (79) (749)
Proceeds from sale of assets - 45,517
--------- ---------
Net cash used for investing activities (353,474) (111,980)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of short-term debt (17,140) (27,637)
Proceeds from issuance of short-term debt 330 4,388
Payments of long-term debt (6,702) (28,493)
Proceeds from issuance of long-term debt 200,068 3,870
Net proceeds from issuance of stock 2,846 -
Dividends paid (11,836) (300)
--------- ---------
Net cash provided by (used for) financing activities 167,566 (48,172)
--------- ---------
Effect of exchange rate changes on cash (1,744) (1,502)
--------- ---------
Decrease in cash and cash equivalents (121,390) (84,966)
Cash and cash equivalents at beginning of period 215,567 209,387
--------- ---------
Cash and cash equivalents at end of period $ 94,177 $ 124,421
========= =========
</TABLE>
See accompanying notes to these Consolidated Financial Statements.
<PAGE>
DEPUY, INC
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Shareholder's Common Common Paid-in Retained Comprehensive Shareholders'
Net Investment Shares Stock Capital Earnings Income Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $ 378,099 - $ - $ - $ - $ - $ -
- ------------------------------------------------------------------------------------------------------------------------------------
Net income for the period 89,640
Dividends to affiliate (8,553)
Change in net transfers
to affiliate 44,063
Foreign currency translation
adjustments 4,727
Unrealized gain on securities 44
Capital contributions
from affiliates 4,564
Capitalization resulting from
reorganization and Initial
Public Offering (512,584) 98,580 986 675,144 - (24,983) 651,147
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT OCTOBER 30, 1996,
EFFECTIVE DATE OF INITIAL
PUBLIC OFFERING - 98,580 986 675,144 - (24,983) 651,147
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income for the period 17,108 17,108
Other comprehensive income 2,373 2,373
----------------------------------------
Total comprehensive income 17,108 2,373 19,481
----------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 - 98,580 986 675,144 17,108 (22,610) 670,628
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income for the year 122,786 122,786
Other comprehensive loss (20,966) (20,966)
----------------------------------------
Total comprehensive income 122,786 (20,966) 101,820
----------------------------------------
Cash dividends declared (11,836) (11,836)
Exercise of stock options and
issuance of other stock awards 13 525 525
Common stock issued for purchase
under the Employee Stock Purchase Plan 87 1 1,553 1,554
Other (573) (573)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 - 98,680 987 676,649 128,058 (43,576) 762,118
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net loss for the period (77,200) (77,200)
Other comprehensive loss (7,251) (7,251)
----------------------------------------
Total comprehensive loss (77,200) (7,251) (84,451)
----------------------------------------
Exercise of stock options and
issuance of other stock awards 136 1 2,845 2,846
Capital contribution
for Corange Service Awards 15,865 15,865
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1998 $ - 98,816 $ 988 $695,359 $ 50,858 ($50,827) $ 696,378
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to these Consolidated Financial Statements.
<PAGE>
DEPUY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except share data)
June 30, 1998
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of DePuy,
Inc. (the "Company") have been prepared in accordance with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of operations for the periods reported have
been included. The results of operations for any interim period are not
necessarily indicative of the results to be expected for the full year. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's 1997 Annual Report on Form 10-K.
NOTE 2 - ORGANIZATION / ACQUISITIONS
DePuy, Inc. was formed as the result of a worldwide reorganization completed by
its parent, Corange Limited ("Corange"), to realign its worldwide orthopaedic
operations into a stand-alone entity in order to sell shares of the realigned
entity to the public through an Initial Public Offering ("IPO"). Prior to the
public offering, various actions were taken to form the Company including (i)
the consolidation of the worldwide operations of DePuy under Corange U.S.
Holdings, Inc., an Indiana corporation ("CUSHI"), (ii) the transfer of
Boehringer Mannheim Corporation ("BMC") out of the CUSHI consolidated group and
(iii) the merging of CUSHI into DePuy, Inc., which was created on July 26, 1996
for purposes of becoming the holding company for the DePuy worldwide operations,
the effect of which was to reincorporate CUSHI in Delaware under the name
"DePuy, Inc." None of these actions involved outside minority shareholders.
Accordingly, the consolidation of the entities was accounted for on a
predecessor basis.
Pursuant to a registration statement filed with the Securities and Exchange
Commission that became effective on October 30, 1996, the Company issued,
through an Initial Public Offering, 7,780,000 shares of its common stock at
$17.50 per share which generated net proceeds after expenses, discounts and
commissions of approximately $126,000. In November 1996, an additional 800,000
shares were sold pursuant to an underwriter's over allotment provision
generating net proceeds of approximately $13,000. The Company used the net
proceeds from the sale of shares of its common stock to fund part of the cost of
the Landanger-Camus ("Landanger") acquisition in April 1997 and part of the
AcroMed acquisition in June 1998.
On April 2, 1997, the Company purchased 89.6% of the shares of Landanger, or
1,939,452 shares, which were held by members of the Landanger family and certain
minority shareholders. The purchase was followed by a tender offer whereby the
Company acquired the remaining 10.4% of the shares, which were owned by the
public. The total purchase price, including acquisition costs, approximated
$150,000. Goodwill totaling $123,489 was recorded as a result of this
acquisition under the purchase method of accounting. The acquisition was funded
partly through external financing and partly with cash received from the IPO.
Landanger, headquartered in France, is a manufacturer of hip implants and a
distributor of orthopaedic devices and supplies.
The operating results of Landanger have been included in the consolidated
statements of income from the date of acquisition. On the basis of a pro forma
consolidation of the results of operations (unaudited), as if the acquisition
had taken place at the beginning of 1996, consolidated net sales of the Company
would have been $792,938 for the year ended December 31, 1997 and $788,064 for
the same period in 1996 (translated at the average exchange rate for 1997 and
1996, respectively). Consolidated pro forma income and earnings per share would
not have been materially different from the reported amounts for the years 1997
and 1996.
<PAGE>
DEPUY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
These unaudited pro forma consolidated results of operations have been prepared
for comparative purposes only and include certain adjustments, such as
additional amortization expense as a result of goodwill, an adjustment for
discontinued businesses and increased interest expense on acquisition debt. In
management's opinion, the pro forma consolidated results of operations are not
necessarily indicative of the actual results that would have occurred had the
acquisition been consummated on January 1, 1996 or of future operations of the
combined companies under the ownership and operation of the Company.
On May 24, 1997, the shareholders of Corange entered into an agreement to sell
100% of its shares to an indirect subsidiary of Roche Holding Ltd ("Roche"), a
multinational company and world leader in research-based healthcare. This
transaction closed on March 5, 1998, upon approval from various regulatory
agencies. The purchase price, after contractually agreed price adjustments,
totaled approximately $10.2 billion. As a result of this transaction, Roche,
through its ownership of Corange, holds an approximate 84% interest in the
Company. The Company continues to operate as an independent organization and
represents an additional segment for Roche. Headquartered in Basel,
Switzerland, Roche is an international company with principal businesses in
pharmaceuticals, diagnostics, vitamins and fine chemicals, and fragrances and
flavors. See Footnote 9 for discussion on Subsequent Events.
On June 3, 1998, the Company purchased the equity of AcroMed Corporation
("AcroMed") for approximately $340,000, including acquisition costs. Goodwill
totaling $93,000 was recorded as a result of this acquisition under the purchase
method of accounting. The transaction also resulted in the recording of one-time
charges of approximately $131,000 primarily related to the cost of acquired in-
process research and development, and $149,000 was recorded as an intangible
asset related to the value of existing AcroMed products, partially offset by an
associated deferred tax liability of $60,000. The acquisition was funded partly
through external financing consisting of a $300,000 revolving line of credit and
partly with cash received from the IPO. AcroMed, headquartered in Cleveland,
Ohio, manufactures and distributes spinal implant medical devices to treat a
range of conditions including degenerative diseases, deformities, traumas/tumors
and cervical applications. For its fiscal year ended June 30, 1997, AcroMed
reported net sales of $91,200 and net loss of approximately $51,100. Excluding
nonrecurring charges primarily related to product liability settlements, AcroMed
would have reported net income of approximately $14,200 (unaudited).
The operating results of AcroMed have been included in the consolidated
statements of income from the date of acquisition. On the basis of a pro forma
consolidation of the results of operations (unaudited), as if the acquisition
had taken place at the beginning of 1997, consolidated net sales of the Company
would have been $468,331 for the six months ended June 30, 1998 and $438,952 for
the same period in 1997. Consolidated pro forma income and earnings per share,
including the write-off of in-process research and development, would have been
($83,494) or ($.84) per share, and $60,668 or $.62 per share for the six months
ended June 30, 1998 and 1997, respectively. For pro forma effect of full year
1997 see the Company's Current Report on Form 8-K dated June 3, 1998, as
amended.
These unaudited pro forma consolidated results of operations have been prepared
for comparative purposes only and include certain adjustments, such as
additional amortization expense as a result of goodwill and other intangibles,
an adjustment for deferred taxes and increased interest expense on acquisition
debt. In management's opinion, the pro forma consolidated results of operations
are not necessarily indicative of the actual results that would have occurred
had the acquisition been consummated on January 1, 1997 or of future operations
of the combined companies under the ownership and operation of the Company.
The Company's primary business is the development, manufacture and sale of
orthopaedic joint implants (primarily hips, knees and shoulders), spinal
implants, related surgical instruments, trauma products and sports medicine soft
goods.
<PAGE>
DEPUY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 - SPECIAL ITEMS
Effective March 28, 1997, the Company completed the sale of the pharmaceutical
business of DePuy International Limited. The pharmaceutical and related
businesses achieved 1996 sales of approximately $14,000, principally from
infection control and skin treatment products sold to hospitals in the United
Kingdom. The transaction was completed through a management buy-out and
resulted in a one-time, pretax gain of $8,000. In addition, the Company
recognized special charges totaling $8,900 during the first quarter of 1997,
primarily related to the cost of instrumentation sets acquired and written off
in connection with reorganizing various distribution channels to increase
implant sales.
Effective May 29, 1997, the Company entered into an agreement to sell the
healthcare business of DePuy International Limited. The healthcare and related
businesses achieved 1996 sales of approximately $17,000 principally from
incontinence care products sold to hospitals in the United Kingdom. The
transaction resulted in a one-time gain of $26,900. In addition, the Company
recognized special charges totaling $34,500 during the second quarter of 1997,
consisting of a $17,400 charge to recognize minimum obligations to former
distributors, a $7,900 provision for impairment in value of assets primarily
related to foreign operations, a $5,200 provision for integration and
reorganization expenses within existing DePuy entities as a consequence of the
Landanger acquisition, and a $4,000 provision for purchased research and
development.
During March 1998, certain employees of DePuy, Inc. and its subsidiaries
received, in connection with the sale of the Corange group to Roche, special
monetary awards in recognition of their services to the Corange group of
companies. DePuy recorded an approximate $24,000 pretax operating expense
related to the awards during the first quarter of 1998. The payment of these
awards had no cash impact on the Company since they were funded through a
$15,900 capital contribution received from Corange representing the estimated
after-tax cash flow effect to the Company. The expense recorded during the
first six months of 1998 for these special awards, as well as the related tax
benefits, represent the estimated cost to the Company since the final accounting
has not yet been completed.
NOTE 4 - INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
<S> <C> <C>
Finished products $175,793 $136,170
Work in process 11,353 13,387
Raw materials 26,752 20,178
-------- --------
213,898 $169,735
======== ========
</TABLE>
NOTE 5 - INCOME TAXES
The difference between the Company's effective and statutory tax rates is
primarily attributable to the tax effects of the Corange special service awards
and the acquired in-process research and development recorded in the first six
months of 1998, from which reduced or no tax benefits were derived, and to the
gains realized on the sale of the Company's pharmaceutical and healthcare
businesses during the first six months of 1997. The gains on the pharmaceutical
and healthcare businesses, as described in Note 3, were subject to tax at a rate
lower than the statutory tax rate. In addition, the effective tax rate is
impacted by state income taxes, nondeductible goodwill, and the effect of
international operations.
<PAGE>
DEPUY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 6 - CONTINGENCIES
The Company is subject to a number of investigations, lawsuits and claims during
the normal course of business. Management does not expect that resulting
liabilities beyond provisions already recorded will have a materially adverse
effect on the Company's consolidated financial position, results of operations
or cash flows. The loss provisions recorded have not been reduced for any
material amounts of anticipated insurance recoveries.
NOTE 7 - ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS
130") and No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("FAS 131"). These Statements establish standards for the
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements and establish standards for the way that
public business enterprises report information about operating segments in
annual financial statements, respectively. Both of these pronouncements became
effective for financial statements for fiscal years beginning after December 15,
1997 and are also required for interim financial reporting. FAS 131 is not
required for interim financial reporting in the initial year of adoption. The
Company has provided the required disclosures as prescribed in FAS 130 in its
financial statements for the first six months of 1998 and intends to provide the
required disclosure for FAS 131 in the Company's 1998 annual financial
statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). This Statement, which must be adopted for
fiscal quarters of fiscal years beginning after June 15, 1999, standardizes the
accounting for derivative instruments by requiring that an entity recognize
those items as assets or liabilities in the statement of financial position and
measure them at fair value. The Company does not believe that the adoption of
this standard will have a material effect on its results of operations.
NOTE 8 - COMPREHENSIVE INCOME
The changes in the components of accumulated other comprehensive income for the
first six months of 1998 and 1997 were $7,251 and $13,251, respectively.
Comprehensive income consisted of the following:
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
--------- ---------
<S> <C> <C>
Cumulative translation adjustment ($7,465) ($13,256)
Net unrealized appreciation on securities 214 5
-------- --------
($7,251) ($13,251)
======== ========
</TABLE>
NOTE 9 - SUBSEQUENT EVENTS
On July 21, 1998, DePuy, Inc. and Johnson & Johnson, a multinational company and
manufacturer of health care products, entered into a definitive agreement under
which Johnson & Johnson will make a tender offer for all of the outstanding
shares of the Company for $35.00 per share, for an aggregate transaction value
of $3.5 billion. Simultaneously, Johnson & Johnson and Roche, of Basel,
Switzerland, entered into an agreement under which Roche, which owns
approximately 84% of the outstanding shares of DePuy, has agreed to tender all
of its shares. Johnson & Johnson is the world's most comprehensive and broadly
based manufacturer of health care products for the consumer, pharmaceutical and
professional markets.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Results of Operations
Overview
- --------
DePuy, Inc. (the "Company") is one of the world's leading designers,
manufacturers and distributors of orthopaedic devices and supplies. The
Company's products include joint reconstructive devices such as hip, knee and
shoulder implants; spinal implants; trauma devices; sports medicine products,
including knee braces and other soft good supplies; and various other
orthopaedic and operating room products. The Company sells and distributes its
products in all major markets throughout the world. During both the first six
months of 1998 and the year 1997, 51% of worldwide sales were to customers
within the United States, with the remaining 49% of total sales being to
customers located primarily in European and Asia/Pacific countries.
On October 30, 1996, the Company issued 8.6 million new shares of common stock,
and Corange Limited ("Corange"), which directly or indirectly owned 100% of the
shares of the Company, sold 7.0 million previously outstanding shares to the
public through an Initial Public Offering ("IPO") at an offering price of $17.50
per share. The issuance of stock generated net proceeds to the Company after
expenses, discounts and commissions of approximately $139 million.
Prior to the public offering, the Company was operated as the orthopaedic
division of Corange. This division comprised various legal entities that were
engaged, or partly engaged, in the orthopaedic business and were owned by a
number of different entities within the Corange group. As a result of a pre-
offering reorganization, (i) the non-U.S. entities (or in certain cases, the
assets thereof) that were involved in the orthopaedic business were transferred
into the Company's U.S. consolidated group, (ii) Boehringer Mannheim
Corporation, the U.S. operating subsidiary of the Boehringer Mannheim companies,
which were under common control with the DePuy companies, was transferred
outside the Company's U.S. consolidated group and (iii) the Company was
reincorporated in Delaware.
Certain transactions occurring during 1998 and 1997 affect the comparison of
financial results for the first six months of 1998 as compared to the same
period in the prior year. In 1998 the Company acquired AcroMed Corporation
("AcroMed"), a manufacturer of spinal implant medical devices located in
Cleveland, Ohio, for approximately $340 million, including acquisition costs.
This acquisition, which occurred in June 1998, contributed approximately 3%
additional sales growth for the six months ended June 30, 1998. In April 1997,
the Company acquired Landanger-Camus ("Landanger"), a leading manufacturer of
hip implants located in France, for approximately $150 million. This acquisition
contributed approximately 4% additional sales growth for the six months ended
June 30, 1998. In addition, the Company sold its international healthcare and
pharmaceutical businesses during the first half of 1997. These divestitures
caused sales to decline by approximately 3% during the first six months of 1998.
<PAGE>
The following table summarizes the selected financial information expressed as a
percentage of net sales for each reporting period:
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Net Sales
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------
1998 1997 1998 1997
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 30.0 32.9 29.6 31.4
------- ------- ------- ------
Gross profit 70.0 67.1 70.4 68.6
------- ------- ------- ------
Selling, general & administrative expenses 36.5 37.4 36.9 37.2
Research and development expenses 3.4 3.8 3.4 3.5
Amortization of goodwill and intangible assets 2.2 2.2 2.0 1.9
Acquired in-process research and development and
other special items, net 59.7 3.7 36.4 2.2
------- ------- ------- ------
Operating (loss) income (31.8) 20.0 (8.3) 23.8
------- ------- ------- ------
Interest expense 1.1 0.8 1.0 0.7
Other income, net 0.6 0.4 1.0 0.8
------- ------- ------- ------
(Loss) income before taxes, minority interest expense
and equity in (loss) earnings of unconsolidated affiliate (32.3) 19.6 (8.3) 23.9
------- ------- ------- ------
Provision for income taxes 11.1 3.7 9.5 7.6
Minority interest expense 0.3 0.3 0.3 0.3
Equity in (loss) earnings of unconsolidated affiliate (0.1) 0.3 - 0.2
------- ------- ------- ------
Net (loss) income (43.8)% 15.9 % (18.1)% 16.2 %
======= ======= ======= ======
</TABLE>
The following table summarizes sales by product line and geographic location:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1998 1997 1998 1997
------- ------- ------- ------
<S> <C> <C> <C> <C>
Reconstructive products $ 143.8 $ 145.6 $ 289.3 $272.8
Spinal implants 29.9 15.1 49.0 29.0
Trauma products 17.5 14.8 34.8 30.0
Sports medicine 12.4 12.4 25.4 24.7
Other products 15.6 16.8 28.0 36.1
------- ------- ------- ------
Total sales $ 219.2 $ 204.7 $ 426.5 $392.6
======= ======= ======= ======
U.S. sourced sales $ 125.5 $ 107.9 $ 239.0 $217.2
International sourced sales 93.7 96.8 187.5 175.4
------- ------- ------- ------
Total sales $ 219.2 $ 204.7 $ 426.5 $392.6
======= ======= ======= ======
Sales to customers located in the United States $ 114.0 $ 99.9 $ 219.6 $200.8
Sales to customers located outside the United States 105.2 104.8 206.9 191.8
------- ------- ------- ------
Total sales $ 219.2 $ 204.7 $ 426.5 $392.6
======= ======= ======= ======
</TABLE>
<PAGE>
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net sales were $426.5 million for the six months ended June 30, 1998,
representing an increase of $33.9 million, or 9% over the same period in the
prior year. Continued penetration of the spinal implant market caused total
sales to increase by 5%, with the acquisition of AcroMed in June 1998
contributing 3% of this growth. The acquisition of Landanger in April 1997
resulted in additional sales growth of 4%. The effects of foreign exchange rates
in 1998 compared with 1997 and the sale of the pharmaceutical and healthcare
businesses resulted in an unfavorable impact on sales of 3% and 3%,
respectively. The remaining 6% increase primarily related to the growth in sales
of hip and knee replacements in the joint reconstructive product line and to
higher sales of various products in the trauma product line.
The components of the worldwide sales improvement were as follows:
<TABLE>
<S> <C>
Acquisitions 7%
Volume and product mix 5%
Net pricing changes 3%
Effect of foreign exchange rates -3%
Divestitures -3%
</TABLE>
U.S. sourced sales to unaffiliated customers rose $21.8 million, or
approximately 10%, during the six months ended June 30, 1998. This growth was
primarily attributable to the acquisition of AcroMed effective June 1, 1998 and
to increased sales of other spinal products, including the new Peak polyaxial
anterior cervical plate, and the continued penetration of this fast-growing
segment of the U.S. orthopaedics market. Increased sales of joint reconstructive
implants and trauma products also contributed to the sales growth for the
period.
International sourced sales to unaffiliated customers rose $12.1 million, or 7%,
during the six months ended June 30, 1998. This increase in sales was primarily
attributable to the acquisition of Landanger in April 1997 resulting in
international sales growth of 9%. The continued expansion in the European and
Asia/Pacific regions also caused sales to grow by 6% and 5%, respectively,
exclusive of the effects of foreign exchange and divestitures. The negative
effect of foreign exchange rates partially offset the overall increase in
international sales by 7% and divestitures caused international sales to decline
by 6%.
The Company's gross profit for the six months ended June 30, 1998 was $300.1
million, or 70.4% of sales, as compared to 68.6% of sales for the comparable
six-month period. During the first six months of 1997, certain one-time
inventory adjustments related to discontinued, obsolete and excess products were
recorded resulting in a 1.5% decrease in gross margin. Excluding this unusual
item, margins improved by .3% in 1998 as compared to the prior year, partly due
to the sale of the pharmaceutical and healthcare businesses during 1997 which
historically had realized significantly lower gross margins than the core
orthopaedic products sold by the Company. In addition, product mix and price
increases occurring during the first six months of the year contributed to the
increase in gross margins.
Selling, general and administrative expenses totaled $157.5 million for the
first six months of 1998, or 36.9% of sales, as compared to 37.2% reported in
the same period of the prior year. This decrease was attributable to lower legal
fees in 1998 and higher general and administrative expenses during the first six
months of 1997 attributable to the Landanger acquisition, partially offset by
higher marketing and consulting fees, and increased investments in international
information systems during the current year.
Research and development expenses increased to $14.6 million, or 3.4% of sales
during the first six months of 1998, as compared to 3.5% reported in the same
period in 1997. The Company continues to make investments in technological
advancements in order to remain competitive in the orthopaedic market and to
provide its customers with the latest technology available.
<PAGE>
Amortization of goodwill and intangibles totaled $8.4 million for the first six
months of the year, representing a $.8 million increase compared to the same
period in the prior year. This increase was primarily attributable to the
recording of the additional goodwill related to the acquisition of Landanger in
April 1997 and of AcroMed in June 1998, partially offset by lower amortization
resulting from the sale of the healthcare and pharmaceutical businesses during
the first six months of 1997.
The acquired in-process research and development of $131.0 million reported
during the first six months of 1998 consisted primarily of a one-time charge
related to the purchase of AcroMed. Special items, net, of $24.0 million
represents monetary awards received, in connection with the sale of Corange to
Roche Holding Ltd ("Roche"), by certain employees of the Company in recognition
of their services to the Corange group of companies. This one-time charge
represents an estimate for the first six months of 1998 since the final
accounting has not yet been completed.
During the first six months of 1997, the special items, net, of $8.5 million
includes an $8.0 million gain on the sale of the pharmaceutical business of
DePuy International Limited, effective March 28, 1997, and a $26.9 million gain
on the sale of the healthcare business of DePuy International Limited, effective
May 29, 1997. These gains were partially offset by special charges totaling
$43.4 million including:
. $8.9 million of costs incurred to reorganize the distribution channels of
the Company,
. a $17.4 million charge to recognize minimum obligations to former
distributors,
. a $7.9 million provision for impairment in value of assets primarily
related to foreign operations,
. a $5.2 million provision for integration and reorganization expenses
within existing DePuy entities as a consequence of the Landanger
acquisition, and
. a $4.0 million provision for purchased research and development.
These items are described in more detail in Note 3 to the financial statements.
Interest expense was $4.3 million through June 30, 1998 representing a $1.5
million increase compared to the same period in the prior year. This higher
interest expense was due to additional debt acquired related to the purchases of
Landanger and AcroMed, partially offset by a reduction in outstanding debt
balances as a result of increased internal funding of short-term financial
requirements.
Other income, net, totaled $4.2 million for the first six months of the year as
compared to $3.2 million reported in the prior year, representing an increase of
$1.0 million. This increase mainly resulted from higher interest income related
to larger invested cash balances and improved interest rates.
The effective income tax rate for the first six months of 1998 was (114.0%) as
compared to 31.9% reported in the same period of the prior year. Excluding the
tax effects of the special employee recognition awards and the one-time charge
for acquired in-process research and development, the effective rate would have
been 40.7% for the first six months of the current year. The 8.8 percentage
point increase in the rate was primarily the result of the lower tax rate
applied to the gains realized on the sale of the healthcare and pharmaceutical
businesses during the first six months of 1997.
The Company reported a net loss for the six months ended June 30, 1998 of $77.2
million. Excluding special items and acquired in-process research and
development, net income would have been $70 million, or 16.4% of sales,
representing 10% growth over the prior year. This increase was attributable to
a 12% increase in operating profit, excluding special items, partially offset by
a higher effective income tax rate. Earnings per share for the first six months
of 1998, excluding special and nonrecurring items, would have been $.71,
representing a 9% increase over the prior year.
<PAGE>
Quarter Ended June 30, 1998 Compared to Quarter Ended June 30, 1997
Net sales were $219.2 million for the quarter ended June 30, 1998, representing
an increase of $14.4 million, or 7% over the same period in the prior year.
Continued penetration of the spinal implant market caused total sales to
increase by 7%, including 5% attributable to the acquisition of AcroMed in June
1998. The effects of foreign exchange rates in 1998 compared with 1997 and the
sale of the healthcare business resulted in an unfavorable impact on sales of 3%
and 2%, respectively. The remaining 5% increase primarily related to the growth
in sales (excluding the effects of foreign currency) of hip and knee
replacements in the joint reconstructive product line and to continued growth in
the trauma market.
The components of the worldwide sales improvement were as follows:
<TABLE>
<S> <C>
Acquisitions 5%
Volume and product mix 5%
Net pricing changes 2%
Effect of foreign exchange rates -3%
Divestitures -2%
</TABLE>
U.S. sourced sales to unaffiliated customers rose $17.6 million, or
approximately 16% during the quarter ended June 30, 1998. This growth was
primarily attributable to the AcroMed acquisition and increased sales of spinal
products, including the new Peak polyaxial anterior cervical plate and continued
penetration of this fast-growing segment of the U.S. orthopaedics market.
Increased sales of joint reconstructive implants and trauma products also
contributed to the sales growth for the quarter.
International sourced sales to unaffiliated customers decreased $3.1 million, or
3%, during the quarter ended June 30, 1998. This decrease in sales was
primarily attributable to the negative effect of foreign exchange rates and
divestitures causing sales to decline by 6% and 4%, respectively. The continued
expansion in the European and Asia/Pacific regions caused sales to grow by 3%
and 4%, respectively, exclusive of the effects of foreign exchange and
divestitures.
The Company's gross profit for the three months ended June 30, 1998 was $153.4
million, or 70.0% of sales, as compared to 67.1% of sales for the comparable
three-month period. This increase in gross margin as a percent of sales
primarily resulted from one-time inventory adjustments related to discontinued,
obsolete and excess products resulting in a 2.8% decrease in margin during the
three months ended June 30, 1997. Excluding this item, gross margins improved by
.1% for the quarter, partly the result of the sale of the healthcare business
during 1997 which historically had realized significantly lower gross margins
than the core orthopaedic products sold by the Company.
Selling, general and administrative expenses totaled $79.9 million for the
second quarter of 1998, or 36.5% of sales, as compared to 37.4% reported in the
same period of the prior year. The lower expenses partly resulted from decreased
legal fees, partially offset by higher consulting fees.
Research and development expenses decreased to $7.4 million, or 3.4% of sales
during the second quarter of 1998, as compared to 3.8% reported during the same
period in 1997 due to the timing of expenditures. The Company continues to make
investments in technological advancements in order to remain competitive in the
orthopaedic market and to provide its customers with the latest technology
available.
The amortization of goodwill and intangibles totaled $4.8 million for the three
months ended June 30, 1998, representing a $.4 million increase compared to the
same period in the prior year. This increase was primarily attributable to the
recording of additional goodwill related to the acquisition of AcroMed in June
1998, partially offset by lower amortization resulting from the sale of the
healthcare business during the second quarter of 1997.
<PAGE>
Acquired in-process research and development reported during the second quarter
of 1998 of $131.0 million primarily represents the write-off of in-process
research and development related to the purchase of AcroMed. During the second
quarter of 1997, special items, net, includes a $26.9 million gain on the sale
of the healthcare business of DePuy International Limited, effective May 29,
1997, described in Note 3 to the financial statements. This gain was partially
offset by special charges totaling $34.5 million primarily resulting from:
. a $17.4 million charge to recognize minimum obligation to former
distributors,
. a $7.9 million provision for impairment in value of assets primarily
related to foreign operations,
. a $5.2 million provision for integration and reorganization expenses
within existing DePuy entities as a consequence of the Landanger
acquisition, and
. a $4.0 million provision for purchased research and development.
Interest expense was $2.5 million for the quarter, representing a $.9 million
increase compared to the same period in the prior year. This higher interest
expense was due to additional debt acquired related to the purchases of
Landanger and AcroMed, partially offset by a reduction in outstanding debt
balances as a result of increased internal funding of short-term financial
requirements.
Other income, net, totaled $1.4 million for the second quarter of the year as
compared to $0.8 million of income reported in the prior year, representing an
increase of $0.6 million. This increase was attributable to higher interest
income resulting from larger invested cash balances and improved interest rates.
The effective income tax rate for the second quarter of 1998 was (34.4%) as
compared to 19.0% reported in the same period of the prior year. Excluding the
tax effects of the one-time charge for in-process research and development, the
effective rate would have been 40.5% for the second quarter of the current year.
Excluding the special items, the effective income tax rate for the second
quarter of 1997 was 42.5%. The 2.0 percentage point reduction in the rate
resulted primarily from the tax effects of the financing structure related to
the Landanger acquisition and other effects of international operations.
The Company recognized a net loss for the three months ended June 30, 1998 of
$96.0 million. Excluding non-recurring items, net income would have been $35.3
million, or 16.1% of sales, representing 9% growth over the prior year. This
increase was attributable to a 14% increase in operating profit, excluding non-
recurring items. Earnings per share for the second quarter of 1998, excluding
special items, would have been $.36, representing a 9% increase over the prior
year.
LIQUIDITY AND CAPITAL RESOURCES
Cash generated from operations, along with available credit lines, are the
principal sources of funding available to the Company and provide adequate
liquidity to meet its operational needs. Cash and cash equivalents totaled $94.2
million at June 30, 1998, compared with $215.6 million at December 31, 1997. The
decrease is primarily due to partially funding the AcroMed acquisition with
existing cash.
Net proceeds received from the IPO in October 1996 totaled approximately $139
million. This cash was used to fund part of the cost of the Landanger and
AcroMed acquisitions.
Working capital at June 30, 1998 was $146.2 million, representing a $257.0
million decrease from December 31, 1997. This decrease primarily resulted from
the utilization of excess cash to fund part of the AcroMed acquisition and an
increase in short-term debt. The annualized inventory turnover ratio for the six
months ended June 30, 1998 was 1.3, down from the 1.7 level reported during the
six months ended June 30, 1997. The annualized accounts receivable turnover rate
was 5.7 for the first six months of 1998, down from 5.9 in the same period in
1996.
<PAGE>
Operating activities generated $66.3 million of cash in the first six months of
1998 as compared to $76.7 million in the same period in the prior year. The
lower cash flows during the first six months of the year resulted primarily from
changes in working capital.
Cash flows used for investing activities totaled $353.5 million through the
second quarter of 1998, including $341.2 million paid for acquisitions (net of
cash received), primarily AcroMed, and $12.3 million of capital expenditures. In
the first six months of 1997, cash flows used for investing activities totaled
$112.0 million including $144.4 million paid in consideration for the
acquisition of Landanger (net of cash received), capital expenditures of $12.3
million and purchases of short-term investments of $.8 million, partially offset
by proceeds received from the sale of the pharmaceutical and healthcare
businesses of DePuy International Limited of $45.5 million.
Cash flows provided by financing activities were $167.6 million in 1998 and
included a net increase in debt of $176.6 million and $2.8 million of proceeds
received from the issuance of stock related to the exercise of stock options and
other stock activity, partially offset by $11.8 million of dividends. The
increase in debt was due to additional financing obtained to partially fund the
AcroMed acquisition. During the first six months of 1997, cash flows used for
financing activities totaled $48.2 million and included a net decrease in debt
of $47.9 million and dividends of $.3 million.
The Company declared an annual cash dividend of $.12 per share in October 1997
which was paid in January 1998. The Board of Directors will determine each year
the amount of dividends to be paid, if any, based upon cash funds available.
Capital expenditures are expected to be approximately $37 million in 1998,
primarily consisting of purchases of machinery and equipment and accounting
software. In addition to these funding requirements, the Company expects to
continue to evaluate future acquisitions to expand its business.
The Company has historically been able to fund its capital and operating needs
through its cash flows from operations and expects to be able to continue to do
so in the future. The Company believes that with its current cash position and
its ability to obtain additional cash, either through the issuance of additional
shares of the common stock or utilization of credit lines, it has the ability to
fund future acquisitions. As described in Note 2 to the financial statements,
the Company recently obtained a $300 million revolving line of credit to fund
the AcroMed acquisition, of which $200 million has been utilized.
FACTORS AFFECTING FUTURE PERFORMANCE
Although management believes that the Company will continue to be a world leader
in the orthopaedic industry with strong financial performance, there are many
risks and uncertainties which may change this outlook and affect the Company's
performance over the next several years. The following discussion points out
certain items which may affect DePuy and summarizes management's expectations
regarding these issues. The Company cannot guarantee that these expectations
will be realized, nor can it predict what future affect these items will have on
its performance. Other risk factors may also exist which have not been
identified either in this discussion or in the Company's Form 10-K.
The orthopaedic industry within the United States has been greatly influenced by
the effects of healthcare reform and the advent of managed care. The enforcement
of strict cost controls and the market trends toward discounted prices have
affected all competitors in the orthopaedic industry. The Company experienced a
gradual leveling of prices during 1997 and believes that in 1998 prices may
increase very slightly. Although the Company does not anticipate that these
pricing issues will emerge again in the near future, there can be no guarantee
of such market trends.
<PAGE>
The advent of managed care and the related pressures on cost containment have
also resulted in increased involvement in the purchasing decisions by hospital
buying groups and higher numbers of national purchasing contracts. These
contracts require manufacturers to provide significant price discounts on their
products in return for preferred supplier arrangements. The Company believes
that the high levels of product sales to such groups and the opportunity for
increased market share can offset the financial impact of discounting products.
However, the extent to which buying groups are able to obtain compliance from
the various institutions within their organizations, as anticipated under such
preferred supplier agreements, varies considerably depending on the particular
buying group. Over the last year the Company has experienced a lower rate of
compliance in the U.S. under certain contracts. If these contracts do not
produce higher levels of compliance in the future, the sales growth and the
financial results of the Company may be adversely impacted.
A significant portion of the Company's business is performed outside the United
States, primarily in Europe and Asia/Pacific countries, where sales and other
transactions are denominated in foreign currencies. Based upon the recent
volatility in the foreign currency markets, currency rate fluctuations could
have a negative impact on future sales and earnings growth. The Company
occasionally hedges certain foreign currency transactions where it is deemed
prudent, in an effort to protect its profit levels. However, there is no
guarantee that such hedges can be obtained or that they will protect the Company
from future losses resulting from foreign currency fluctuations.
The orthopaedic industry is highly competitive and is characterized by
innovation, technological change and advancement. The Company currently competes
with a number of companies and can provide no assurance that its competitors
will not succeed in developing technologies and products that are more effective
than the Company's or that would render the Company's technology or products
obsolete or uncompetitive.
The Company's sales growth and continued success in the U.S. depends largely
upon marketing arrangements with independent sales associates, who are managed
by a Company employee or by an independent agent. The sales associates' sales
and service expertise and relationships with the customers in the marketplace
are critical to the continued success of the Company and its ability to maintain
market share. Due to the extreme competitiveness in the orthopaedic market,
there can be no guarantee that the Company will be able to retain the associates
currently marketing its products or will be able to attract new associates to
grow the business. If the Company is unable to maintain the relationships
currently existing with its sales representatives and associates, this could
have a material adverse effect on the Company's business and results of
operations.
The Company holds U.S. and foreign patents and regularly applies for new patents
related to certain systems, components and instrumentation for its products.
Recently the medical device industry has experienced extensive litigation
regarding patents and other intellectual property rights. There can be no
assurance as to the protection provided by these patents nor that the Company
will not become subject to patent infringement claims or litigation in the
future to determine the priority of inventions. If such claims result in
lawsuits, the Company may incur substantial legal expenses which may affect its
financial performance. In addition, the Company holds licenses from third
parties to utilize certain patents and technology applied to the design of some
of its devices. The loss of such licenses would prevent the Company from
manufacturing and selling certain products, which could have a material adverse
effect on the Company's business.
The Company's products are subject to extensive regulation in the United States
by the federal Food and Drug Administration (the "FDA") and, in some
jurisdictions, by state authorities. There can be no assurance that the FDA will
act favorably or quickly in its review of the Company's regulatory filings or
that significant difficulties and costs will not be encountered by the Company
in its efforts to obtain necessary FDA clearance on its products. In addition,
the FDA may require the Company to conduct additional product testing or perform
more clinical studies. The FDA may also place significant limitations upon the
intended use of the Company's products as a condition to clearance. These
additional requirements or restrictions may have an impact on the Company's
ability to manufacture and sell certain products which could have a material
adverse effect on the Company's financial results.
<PAGE>
The Company recognizes the need to ensure its operations will not be adversely
impacted by Year 2000 software issues. The Company believes that major areas of
potential business impact have been identified and remedial actions are being
considered. Based upon current assessments, the Company believes that future
financial results will not be materially affected by Year 2000 issues. Most of
these issues will be resolved through the purchase of new software systems which
will be capitalized and depreciated over the life of such systems. There will be
certain costs incurred related to the modification of existing software, but
these costs are estimated to be immaterial to the financial results of the
Company. However, there can be no guarantee that the Company's current
assessment will be achieved. Actual results could differ materially from such
assessments.
The pending acquisition of DePuy by Johnson & Johnson, as described in Note 9 to
the financial statements, may have an impact on future growth strategies and
operations of the Company dependent upon the guidance provided by the new owner.
Item 3 - Quantitative and Qualitative Disclosure About Market Risk
Not Applicable
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Not Applicable
Item 2 - Changes in Securities and Use of Proceeds
Pursuant to the Company's Registration Statement on Form S-1
(Registration Statement No. 333-09345) which became effective on
October 30, 1996, the Company issued 8,580,000 shares of common stock,
including shares issued pursuant to the exercise of an underwriters'
over allotment option. The offering generated net proceeds to the
Company after expenses, discounts and commissions of approximately $139
million. The Company used a portion of the net proceeds to partially
fund the acquisition of Landanger-Camus in April 1997 and the remainder
of the net proceeds to partially fund the acquisition of AcroMed in
June 1998. The net proceeds to the Company from the offering have been
completely applied to the aforesaid uses.
Item 3 - Defaults Upon Senior Securities
Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders
On April 30, 1998, the Company held its annual meeting of shareholders,
at which meeting the shareholders elected Messrs. Richard C. Bolesky,
Gerald C. Hanes and Robert Volz, M.D. as Class II directors for three
year terms. The votes were 95,836,762, 95,836,622 and 95,827,112 shares
for, 0, 0 and 0 shares against, 220,275, 220,415 and 229,925 shares
abstaining, and 0, 0 and 0 shares broker nonvotes, respectively.
Messrs. James A. Lent, Anthony Williams, Richard A. Gilleland, M.L.
Lowenkron and Michael J. Dormer continued as directors of the Company.
In a subsequent meeting, the board of directors of the Company elected
Dr. Fritz Gerber and Dr. Franz B. Humer as directors of DePuy, Inc.
effective April 30, 1998.
In addition to the election of directors, the shareholders took the
following actions:
(1) approved a change to the last sentence of the first paragraph of
Section 4.1 of the DePuy, Inc. Employee Stock Option/Purchase Plan
to increase the maximum number of shares to be issued under the
Plan with respect to the 1997 annual offering to 200,000 with a
vote of 95,775,439 shares in favor, 261,612 shares opposed,
19,986 shares abstaining and 0 shares broker nonvotes; and
(2) confirmed the appointment of Price Waterhouse LLP as auditor for
the Company for the year ended December 31, 1998 with a vote of
96,042,137 shares in favor, 6,325 shares opposed, 8,575 shares
abstaining and 0 shares broker nonvotes.
Item 5 - Other Information
Not Applicable
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Revolving Credit Agreement among DePuy, Inc. as Borrower, the
Lenders named therein and The First National Bank of Chicago,
as Agent, dated as of May 29, 1998.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the three-month period ended June 30, 1998, the Company
filed one Report on Form 8-K, dated June 3, 1998, reporting under
Item 2. Acquisition and Disposition of Assets, related to the
Company's acquisition of AcroMed Corporation. The Company filed an
amendment to the Form 8-K on August 14, 1998, reporting the
financial statements and pro forma financial information required
by Item 7 of Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1998 DEPUY, INC.
By: /s/ Steven L. Artusi
---------------------------------
Steven L. Artusi
Senior Vice President,
General Counsel and Secretary
Date: August 14, 1998 By: /s/ Thomas J. Oberhausen
---------------------------------
Thomas J. Oberhausen
Senior Vice President and
Chief Financial and Accounting
Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
4.1 Revolving Credit Agreement among DePuy, Inc. as Borrower, the Lenders named therein
and The First National Bank of Chicago, as Agent, dated as of May 29, 1998.
27.1 Financial Data Schedule
</TABLE>
<PAGE>
EXECUTION COPY
================================================================================
$300,000,000
REVOLVING CREDIT AGREEMENT
AMONG
DEPUY, INC.
as Borrower,
THE LENDERS NAMED HEREIN
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
DATED AS OF
May 29, 1998
================================================================================
Arranged by
FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS.............................................................. 1
ARTICLE II
THE CREDITS.............................................................. 13
2.1. Advances........................................................... 13
2.2. Ratable Loans...................................................... 13
2.3. Types of Advances.................................................. 13
2.4. Facility Fee; Reductions and Increases in Aggregate Commitment..... 13
2.5. Minimum Amount of Each Advance..................................... 14
2.6. Optional Principal Payments........................................ 14
2.7. Method of Selecting Types and Interest Periods for New Advances.... 15
2.8. Conversion and Continuation of Outstanding Advances................ 15
2.9. Changes in Interest Rate, etc...................................... 16
2.10. Method of Payment.................................................. 16
2.11. Noteless Agreement; Evidence of Indebtedness....................... 16
2.12. Rates Applicable After Default..................................... 17
2.13. Telephonic Notices................................................. 17
2.14. Interest Payment Dates; Interest and Fee Basis..................... 18
2.15. Notification of Advances, Interest Rates, Prepayments, Commitment
Reductions and Issuance Requests................................... 18
2.16. Lending Installations.............................................. 18
2.17. Non-Receipt of Funds by the Agent.................................. 18
2.18. Facility Letters of Credit......................................... 19
2.18.1 Issuance of Facility Letters of Credit..................... 19
2.18.2 Participating Interests.................................... 19
2.18.3 Facility Letter of Credit Reimbursement Obligations........ 20
2.18.4 Procedure for Issuance..................................... 21
2.18.5 Nature of the Lenders' Obligations......................... 22
2.18.6 Facility Letter of Credit Fees............................. 22
ARTICLE III
YIELD PROTECTION; TAXES.................................................. 23
3.1. Yield Protection................................................... 23
3.2. Changes in Capital Adequacy Regulations............................ 24
3.3. Availability of Types of Advances.................................. 24
3.4. Funding Indemnification............................................ 24
3.5. Taxes.............................................................. 24
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3.6. Lender Statements; Survival of Indemnity........................... 26
3.7. Substitution of Lenders............................................ 26
ARTICLE IV
CONDITIONS PRECEDENT..................................................... 27
4.1. Initial Loans and Facility Letters of Credit....................... 27
4.2. Each Future Advance and Facility Letter of Credit.................. 28
ARTICLE V
REPRESENTATIONS AND WARRANTIES........................................... 29
5.1. Corporate Existence and Standing................................... 29
5.2. Authorization and Validity......................................... 29
5.3. Compliance with Laws and Contracts................................. 29
5.4. Governmental Consents.............................................. 30
5.5. Financial Statements............................................... 30
5.6. Material Adverse Change............................................ 30
5.7. Taxes.............................................................. 30
5.8. Litigation and Contingent Obligations.............................. 31
5.9. Subsidiaries....................................................... 31
5.10. ERISA.............................................................. 31
5.11. Defaults........................................................... 31
5.12. Federal Reserve Regulations........................................ 31
5.13. Investment Company; Public Utility Holding Company................. 32
5.14. Plan Assets; Prohibited Transactions............................... 32
5.15. Ownership of Properties............................................ 32
5.16. Material Agreements................................................ 32
5.17. Acquisition Documents.............................................. 32
5.18. Environmental Matters.............................................. 32
5.19. Insurance.......................................................... 33
5.20. Year 2000 Compliance............................................... 33
5.21. Disclosure......................................................... 33
ARTICLE VI
COVENANTS................................................................ 33
6.1. Financial Reporting................................................ 33
6.2. Use of Proceeds.................................................... 35
6.3. Notice of Default.................................................. 35
6.4. Conduct of Business................................................ 35
6.5. Taxes.............................................................. 35
6.6. Insurance.......................................................... 35
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6.7. Compliance with Laws............................................... 35
6.8. Maintenance of Properties.......................................... 36
6.9. Inspection......................................................... 36
6.10. Capital Stock and Dividends........................................ 36
6.11. Indebtedness....................................................... 36
6.12. Merger............................................................. 36
6.13. Sale of Assets..................................................... 37
6.14. Investments and Purchases.......................................... 37
6.15. Liens.............................................................. 38
6.16. Affiliates......................................................... 38
6.17. Change in Corporate Structure; Fiscal Year......................... 38
6.18. Inconsistent Agreements............................................ 39
6.19. Financial Covenants................................................ 39
6.19.1. Minimum Tangible Net Worth................................ 39
6.19.2. Leverage Ratio............................................ 39
6.20. Year 2000 Compliance.............................................. 39
ARTICLE VII
DEFAULTS................................................................. 39
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES........................... 41
8.1. Acceleration....................................................... 41
8.2. Amendments......................................................... 42
8.3. Preservation of Rights............................................. 43
ARTICLE IX
GENERAL PROVISIONS....................................................... 43
9.1. Survival of Representations........................................ 43
9.2. Governmental Regulation............................................ 43
9.3. Headings........................................................... 43
9.4. Entire Agreement................................................... 43
9.5. Several Obligations; Benefits of this Agreement.................... 43
9.6. Expenses; Indemnification.......................................... 44
9.7. Numbers of Documents............................................... 44
9.8. Accounting......................................................... 45
9.9. Severability of Provisions......................................... 45
9.10. Nonliability of Lenders............................................ 45
9.11. Confidentiality.................................................... 45
9.12. Nonreliance........................................................ 45
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9.13. Disclosure........................................................ 45
ARTICLE X
THE AGENT................................................................ 46
10.1. Appointment; Nature of Relationship............................... 46
10.2. Powers............................................................ 46
10.3. General Immunity.................................................. 46
10.4. No Responsibility for Loans, Recitals, etc........................ 46
10.5. Action on Instructions of Lenders................................. 47
10.6. Employment of Agents and Counsel.................................. 47
10.7. Reliance on Documents; Counsel.................................... 47
10.8. Agent's Reimbursement and Indemnification......................... 47
10.9. Notice of Default................................................. 48
10.10. Rights as a Lender................................................ 48
10.11. Lender Credit Decision............................................ 48
10.12. Successor Agent................................................... 49
10.13. Agent's Fee....................................................... 49
10.14. Delegation to Affiliates.......................................... 49
ARTICLE XI
SETOFF; RATABLE PAYMENTS................................................. 49
11.1. Setoff............................................................ 50
11.2. Ratable Payments.................................................. 50
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS........................ 50
12.1. Successors and Assigns............................................ 50
12.2. Participations.................................................... 51
12.2.1 Permitted Participants; Effect............................ 51
12.2.2. Voting Rights............................................ 51
12.2.3. Benefit of Setoff........................................ 51
12.3. Assignments....................................................... 51
12.3.1. Permitted Assignments.................................... 52
12.3.2. Effect; Effective Date................................... 52
12.4. Dissemination of Information...................................... 52
12.5. Tax Treatment..................................................... 53
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ARTICLE XIII
NOTICES.................................................................. 53
13.1. Notices........................................................... 53
13.2. Change of Address................................................. 53
ARTICLE XIV
COUNTERPARTS............................................................. 53
ARTICLE XV
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL............. 54
15.1. CHOICE OF LAW..................................................... 54
15.2. CONSENT TO JURISDICTION........................................... 54
15.3. WAIVER OF JURY TRIAL.............................................. 54
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EXHIBITS
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Exhibit A (Article 1) Note
Exhibit B (Section 6.1(c)) Compliance Certificate
Exhibit C (Section 12.3.1) Assignment Agreement
SCHEDULES
---------
Schedule 5.3 - Approvals and Consents
Schedule 5.9 - Subsidiaries
Schedule 5.15 - Ownership of Properties
Schedule 6.11 - Indebtedness
Schedule 6.14 - Investments
Schedule 6.15 - Liens
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CREDIT AGREEMENT
This Credit Agreement, dated as of May 29, 1998, is among DEPUY, INC., a
Delaware corporation, the Lenders and THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Agent.
R E C I T A L S:
- - - - - - - -
A. The Borrower has requested the Lenders to make financial
accommodations to it in the aggregate principal amount of $300,000,000, the
proceeds of which the Borrower will use (a) in part to finance the cash payment
to be made by the Borrower in connection with its acquisition by merger of
AcroMed Corporation and the expenses incurred therewith, and (b) for the working
capital needs of the Borrower and its subsidiaries.
B. The Lenders are willing to extend such financial accommodations on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the
Agent hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement:
"Acquisition" means the Borrower's acquisition by merger of AcroMed
Corporation pursuant to the Merger Agreement.
"Acquisition Documents" means the Merger Agreement and the other documents,
certificates and agreements delivered in connection with the Acquisition.
"Advance" means a borrowing hereunder (or conversion or continuation
thereof) consisting of the aggregate amount of the several Loans made on the
same Borrowing Date (or date of conversion or continuation) by the Lenders to
the Borrower of the same Type and, in the case of Eurodollar Advances, for the
same Interest Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause
<PAGE>
the direction of the management or policies of the controlled Person, whether
through ownership of stock, by contract or otherwise.
"Agent" means The First National Bank of Chicago in its capacity as
contractual representative of the Lenders pursuant to Article X, and not in its
individual capacity as a Lender, and any successor Agent appointed pursuant to
Article X.
"Aggregate Available Commitment" means, at any time, (a) the Aggregate
Commitment at such time less (b) the outstanding Facility Letter of Credit
----
Obligations at such time.
"Aggregate Commitment" means the aggregate of the Commitments of all the
Lenders, as reduced or increased from time to time pursuant to the terms hereof.
The initial Aggregate Commitment is $300,000,000.
"Agreement" means this Credit Agreement, as it may be amended, modified or
restated and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
those used in preparing the financial statements referred to in Section 5.5;
provided, however, that for purposes of all computations required to be made
- -------- -------
with respect to compliance by the Borrower with Section 6.19, such term shall
mean generally accepted accounting principles as in effect on the date hereof,
applied in a manner consistent with those used in preparing the financial
statements referred to in Section 5.5.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (a) the Corporate Base Rate for such day, and (b) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.
"Alternate Base Rate Advance" means an Advance which bears interest at the
Alternate Base Rate.
"Alternate Base Rate Loan" means a Loan which bears interest at the
Alternate Base Rate.
"Applicable Fee Rate" means, at any time, the percentage rate per annum at
which Facility Fees are accruing on the Aggregate Commitment (without regard to
usage) pursuant to Section 2.4 at such time as set forth in the Pricing
Schedule.
"Applicable Margin" means, with respect to Advances of any Type at any time
or Facility Letters of Credit at any time, the percentage rate per annum which
is applicable at such time with respect to Advances of such Type or Facility
Letters of Credit as set forth in the Pricing Schedule.
"Arranger" means First Chicago Capital Markets, Inc. and its successors.
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"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Officer" means any of the president, chief financial officer,
chief operating officer or Director of Treasury of the Borrower, acting singly.
"Bankruptcy Code" means Title 11, United States Code, sections 1 et seq.,
-- ---
as the same may be amended from time to time, and any successor thereto or
replacement therefor which may be hereafter enacted.
"Borrower" means DePuy, Inc., a Delaware corporation, and its successors
and assigns.
"Borrowing Date" means a date on which an Advance is made or a Facility
Letter of Credit is issued hereunder.
"Borrowing Notice" is defined in Section 2.7.
"Business Day" means (a) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market, and (b)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Cash Equivalent Investments" means (a) short-term obligations of, or fully
guaranteed by, the United States of America, (b) commercial paper rated A-1 or
better by Standard and Poor's Rating Services, a division of the McGraw Hill
Companies, Inc., or P-1 or better by Moody's Investor Services, Inc, (c) demand
deposit accounts maintained in the ordinary course of business, (d) certificates
of deposit issued by and time deposits with commercial banks (whether domestic
or foreign) having capital and surplus in excess of $100,000,000 and (e) other
short-term money market type instruments of comparable credit quality; provided
--------
in each case that the same provides for payment of both principal and interest
(and not principal alone or interest alone) and is not subject to any
contingency regarding the payment of principal or interest.
"Change" is defined in Section 3.2.
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"Change in Control" means (a) the acquisition by any Person (other than
Roche Holdings Ltd. and its affiliates), or two or more Persons acting in
concert, including without limitation any acquisition effected by means of any
transaction contemplated by Section 6.12, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 20% or more of the outstanding shares of
voting stock of the Borrower, or (b) during any period of twelve (12)
consecutive calendar months, commencing on the date of this Agreement, the
ceasing of those individuals (the "Continuing Directors") who (i) were directors
--------------------
of the Borrower on the first day of each such period or (ii) subsequently became
directors of the Borrower and whose initial election or initial nomination for
election subsequent to that date was approved by a majority of the Continuing
Directors then on the board of directors of the Borrower, to constitute a
majority of the board of directors of the Borrower.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, the obligation of such Lender to make
Loans and participate in Facility Letters of Credit not exceeding the amount set
forth opposite its signature below or as set forth in any Notice of Assignment
relating to any assignment which has become effective pursuant to Section
12.3.2, as such amount may be modified from time to time pursuant to the terms
hereof.
"Consolidated" or "consolidated", when used in connection with any
calculation, means a calculation to be determined on a consolidated basis for
the Borrower and its Subsidiaries in accordance with Agreement Accounting
Principles.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any take-or-pay contract.
"Controlled Group" means all members of a controlled group of corporations
or other business entities and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any of
its Subsidiaries, are treated as a single employer under Section 414 of the
Code.
"Conversion/Continuation Notice" is defined in Section 2.8.
"Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes. The Corporate Base Rate is a reference
rate and does not necessarily represent the lowest or best rate of interest
actually charged to any customer. First Chicago may make commercial loans or
other loans at rates of interest at, above or below the Corporate Base Rate.
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"Default" means an event described in Article VII.
"EBITDA" means, for any applicable computation period, (a) the Borrower's
and Subsidiaries' Net Income from continuing operations, plus, to the extent
----
deducted from revenues in determining Net Income, (i) interest expense paid or
accrued during such period, (ii) expenses for taxes paid or accrued during such
period, (iii) amortization and depreciation for such period, and (iv)
extraordinary losses incurred during such period other than in the ordinary
course of business, minus (b) to the extent included in Net Income,
extraordinary gains accrued during such period other than in the ordinary course
of business, all calculated for the Borrower and its Subsidiaries on a
consolidated basis.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, franchises, licenses and other
governmental restrictions relating to (a) the protection of the environment, (b)
the effect of the environment on human health, (c) emissions, discharges or
releases of pollutants, contaminants, hazardous substances or wastes into
surface water, ground water or land, or (d) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, hazardous substances or wastes or the clean-up or
other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which bears interest at the
Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the rate determined by the Agent to be the rate at
which First Chicago offers to place deposits in U.S. dollars with first-class
banks in the London interbank market at approximately 11:00 a.m. (London time)
two (2) Business Days prior to the first day of such Interest Period, in the
approximate amount of First Chicago's relevant Eurodollar Loan and having a
maturity approximately equal to such Interest Period.
"Eurodollar Loan" means a Loan which bears interest at the applicable
Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (a) the quotient of (i) the Eurodollar Base
Rate applicable to such Interest Period, divided by (ii) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(b) the Applicable Margin. The Eurodollar Rate shall be rounded to the next
higher multiple of 1/16 of 1% if the rate is not such a multiple.
"Excluded Taxes" means, in the case of each Lender or applicable Lending
Installation and the Agent, taxes imposed on its overall net income (or, for
purposes of the Gross Income Tax of Indiana, gross income), and franchise taxes
imposed on it, by (a) the jurisdiction under the laws of which such Lender or
the Agent is incorporated or organized or (b) the jurisdiction in which
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the Agent's or such Lender's principal executive office is located or in which
such Lender maintains a Lending Installation.
"Facility Fee" is defined in Section 2.4.
"Facility Letter of Credit" means a standby Letter of Credit issued
pursuant to Section 2.18.
"Facility Letter of Credit Obligations" means as at the time of
determination thereof, the sum of (a) the Reimbursement Obligations then
outstanding and (b) the aggregate then undrawn face amount of the then
outstanding Facility Letters of Credit.
"Facility Letter of Credit Sublimit" means an aggregate amount of
$10,000,000.
"Facility Termination Date" means May 28, 2003.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"Financial Statements" is defined in Section 5.5.
"First Chicago" means The First National Bank of Chicago in its individual
capacity, and its successors.
"Fiscal Quarter" means one of the four three-month accounting periods
comprising a Fiscal Year.
"Fiscal Year" means the twelve-month accounting period ending December 31
of each year.
"Indebtedness" of a Person means such Person's (a) obligations for borrowed
money, (b) obligations representing the deferred purchase price of Property or
services (other than accounts payable arising in the ordinary course of such
Person's business payable on terms customary in the trade), (c) obligations,
whether or not assumed, secured by Liens or payable out of the proceeds or
production from property now or hereafter owned or acquired by such Person, (d)
obligations which are evidenced by notes, acceptances, or other instruments, (e)
obligations of such Person to purchase securities or other property arising out
of or in connection with the sale of the same or substantially similar
securities or property, (f) Capitalized Lease Obligations (g) Contingent
Obligations, (h) actual and contingent reimbursement obligations in respect of
Letters of Credit, (i) Rate Hedging Obligations, (j) any other obligation for
borrowed money or other
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financial accommodation which in accordance with Agreement Accounting Principles
would be shown as a liability on the consolidated balance sheet of such Person,
(k) any liability under any financing lease or so-called "synthetic lease"
transaction entered into by such Person and (l) any obligation arising with
respect to any other transaction which is the functional equivalent of or takes
the place of borrowing but which does not constitute a liability on the
consolidated balance sheet of such Person.
"Interest Period" means, with respect to a Eurodollar Advance, a period of
one, two, three or six months commencing on a Business Day selected by the
Borrower pursuant to this Agreement. Such Interest Period shall end on (but
exclude) the day which corresponds numerically to such date one, two, three or
six months thereafter; provided, however, that if there is no such numerically
-------- -------
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day; provided, however, that if said next succeeding
-------- -------
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.
"Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade) or
contribution of capital by such Person; stocks, bonds, mutual funds, partnership
interests, notes, debentures or other securities owned by such Person; any
deposit accounts or certificate of deposit owned by such Person; and structured
notes, derivative financial instruments and other similar instruments or
contracts owned by such Person.
"Issuance Request" is defined in Section 2.18.4.
"Issuer" means First Chicago.
"Lenders" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent, the
office, branch, subsidiary or affiliate of such Lender or the Agent listed on
the signature pages hereof or on a Schedule or otherwise selected by such Lender
or the Agent pursuant to Section 2.16.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Letter of Credit Cash Collateral Account" is defined in Section 8.1. Such
account and the related cash collateralization shall be subject to documentation
satisfactory to the Agent.
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"Leverage Ratio" means, as at the end of any Fiscal Quarter, the ratio of
(a) Indebtedness (excluding Rate Hedging Obligations and Contingent Obligations)
of the Borrower and its Subsidiaries on a consolidated basis as of the end of
such Fiscal Quarter to (b) EBITDA for the period consisting of the four
consecutive Fiscal Quarters then most recently ended.
"Lien" means any security interest, lien (statutory or other), mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, the interest of a
vendor or lessor under any conditional sale, Capitalized Lease or other title
retention agreement).
"Loan" means, with respect to a Lender, any loan made by such Lender
pursuant to Article II (or any conversion or continuation thereof).
"Loan Documents" means this Agreement, the Notes, the Reimbursement
Agreements and the other documents and agreements contemplated hereby and
executed by the Borrower in favor of the Agent or any Lender.
"Margin Stock" has the meaning assigned to that term under Regulation U.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or other), operations, performance, properties or
results of operations of the Borrower and its Subsidiaries taken as a whole, (b)
the ability of the Borrower to perform its obligations under the Loan Documents,
or (c) the validity or enforceability of any of the Loan Documents or the rights
or remedies of the Agent or the Lenders thereunder.
"Merger Agreement" means that certain Agreement and Plan of Merger dated as
of March 19, 1998 among the Borrower, DP Merger-Sub, Inc. and AcroMed
Corporation, as the same may be amended or modified after the date hereof with
the consent of the Required Lenders and the Agent.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"Net Income" means, for any computation period, with respect to the
Borrower on a consolidated basis with its Subsidiaries (other than any
Subsidiary which is restricted from declaring or paying dividends or otherwise
advancing funds to its parent whether by contract or otherwise), cumulative net
income earned (or loss incurred) during such period as determined in accordance
with Agreement Accounting Principles.
"Note" means any promissory note issued at the request of a Lender pursuant
to Section 2.11 in the form of Exhibit A, including any amendment, modification,
---------
renewal or replacement of such promissory note.
"Notice of Assignment" is defined in Section 12.3.2.
-8-
<PAGE>
"Obligations" means all unpaid principal of and accrued and unpaid interest
on the Loans, the Facility Letter of Credit Obligations and all other
liabilities (if any), whether actual or contingent, of the Borrower with respect
to Facility Letters of Credit, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to any Lender,
the Agent or any indemnified party hereunder arising under any of the Loan
Documents.
"Other Taxes" is defined in Section 3.5(b).
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each February, May, August and
November.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, limited liability company, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"Pricing Schedule" means the Schedule attached hereto identified as such.
"Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
"Pro-rata" means, when used with respect to a Lender, and any described
aggregate or total amount, an amount equal to such Lender's Pro-rata share or
portion based on its percentage of the Aggregate Commitment or if the Aggregate
Commitment has been terminated, its percentage of the aggregate principal amount
of outstanding Advances and Facility Letter of Credit Obligations.
"Purchase" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (a) acquires any going business or all or substantially all
of the assets of any firm, corporation or limited liability company or division
or line of business thereof, whether through purchase of assets, merger or
otherwise, or (b) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary voting
power for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority (by percentage
or voting power) of the outstanding ownership interests of a partnership or
limited liability company.
"Purchasers" is defined in Section 12.3.1.
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"Rate Hedging Agreement" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to, dollar-
denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all Rate
Hedging Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor or
other regulation or official interpretation of such Board of Governors relating
to the extension of credit by securities brokers and dealers for the purpose of
purchasing or carrying margin stocks applicable to such Persons.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor or
other regulation or official interpretation of said Board of Governors relating
to the extension of credit by the specified lenders for the purpose of
purchasing or carrying margin stocks applicable to such Persons.
"Reimbursement Agreement" means a letter of credit application and
reimbursement agreement in such form as the Issuer may from time to time employ
in the ordinary course of business.
"Reimbursement Obligations" means, at any time, the aggregate (without
duplication) of the Obligations of the Borrower to the Lenders, the Issuer
and/or the Agent in respect of all unreimbursed payments or disbursements made
by the Lenders, the Issuer and/or the Agent under or in respect of draws made
under the Facility Letters of Credit.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within thirty
(30) days of the occurrence of such event; provided, that a failure to meet the
--------
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<PAGE>
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least 51% of
the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
the sum of (a) the aggregate unpaid principal amount of the outstanding Loans
plus (b) the aggregate amount of the outstanding Facility Letter of Credit
- ----
Obligations.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"Risk-Based Capital Guidelines" is defined in Section 3.2.
"Schedule" refers to a specific schedule to this Agreement, unless another
document is specifically referenced.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan subject to Title IV of ERISA maintained
by the Borrower or any member of the Controlled Group for employees of the
Borrower or any member of the Controlled Group, other than a Multiemployer Plan.
"Subsidiary" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(b) any partnership, association, joint venture, limited liability company or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the Borrower
and its Subsidiaries, Property which (a) represents more than 10% of the
consolidated assets of the Borrower and its Subsidiaries as would be shown in
the consolidated financial statements of the Borrower and its Subsidiaries as at
the beginning of the twelve-month period ending with the month in which such
determination is made, or (b) is responsible for more than 10% of the
consolidated net sales or of the consolidated net income of the Borrower and its
Subsidiaries as reflected in the financial statements referred to in clause (a)
above.
"Tangible Net Worth" means at any date the common stockholders' equity of
the Borrower and its Subsidiaries determined from a consolidated balance sheet
of the Borrower and its Subsidiaries prepared in accordance with Agreement
Accounting Principles, less the consolidated Intangible Assets of the Borrower
and its Subsidiaries, all determined as of such date. For purposes
-11-
<PAGE>
of this definition "Intangible Assets" means the amount (to the extent reflected
in determining such common stockholders' equity) of (a) all write-ups (other
than write-ups resulting from foreign currency translations and write-ups of
assets of a going concern business made within twelve months after the
acquisition of such business) subsequent to December 31, 1997 in the book value
of any asset owned by the Borrower or a consolidated Subsidiary, (b) all
investments in unconsolidated Subsidiaries and all equity investments in Persons
which are not Subsidiaries and (c) all unamortized debt discount and expense,
unamortized deferred charges, good will, patents, trademarks, service marks,
trade names, copyrights, organization or developmental expenses and other
intangible items.
"Taxes" means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings, and any and all liabilities with respect to
the foregoing, but excluding Excluded Taxes.
"Termination Event" means, with respect to a Plan which is subject to Title
IV of ERISA, (a) a Reportable Event, (b) the withdrawal of the Borrower or any
other member of the Controlled Group from such Plan during a plan year in which
the Borrower or any other member of the Controlled Group was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under
Section 4068(f) of ERISA, (c) the termination of such Plan, the filing of a
notice of intent to terminate such Plan or the treatment of an amendment of such
Plan as a termination under Section 4041 of ERISA, (d) the institution by the
PBGC of proceedings to terminate such Plan or (e) any event or condition which
might constitute grounds under Section 4042 of ERISA for the termination of, or
appointment of a trustee to administer, such Plan.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Alternate Base
Rate Advance or Eurodollar Advance.
"Unfunded Liabilities" means the amount (if any) by which the present value
of all vested and unvested accrued benefits under all Single Employer Plans
exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (b) any partnership, association, joint venture, limited
liability company or similar business organization 100% of the ownership
interests having ordinary voting power of which shall at the time be so owned or
controlled.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
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<PAGE>
ARTICLE II
THE CREDITS
-----------
2.1. Advances. (a) From and including the date hereof to but excluding
--------
the Facility Termination Date, each Lender severally (and not jointly) agrees,
on the terms and conditions set forth in this Agreement, to make Loans to the
Borrower from time to time in amounts not to exceed in the aggregate at any one
time outstanding the amount of its Pro-rata share of the Aggregate Available
Commitment existing at such time. Subject to the terms of this Agreement, the
Borrower may borrow, repay and reborrow Advances at any time prior to the
Facility Termination Date. The Commitments to lend or issue or participate in
Facility Letters of Credit shall expire on the Facility Termination Date.
(b) The Borrower hereby agrees that, if at any time as a result of
reductions in the Aggregate Commitment pursuant to Section 2.4 or otherwise, the
aggregate balance of the sum of the Loans and the Facility Letter of Credit
Obligations exceeds the Aggregate Commitment, the Borrower shall repay
immediately its then outstanding Loans in such amount as may be necessary to
eliminate such excess; provided, that if an excess remains after repayment of
--------
all outstanding Loans, then the Borrower shall cash collateralize the Facility
Letter of Credit Obligations by depositing into the Letter of Credit Cash
Collateral Account such amount as may be necessary to eliminate such excess.
(c) The Borrower's obligation to pay the principal of, and interest
on, the Loans shall be evidenced by the Notes. Although the Notes shall be
dated the date of the initial Advance, interest in respect thereof shall be
payable only for the periods during which the Loans evidenced thereby are
outstanding and, although the stated amount of each Note shall be equal to the
applicable Lender's Commitment, each Note shall be enforceable, with respect to
the Borrower's obligation to pay the principal amount thereof, only to the
extent of the unpaid principal amount of the Loan at the time evidenced thereby.
(d) Any outstanding Advances and all other unpaid Obligations shall be
paid in full by the Borrower on the Facility Termination Date.
2.2. Ratable Loans. Each Advance hereunder shall consist of Loans made
-------------
from the several Lenders ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.
2.3. Types of Advances. The Advances may be Alternate Base Rate Advances
-----------------
or Eurodollar Advances, or a combination thereof, selected by the Borrower in
accordance with Sections 2.7 and 2.8.
2.4.Facility Fee; Reductions and Increases in Aggregate Commitment.
--------------------------------------------------------------
(a) The Borrower agrees to pay to the Agent for the account of each Lender a
facility fee (the "Facility Fee") in an amount equal to the Applicable Fee Rate
times the Aggregate Commitment (regardless of
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<PAGE>
usage), from the date hereof to and including the Facility Termination Date,
payable quarterly in arrears to the Agent for the ratable benefit of the Lenders
on each Payment Date hereafter and on the Facility Termination Date. All accrued
Facility Fees shall be payable on the effective date of any termination of the
obligations of the Lenders to make Loans hereunder.
(b) The Borrower may permanently reduce the Aggregate Commitment in
whole, or in part ratably among the Lenders in a minimum aggregate amount of
$10,000,000 or any integral multiple thereof, upon at least three (3) Business
Days' prior written notice to the Agent, which notice shall specify the amount
of any such reduction; provided, however, that the amount of the Aggregate
-------- -------
Commitment may not be reduced below the sum of (i) the aggregate principal
amount of the outstanding Advances, plus (ii) the aggregate amount of the
----
outstanding Facility Letter of Credit Obligations.
(c) The Borrower may, at its option, on a single occasion, seek to
increase the Aggregate Commitment by up to $100,000,000 upon at least three (3)
Business Days' prior notice to the Agent, which notice shall specify the amount
of any such increase and shall be delivered at a time when no Default or
Unmatured Default has occurred or is continuing. The Borrower may, after giving
such notice, offer the increase in the Aggregate Commitment to any of the
existing Lenders and/or to other banks, financial institutions or other entities
acceptable to the Agent on a non Pro-rata basis in such amounts as determined by
the Borrower and agreed to by the Agent. The Borrower may elect to accept on
such single occasion an increase in the Aggregate Commitment by an amount less
than $100,000,000. No increase in the Aggregate Commitment shall become
effective until (i) the existing or new Lender extending such incremental
commitment amount and the Borrower shall have delivered to the Agent a writing
in form reasonably acceptable to the Agent pursuant to which such Lender states
its Commitment amount and agrees to assume and accept the obligations and rights
of a Lender hereunder and (ii) the Borrower has provided the Agent with such
related certificates, opinions and other documents as the Agent may reasonably
request. In conjunction with such increase, the Lenders (new or existing) shall
accept (and the existing Lenders shall make) an assignment at par of an interest
in the Loans and Facility Letter of Credit Obligations outstanding at the time
of such Aggregate Commitment increase such that, after giving effect thereto,
all Loans and Facility Letter of Credit Obligations are held by the Lenders on a
Pro-rata basis. The Borrower shall make any payments under Section 3.4
resulting from such assignments.
2.5. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in
------------------------------
the minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess
thereof), and each Alternate Base Rate Advance shall be in the minimum amount of
$1,000,000 (and in multiples of $500,000 if in excess thereof); provided,
--------
however, that (a) any Alternate Base Rate Advance may be in the amount of the
- -------
unused Aggregate Commitment and (b) in no event shall more than six (6)
Eurodollar Advances be permitted to be outstanding at any time.
2.6. Optional Principal Payments. The Borrower may from time to time pay,
---------------------------
without penalty or premium, all outstanding Alternate Base Rate Advances, or, in
a minimum aggregate amount of $1,000,000 or any integral multiple of $500,000 in
excess thereof, any portion of the outstanding Alternate Base Rate Advances upon
one (1) Business Day's prior notice to the Agent. The Borrower may from time to
time pay, subject to the payment of any funding indemnification
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<PAGE>
amounts required by Section 3.4 but without penalty or premium, all outstanding
Eurodollar Advances, or, in a minimum aggregate amount of $5,000,000 or any
integral multiple of $1,000,000 in excess thereof, any portion of the
outstanding Eurodollar Advances upon three (3) Business Days' prior notice to
the Agent.
2.7. Method of Selecting Types and Interest Periods for New Advances. The
---------------------------------------------------------------
Borrower shall select the Type of Advance and, in the case of each Eurodollar
Advance, the Interest Period applicable thereto from time to time; provided,
--------
however, that notwithstanding anything in this Agreement to the contrary, for so
- -------
long as First Chicago shall be the sole Lender, First Chicago and the Borrower
may agree to Interest Periods of durations of less than one month. The Borrower
shall give the Agent irrevocable notice (a "Borrowing Notice") not later than
----------------
10:00 a.m. (Chicago time) at least one (1) Business Day before the Borrowing
Date of each Alternate Base Rate Advance and at least three (3) Business Days
before the Borrowing Date for each Eurodollar Advance, specifying:
(a) the Borrowing Date of such Advance, which shall be a Business
Day;
(b) the aggregate amount of such Advance;
(c) the Type of Advance selected; and
(d) in the case of each Eurodollar Advance, the Interest Period
applicable thereto, which shall end on or prior to the Facility Termination
Date.
Not later than noon (Chicago time) on each Borrowing Date, each Lender shall
make available its Loan or Loans in funds immediately available in Chicago to
the Agent at its address specified pursuant to Article XIII. The Agent will
make the funds so received from the Lenders available to the Borrower at the
Agent's aforesaid address.
2.8. Conversion and Continuation of Outstanding Advances. Alternate Base
---------------------------------------------------
Rate Advances shall continue as Alternate Base Rate Advances unless and until
such Alternate Base Rate Advances are converted into Eurodollar Advances
pursuant to this Section 2.8 or are repaid in accordance with Section 2.6. Each
Eurodollar Advance shall continue as a Eurodollar Advance until the end of the
then applicable Interest Period therefor, at which time such Eurodollar Advance
shall be automatically continued as a Eurodollar Advance with a one month
Interest Period unless (x) such Eurodollar Advance is or was repaid in
accordance with Section 2.6 or (y) the Borrower shall have given the Agent a
Conversion/Continuation Notice (as defined below) requesting that, at the end of
such Interest Period, such Eurodollar Advance be converted into an Alternate
Base Rate Advance or continue as a Eurodollar Advance for the same or another
Interest Period. Subject to the terms of Section 2.5, the Borrower may elect
from time to time to convert all or any part of an Alternate Base Rate Advance
into a Eurodollar Advance. The Borrower shall give the Agent irrevocable notice
(a "Conversion/Continuation Notice") of each conversion of an Alternate Base
Rate Advance into a Eurodollar Advance, conversion of a Eurodollar Advance into
an Alternate Base Rate Advance or continuation of a Eurodollar Advance not later
than 10:00 a.m.
-15-
<PAGE>
(Chicago time) at least three (3) Business Days prior to the date of the
requested conversion or continuation, specifying:
(a) the requested date, which shall be a Business Day, of such
conversion or continuation,
(b) the aggregate amount and Type of the Advance which is to be
converted or continued, and
(c) the amount of such Advance which is to be converted into or
continued as a Eurodollar Advance or Alternate Base Rate
Advance and, with respect to any Eurodollar Advance, the
duration of the Interest Period applicable thereto.
2.9. Changes in Interest Rate, etc. Each Alternate Base Rate Advance
------------------------------
shall bear interest on the outstanding principal amount thereof, for each day
from and including the date such Advance is made or is automatically converted
from a Eurodollar Advance into an Alternate Base Rate Advance pursuant to
Section 2.8, to but excluding the date it is paid or is converted into a
Eurodollar Advance pursuant to Section 2.8 hereof, at a rate per annum equal to
the Alternate Base Rate for such day. Changes in the rate of interest on that
portion of any Advance maintained as an Alternate Base Rate Advance will take
effect simultaneously with each change in the Alternate Base Rate. Each
Eurodollar Advance shall bear interest on the outstanding principal amount
thereof from and including the first day of the Interest Period applicable
thereto to (but not including) the last day of such Interest Period at the
interest rate determined by the Agent as applicable to such Eurodollar Advance
based upon the Borrower's selections under Section 2.7 and 2.8 and otherwise in
accordance with the terms hereof. No Interest Period may end after the Facility
Termination Date.
2.10. Method of Payment. All payments of the Obligations hereunder shall
-----------------
be made, without setoff, deduction, or counterclaim, in immediately available
funds to the Agent at the Agent's address specified pursuant to Article XIII, or
at any other Lending Installation of the Agent specified in writing by the Agent
to the Borrower, by noon (Chicago time) on the date when due and shall be
applied ratably by the Agent among the Lenders. Each payment delivered to the
Agent for the account of any Lender shall be delivered promptly by the Agent to
such Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIII or at any Lending Installation specified in a
notice received by the Agent from such Lender. The Agent is hereby authorized
to charge the account of the Borrower maintained with First Chicago for each
payment of principal, interest and fees as it becomes due hereunder.
2.11. Noteless Agreement; Evidence of Indebtedness. (a) Each Lender
--------------------------------------------
shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Lender resulting from each
Loan made by such Lender from time to time, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
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<PAGE>
(b) The Agent shall also maintain accounts in which it will record (a) the
amount of each Loan made hereunder, the Type thereof and the Interest Period
with respect thereto, (b) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (c) the amount of any sum received by the Agent hereunder from the Borrower
and each Lender's share thereof.
(c) The entries maintained in the accounts maintained pursuant to
paragraphs (a) and (b) above shall be prima facie evidence of the existence and
amounts of the Obligations therein recorded; provided, however, that the failure
-------- -------
of the Agent or any Lender to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Borrower to repay the Obligations
in accordance with their terms.
(iv) Any Lender may request that its Loans be evidenced by a promissory
note (a "Note"). In such event, the Borrower shall prepare, execute and deliver
to such Lender a Note payable to the order of such Lender in a form supplied by
the Agent. Thereafter, the Loans evidenced by such Note and interest thereon
shall at all times (including after any assignment pursuant to Section 12.3) be
represented by one or more Notes payable to the order of the payee named therein
or any assignee pursuant to Section 12.3, except to the extent that any such
Lender or assignee subsequently returns any such Note for cancellation and
requests that such Loans once again be evidenced as described in paragraphs (a)
and (b) above.
2.12. Rates Applicable After Default. Notwithstanding anything to the
------------------------------
contrary contained in Section 2.7 or 2.8, no Advance may be made as, converted
into or continued as a Eurodollar Advance (except with the consent of the Agent
and the Required Lenders) when any Default or Unmatured Default has occurred and
is continuing. During the continuance of a Default the Required Lenders may, at
their option, by notice to the Borrower (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest rates),
declare that (a) each Eurodollar Advance and Alternate Base Rate Advance shall
bear interest (for the remainder of the applicable Interest Period in the case
of Eurodollar Advances) at a rate per annum equal to the rate otherwise
applicable plus two percent (2.0%) per annum and (b) the Facility Letter of
Credit Fee Rate otherwise applicable pursuant to Section 2.18.6 shall be
increased by two percent (2.0%) per annum; provided, however, that such
-------- -------
increased rate shall automatically and without action of any kind by the Lenders
become and remain applicable until revoked by the Required Lenders in the event
of a Default described in Section 7.6 or 7.7.
2.13. Telephonic Notices. The Borrower hereby authorizes the Lenders and
------------------
the Agent to extend, convert or continue Advances, effect selections of Types of
Advances and to transfer funds based on telephonic notices made by any person or
persons the Agent or any Lender in good faith believes to be acting on behalf of
the Borrower. The Borrower agrees to deliver promptly to the Agent a written
confirmation, if such confirmation is requested by the Agent or any Lender, of
each telephonic notice signed by an Authorized Officer. If the written
confirmation differs in any material respect from the action taken by the Agent
and the Lenders, the records of the Agent and the Lenders shall govern absent
manifest error.
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<PAGE>
2.14. Interest Payment Dates; Interest and Fee Basis. Interest accrued
----------------------------------------------
on each Alternate Base Rate Advance shall be payable on each Payment Date,
commencing with the first such date to occur after the date hereof and at
maturity. Interest accrued on each Eurodollar Advance shall be payable on the
last day of its applicable Interest Period, on any date on which the Eurodollar
Advance is prepaid, whether by acceleration or otherwise, and at maturity.
Interest accrued on each Eurodollar Advance having an Interest Period longer
than three months shall also be payable on the last day of each three-month
interval during such Interest Period. Interest on Eurodollar Advances and
Facility Fees shall be calculated for actual days elapsed on the basis of a 360-
day year while interest on Alternate Base Rate Advances shall be calculated for
actual days elapsed on the basis of a 365 or 366-day year, as applicable.
Interest shall be payable for the day an Advance is made but not for the day of
any payment on the amount paid if payment is received prior to noon (Chicago
time) at the place of payment. If any payment of principal of or interest on an
Advance shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment.
2.15. Notification of Advances, Interest Rates, Prepayments, Commitment
-----------------------------------------------------------------
Reductions and Issuance Requests. Promptly after receipt thereof, the Agent
- --------------------------------
will notify each Lender of the contents of each Aggregate Commitment reduction
notice, Borrowing Notice, Conversion/ Continuation Notice, Issuance Request and
repayment notice received by it hereunder. The Agent will notify each Lender of
the interest rate applicable to each Eurodollar Advance promptly upon
determination of such interest rate and will give each Lender prompt notice of
each change in the Alternate Base Rate.
2.16. Lending Installations. Each Lender may book its Loans at any
---------------------
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Loans and any Notes issued hereunder shall be
deemed held by each Lender for the benefit of such Lending Installation. Each
Lender may, by written notice to the Agent and the Borrower in accordance with
Article XIII, designate replacement or additional Lending Installations through
which Loans will be made by it and for whose account Loan payments are to be
made.
2.17. Non-Receipt of Funds by the Agent. Unless the Borrower or a
---------------------------------
Lender, as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (a) in the case of a Lender, the
proceeds of a Loan or (b) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption.
If such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of the payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to the Federal Funds Effective Rate for such
day. If any Lender has not in fact made such payment to the Agent, such Lender
or the Borrower shall, on demand by the Agent, repay to the Agent the amount so
made available together
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<PAGE>
with interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to (a) in the case of payment by
a Lender, the Federal Funds Effective Rate for such day, or (b) in the case of
payment by the Borrower, the interest rate applicable to the relevant Loan.
2.18. Facility Letters of Credit.
--------------------------
2.18.1 Issuance of Facility Letters of Credit. (a) From and after
--------------------------------------
the date hereof, the Issuer agrees, upon the terms and conditions set forth
in this Agreement, to issue at the request and for the account of the
Borrower, one or more Facility Letters of Credit; provided, however, that
-------- -------
the Issuer shall not be under any obligation to issue, and shall not issue,
any Facility Letter of Credit if (i) any order, judgment or decree of any
governmental authority or other regulatory body with jurisdiction over the
Issuer shall purport by its terms to enjoin or restrain such Issuer from
issuing such Facility Letter of Credit, or any law or governmental rule,
regulation, policy, guideline or directive (whether or not having the force
of law) from any governmental authority or other regulatory body with
jurisdiction over the Issuer shall prohibit, or request that the Issuer
refrain from, the issuance of Facility Letters of Credit in particular or
shall impose upon the Issuer with respect to any Facility Letter of Credit
any restriction or reserve or capital requirement (for which the Issuer is
not otherwise compensated) or any unreimbursed loss, cost or expense which
was not applicable, in effect and known to the Issuer as of the date of
this Agreement and which the Issuer in good faith deems material to it;
(ii) one or more of the conditions to such issuance contained in Section
4.2 is not then satisfied; or (iii) after giving effect to such issuance,
the aggregate outstanding amount of the Facility Letter of Credit
Obligations would exceed the Facility Letter of Credit Sublimit.
(b) In no event shall: (i) the aggregate amount of the Facility
Letter of Credit Obligations at any time exceed the Facility Letter of
Credit Sublimit; (ii) the sum at any time of (A) the aggregate amount of
Facility Letter of Credit Obligations and (B) the aggregate principal
balance of outstanding Advances exceed the amount of the Aggregate
Commitment; or (iii) the expiration date of any Facility Letter of Credit
(including, without limitation, Facility Letters of Credit issued with an
automatic "evergreen" provision providing for renewal absent advance notice
by the Borrower or the Issuer), or the date for payment of any draft
presented thereunder and accepted by the Issuer, be later than the earlier
of (A) one year after the date of issuance and (B) five (5) Business Days
prior to the Facility Termination Date.
2.18.2 Participating Interests. Immediately upon the issuance by
-----------------------
the Issuer of a Facility Letter of Credit in accordance with Section
2.18.4, each Lender shall be deemed to have irrevocably and unconditionally
purchased and received from the Issuer, without recourse, representation or
warranty, an undivided participation interest equal to its Pro-rata share
of the Aggregate Commitment of the face amount of such Facility Letter of
Credit and each draw paid by the Issuer thereunder. Each Lender's
obligation to pay its proportionate share of all draws under the Facility
Letters of Credit, absent gross negligence or willful
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<PAGE>
misconduct by the Issuer in honoring any such draw, shall be absolute,
unconditional and irrevocable and in each case shall be made without
counterclaim or set-off by such Lender.
2.18.3 Facility Letter of Credit Reimbursement Obligations. (a)
---------------------------------------------------
The Borrower agrees to pay to the Issuer of a Facility Letter of Credit (i)
on each date that any amount is drawn under each Facility Letter of Credit
a sum (and interest on such sum as provided in clause (ii) below) equal to
the amount so drawn plus all other charges and expenses with respect
thereto specified in Section 2.18.6 or in the applicable Reimbursement
Agreement and (ii) interest on any and all amounts remaining unpaid under
this Section 2.18.3 until payment in full at the Alternate Base Rate plus
the margin specified in Section 2.12. The Borrower agrees to pay to the
Issuer the amount of all Facility Letter of Credit Reimbursement
Obligations owing in respect of any Facility Letter of Credit immediately
when due, under all circumstances, including, without limitation, any of
the following circumstances: (w) any lack of validity or enforceability of
this Agreement or any of the other Loan Documents; (x) the existence of any
claim, set-off, defense or other right which the Borrower may have at any
time against a beneficiary named in a Facility Letter of Credit, any
transferee of any Facility Letter of Credit (or any Person for whom any
such transferee may be acting), any Lender or any other Person, whether in
connection with this Agreement, any Facility Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including
any underlying transaction between the Borrower and the beneficiary named
in any Facility Letter of Credit); (y) the validity, sufficiency or
genuineness of any document which the Issuer has determined in good faith
complies on its face with the terms of the applicable Facility Letter of
Credit, even if such document should later prove to have been forged,
fraudulent, invalid or insufficient in any respect or any statement therein
shall have been untrue or inaccurate in any respect; or (z) the surrender
or impairment of any security for the performance or observance of any of
the terms hereof.
(b) Notwithstanding any provisions to the contrary in any
Reimbursement Agreement, the Borrower agrees to reimburse the Issuer for
amounts which the Issuer pays under such Facility Letter of Credit no later
than the time specified in this Agreement. If the Borrower does not pay
any such Facility Letter of Credit Reimbursement Obligations when due, the
Borrower shall be deemed to have immediately requested that the Lenders
make a Alternate Base Rate Advance under this Agreement in a principal
amount equal to such unreimbursed Facility Letter of Credit Reimbursement
Obligations. The Agent shall promptly notify the Lenders of such deemed
request and, without the necessity of compliance with the requirements of
Sections 2.5 and 4.2, each Lender shall make available to the Agent its
Loan in the manner prescribed for Alternate Base Rate Advances. The
proceeds of such Loans shall be paid over by the Agent to the Issuer for
the account of the Borrower in satisfaction of such unreimbursed Facility
Letter of Credit Reimbursement Obligations, which shall thereupon be deemed
satisfied by the proceeds of, and replaced by, such Alternate Base Rate
Advance.
(c) If the Issuer makes a payment on account of any Facility Letter
of Credit and is not concurrently reimbursed therefor by the Borrower and
if for any reason a Alternate Base Rate Advance may not be made pursuant to
paragraph (b) above, then as promptly as
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<PAGE>
practical during normal banking hours on the date of its receipt of such
notice or, if not practicable on such date, not later than noon (Chicago
time) on the Business Day immediately succeeding such date of notification,
each Lender shall deliver to the Agent for the account of the Issuer, in
immediately available funds, the purchase price for such Lender's interest
in such unreimbursed Facility Letter of Credit Obligations, which shall be
an amount equal to such Lender's Pro-rata share of such payment. Each
Lender shall, upon demand by the Issuer, pay the Issuer interest on such
Lender's Pro-rata share of such draw from the date of payment by the Issuer
on account of such Facility Letter of Credit until the date of delivery of
such funds to the Issuer by such Lender at a rate per annum, computed for
actual days elapsed based on a 360-day year, equal to the Federal Funds
Effective Rate for such period; provided, that such payments shall be made
--------
by the Lenders only in the event and to the extent that the Issuer is not
reimbursed in full by the Borrower for interest on the amount of any draw
on the Facility Letters of Credit.
(d) At any time after the Issuer has made a payment on account of
any Facility Letter of Credit and has received from any other Lender such
Lender's Pro-rata share of such payment, such Issuer shall, forthwith upon
its receipt of any reimbursement (in whole or in part) by the Borrower for
such payment, or of any other amount from the Borrower or any other Person
in respect of such payment (including, without limitation, any payment of
interest or penalty fees and any payment under any collateral account
agreement of the Borrower or any Loan Document but excluding any transfer
of funds from any other Lender pursuant to Section 2.18.3(b)), transfer to
such other Lender such other Lender's ratable share of such reimbursement
or other amount; provided, that interest shall accrue for the benefit of
--------
such Lender from the time such Issuer has made a payment on account of any
Facility Letter of Credit; provided, further, that in the event that the
--------
receipt by the Issuer of such reimbursement or other amount is found to
have been a transfer in fraud of creditors or a preferential payment under
the United States Bankruptcy Code or is otherwise required to be returned,
such Lender shall promptly return to the Issuer any portion thereof
previously transferred by the Issuer to such Lender, but without interest
to the extent that interest is not payable by the Issuer in connection
therewith.
2.18.4 Procedure for Issuance. Prior to the issuance of each
----------------------
Facility Letter of Credit, and as a condition of such issuance, the
Borrower shall deliver to the Issuer (with a copy to the Agent) a
Reimbursement Agreement signed by the Borrower, together with such other
documents or items as may be required pursuant to the terms thereof, and
the proposed form and content of such Facility Letter of Credit shall be
reasonably satisfactory to the Issuer. Each Facility Letter of Credit
shall be issued no earlier than two (2) Business Days after delivery of the
foregoing documents, which delivery may be by the Borrower to the Issuer by
telecopy, telex or other electronic means followed by delivery of executed
originals within five (5) days thereafter. The documents so delivered
shall be in compliance with the requirements set forth in Section
2.18.1(b), and shall specify therein (i) the stated amount of the Facility
Letter of Credit requested, (ii) the effective date of issuance of such
requested Facility Letter of Credit, which shall be a Business Day, (iii)
the date on which such requested Facility Letter of Credit is to expire,
which shall be at least five (5) Business Days prior to the Termination
Date, (iv) the entity for whose benefit the requested Facility
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<PAGE>
Letter of Credit is to be issued, which shall be the Borrower or a
Subsidiary, and (v) the aggregate amount of Facility Letter of Credit
Obligations which are outstanding and which will be outstanding after
giving effect to the requested Facility Letter of Credit issuance. The
delivery of the foregoing documents and information shall constitute an
"Issuance Request" for purposes of this Agreement. Subject to the terms and
conditions of Section 2.18.1 and provided that the applicable conditions
set forth in Section 4.2 hereof have been satisfied, the Issuer shall, on
the requested date, issue a Facility Letter of Credit on behalf of the
Borrower in accordance with the Issuer's usual and customary business
practices. In addition, any amendment of an existing Facility Letter of
Credit shall be deemed to be an issuance of a new Facility Letter of Credit
and shall be subject to the requirements set forth above. The Issuer shall
give the Agent prompt written notice of the issuance of any Facility Letter
of Credit.
2.18.5 Nature of the Lenders' Obligations. (a) As between the
----------------------------------
Borrower and the Lenders, the Borrower assumes all risks of the acts and
omissions of, or misuse of the Facility Letters of Credit by, the
respective beneficiaries of the Facility Letters of Credit. In furtherance
and not in limitation of the foregoing, the Lenders shall not be
responsible for (i) the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any party in connection with
the application for an issuance of a Facility Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Facility Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective
for any reason; provided that in the good faith judgment of the Issuer such
--------
instrument appears to be valid or effective on its face; (iii) the failure
of the beneficiary of a Facility Letter of Credit to comply fully with
conditions required to be satisfied by any Person other than the Issuer in
order to draw upon such Facility Letter of Credit; (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by
mail, cable, telegraph, telex or otherwise; (v) errors in the
interpretation of technical terms; (vi) the misapplication by the
beneficiary of a Facility Letter of Credit of the proceeds of any drawing
under such Facility Letter of Credit; or (vii) any consequences arising
from causes beyond control of the Issuer.
(b) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by
the Issuer under or in connection with the Facility Letters of Credit or
any related certificates, if taken or omitted in good faith, shall not put
the Agent or any Lender under any resulting liability to the Borrower or
relieve the Borrower of any of its obligations hereunder to the Issuer or
any such Person.
2.18.6 Facility Letter of Credit Fees. The Borrower hereby agrees
------------------------------
to pay to the Agent for the account of the Issuer or the Lenders, as
applicable, letter of credit fees with respect to each Facility Letter of
Credit from and including the date of issuance thereof until the date such
Facility Letter of Credit is fully drawn, cancelled or expired, (a) for the
account of the Issuer, such fee as may be from time to time separately
agreed to by the Issuer and the Borrower, payable on the date of issuance,
and (b) for the ratable account of the Lenders,
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<PAGE>
equal to the Applicable Margin multiplied by the aggregate amount from time
to time available to be drawn on such Facility Letter of Credit, calculated
with respect to actual days elapsed on the basis of a 360-day year and
payable quarterly in arrears on each Payment Date in each year and upon the
expiration, cancellation or utilization in full of such Facility Letter of
Credit. In addition to the foregoing, the Borrower agrees to pay the Issuer
any other fees customarily charged by it in respect of Letters of Credit
issued by it.
ARTICLE III
YIELD PROTECTION; TAXES
-----------------------
3.1. Yield Protection. If, on or after the date of this Agreement, the
----------------
adoption of any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
change in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:
(a) subjects any Lender or any applicable Lending Installation to any
Taxes, or changes the basis of taxation of payments (other than
with respect to Excluded Taxes) to any Lender in respect of its
Eurodollar Loans or its interest in the Facility Letters of Credit,
or
(b) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended
by, any Lender or any applicable Lending Installation (other than
reserves and assessments taken into account in determining the
interest rate applicable to Eurodollar Advances), or
(c) imposes any other condition the result of which is to increase the
cost to any Lender or any applicable Lending Installation of
making, funding or maintaining its Eurodollar Loans or issuing
Facility Letters of Credit or reduces any amount receivable by any
Lender or any applicable Lending Installation in connection with
its Eurodollar Loans or any Facility Letter of Credit, or requires
any Lender or any applicable Lending Installation to make any
payment calculated by reference to the amount of Eurodollar Loans
held, Facility Letters of Credit issued or participated in or
interest received by it, by an amount deemed material by such
Lender,
and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation of making or maintaining its Eurodollar Loans or
Commitment or its interest in the Facility Letters of Credit to reduce the
return received by such Lender or applicable Lending
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<PAGE>
Installation in connection with such Eurodollar Loans or Commitment, then,
within fifteen (15) days of demand by such Lender, the Borrower shall pay such
Lender such additional amount or amounts as will compensate such Lender for such
increased cost or reduction in amount received.
3.2. Changes in Capital Adequacy Regulations. If a Lender reasonably
---------------------------------------
determines the amount of capital required or expected to be maintained by such
Lender, any Lending Installation of such Lender or any corporation controlling
such Lender is increased as a result of a Change, then, within fifteen (15) days
of demand by such Lender, the Borrower shall pay such Lender the amount
necessary to compensate for any shortfall in the rate of return on the portion
of such increased capital which such Lender reasonably determines is
attributable to this Agreement, its Loans, Facility Letters of Credit, or its
Commitment to make Loans or issue as participation or participate in Facility
Letters of Credit hereunder (after taking into account such Lender's policies as
to capital adequacy). "Change" means (a) any change after the date of this
Agreement in the Risk-Based Capital Guidelines or (b) any adoption of or change
in any other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of law)
after the date of this Agreement which affects the amount of capital required or
expected to be maintained by any Lender or any Lending Installation or any
corporation controlling any Lender. "Risk-Based Capital Guidelines" means (a)
the risk-based capital guidelines in effect in the United States on the date of
this Agreement, including transition rules, and (b) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.3. Availability of Types of Advances. If (a) any Lender determines
---------------------------------
that maintenance of its Eurodollar Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation, or directive, whether or not
having the force of law and gives notice of such fact to the Agent or (b) the
Required Lenders determine that (i) deposits of a type and maturity appropriate
to match fund Eurodollar Advances are not available or (ii) the interest rate
applicable to a Type of Advance does not accurately reflect the cost of making
or maintaining such Advance, then the Agent shall suspend the availability of
the affected Type of Advance and require any affected Eurodollar Advances to be
repaid or converted to Alternate Base Rate Advances, subject to the payment of
any funding indemnification amounts required by Section 3.4.
3.4. Funding Indemnification. If any payment of a Eurodollar Advance
-----------------------
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason other
than default by the Lenders, the Borrower will indemnify each Lender for any
loss or cost incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or
maintain such Eurodollar Advance.
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<PAGE>
3.5. Taxes. (a) All payments by the Borrower to or for the account of
-----
any Lender or the Agent hereunder or under any Note shall be made free and clear
of and without deduction for any and all Taxes. If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 3.5) such Lender or the
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions, (iii) the Borrower shall pay the full amount deducted to the
relevant authority in accordance with applicable law and (iv) the Borrower shall
furnish to the Agent the original copy of a receipt evidencing payment thereof
within thirty (30) days after such payment is made.
(b) In addition, the Borrower hereby agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under any Note or
from the execution or delivery of, or otherwise with respect to, this Agreement
or any Note ("Other Taxes").
(c) The Borrower hereby agrees to indemnify the Agent and each Lender for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by
the Agent or such Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. Payments due under this
indemnification shall be made within thirty (30) days of the date the Agent or
such Lender makes demand therefor pursuant to Section 3.6.
(d) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof (each a "Non-U.S. Lender") agrees that it
will, not less than ten (10) Business Days after the date of this Agreement, (i)
deliver to each of the Borrower and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes, and
(ii) deliver to each of the Borrower and the Agent a United States Internal
Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to
an exemption from United States backup withholding tax. Each Non-U.S. Lender
further undertakes to deliver to each of the Borrower and the Agent (x) renewals
or additional copies of such form (or any successor form) on or before the date
that such form expires or becomes obsolete, and (y) after the occurrence of any
event requiring a change in the most recent forms so delivered by it, such
additional forms or amendments thereto as may be reasonably requested by the
Borrower or the Agent. All forms or amendments described in the preceding
sentence shall certify that such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes, unless an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form or amendment with respect to it and such Lender advises the Borrower and
the Agent that
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<PAGE>
it is not capable of receiving payments without any deduction or withholding of
United States federal income tax.
(e) For any period during which a Non-U.S. Lender has failed to provide
the Borrower with an appropriate form pursuant to clause (d), above (unless such
failure is due to a change in treaty, law or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 3.5 with respect to Taxes imposed by the United States; provided
--------
that, should a Non-U.S. Lender which is otherwise exempt from or subject to a
reduced rate of withholding tax become subject to Taxes because of its failure
to deliver a form required under clause (d), above, the Borrower shall take such
steps at the expense of such Non-U.S. Lender as such Non-U.S. Lender shall
reasonably request to assist such Non-U.S. Lender to recover such Taxes.
(f) Any Lender that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement or any Note
pursuant to the law of any relevant jurisdiction or any treaty shall deliver to
the Borrower (with a copy to the Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without withholding or at
a reduced rate.
3.6. Lender Statements; Survival of Indemnity. To the extent reasonably
----------------------------------------
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of
Eurodollar Advances under Section 3.3, so long as such designation is not, in
the judgment of such Lender, disadvantageous to such Lender. Each Lender shall
deliver a written statement of such Lender to the Borrower (with a copy to the
Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such
written statement shall set forth in reasonable detail the calculations upon
which such Lender determined such amount and shall be final, conclusive and
binding on the Borrower in the absence of manifest error. Determination of
amounts payable under such Sections in connection with a Eurodollar Loan shall
be calculated as though each Lender funded its Eurodollar Loan through the
purchase of a deposit of the type and maturity corresponding to the deposit used
as a reference in determining the Eurodollar Rate applicable to such Loan,
whether in fact that is the case or not. Unless otherwise provided herein, the
amount specified in the written statement of any Lender shall be payable on
demand after receipt by the Borrower of such written statement. The obligations
of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of
the Obligations and termination of this Agreement.
3.7. Substitution of Lenders. Any Lender claiming any additional amounts
-----------------------
payable pursuant to Section 3.1, 3.2, or 3.5 or which gives a notice described
in Section 3.3(a) shall, so long as no Default or Unmatured Default has occurred
and is continuing, upon the written request of the Borrower delivered to such
Lender and the Agent, assign, pursuant to and in accordance with the provisions
of Section 12.3, all of its rights and obligations under this Agreement and
under the Loan
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<PAGE>
Documents to another Lender or to a commercial bank, other financial
institution, commercial finance company or other business lender selected by the
Borrower and reasonably acceptable to the Agent that has agreed not to claim any
additional amounts under Section 3.1, 3.2 or 3.5 with respect to some or all of
the costs or regulatory charges that gave rise to such assigning Lender's claim
for such compensation or, as applicable, has not made a determination of the
type described in Section 3.3(a), in consideration for (a) the payment by such
assignee to such assigning Lender of the principal of, and interest accrued and
unpaid to the date of such assignment on, the Loans held by such assigning
Lender, (b) the payment by the Borrower to such assigning Lender of any and all
other amounts owing to such assigning Lender under any provision of this
Agreement accrued and unpaid to the date of such assignment and (c) the payment
by the Borrower to such assigning Lender of any amounts which would be payable
to such Lender pursuant to Section 3.4 were such assignment treated as a
repayment of such Loans.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
4.1. Initial Loans and Facility Letters of Credit. The Lenders shall not
--------------------------------------------
be required to make the initial Advance hereunder and the Issuer shall not be
required to issue any Facility Letter of Credit hereunder unless the Borrower
has furnished the following to the Agent with sufficient copies for the Lenders
and the other conditions set forth below have been satisfied:
(a) Charter Documents; Good Standing Certificates. Copies of the
---------------------------------------------
certificate of incorporation of the Borrower, together with all amendments
thereto, both certified by the appropriate governmental officer in its
jurisdiction of incorporation, together with a good standing certificate issued
by the Secretary of State of the jurisdiction of its incorporation and such
other jurisdictions as shall be requested by the Agent.
(b) By-Laws and Resolutions. Copies, certified by the Secretary or
-----------------------
Assistant Secretary of the Borrower, of its by-laws and of its Board of
Directors' resolutions (and resolutions of other bodies, if any are deemed
necessary by counsel for the Agent) authorizing the execution, delivery and
performance of the Loan Documents to which the Borrower is a party.
(c) Secretary's Certificate. An incumbency certificate, executed by
-----------------------
the Secretary or Assistant Secretary of the Borrower, which shall identify by
name and title and bear the signature of the officers of the Borrower authorized
to sign the Loan Documents and to make borrowings hereunder, upon which
certificate the Agent and the Lenders shall be entitled to rely until informed
of any change in writing by the Borrower.
(d) Officer's Certificate. A certificate, dated the initial Borrowing
---------------------
Date, signed by an Authorized Officer of the Borrower, in form and substance
satisfactory to the Agent, to the effect that: (i) on the initial Borrowing Date
(both before and after giving effect to the Acquisition, if applicable, the
making of the Loans and the issuance of any Facility Letters of Credit
hereunder) no Default or Unmatured Default has occurred and is continuing; (ii)
no injunction or temporary
-27-
<PAGE>
restraining order which would prohibit the making of the Loans or the issuance
of any Facility Letters of Credit, or other litigation which could reasonably be
expected to have a Material Adverse Effect is pending or, to the best of such
Person's knowledge, threatened; (iii) each of the representations and warranties
set forth in Article V of this Agreement is true and correct on and as of the
initial Borrowing Date; and (iv) since December 31, 1997, no event or change has
occurred that has caused or evidences a Material Adverse Effect.
(e) Legal Opinions. A written opinion of Barnes & Thornburg, counsel
--------------
to the Borrower, addressed to the Agent and the Lenders in form and substance
acceptable to the Agent and its counsel.
(f) Notes. Any Notes requested by a Lender pursuant to Section 2.11
-----
payable to the order of each such requesting Lender.
(g) Loan Documents. Executed originals of this Agreement and each of
--------------
the Loan Documents, which shall be in full force and effect, together with all
schedules, exhibits, certificates, instruments, opinions and documents required
to be delivered pursuant hereto and thereto.
(h) Letters of Direction. Written money transfer instructions with
--------------------
respect to the initial Advances and to future Advances in form and substance
acceptable to the Agent and its counsel addressed to the Agent and signed by an
Authorized Officer, together with such other related money transfer
authorizations as the Agent may have reasonably requested.
(i) Financial Statements. The Agent and the Required Lenders shall
--------------------
have received the Borrower's audited consolidated financial statements as of
December 31, 1997, prepared and provided in accordance with Agreement Accounting
Principles.
(j) Other. Such other documents as the Agent, any Lender or their
-----
counsel may have reasonably requested.
4.2. Each Future Advance and Facility Letter of Credit. The Lenders shall
-------------------------------------------------
not be required to make any Advance (other than an Advance that, after giving
effect thereto and to the application of the proceeds thereof, does not increase
the aggregate amount of outstanding Advances) and the Issuer shall not be
obligated to issue any future Facility Letter of Credit unless on the applicable
Borrowing Date:
(a) There exists no Default or Unmatured Default and none would
result from such Advance or issuance of such Facility Letter of Credit;
(b) The representations and warranties contained in Article V are
true and correct as of such Borrowing Date except to the extent any such
representation or warranty is stated to relate solely to an earlier date, in
which case such representation or warranty shall be true and correct on and as
of such earlier date.
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<PAGE>
(c) A Borrowing Notice or Issuance Request, as applicable, shall have
been properly submitted; and
(d) All legal matters incident to the making of such Advance or
issuance of such Facility Letter of Credit shall be reasonably satisfactory to
the Lenders and their counsel.
Each Borrowing Notice with respect to each such Advance and each Issuance
Request with respect to each such Facility Letter of Credit shall constitute a
representation and warranty by the Borrower that the conditions contained in
Section 4.2 (a) and (b) have been satisfied. Any Lender may require a duly
completed compliance certificate in substantially the form of Exhibit B hereto
---------
as a condition to making an Advance or issuing a Facility Letter of Credit.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Lenders that, both before and
after giving effect to the making of the Loans and the issuance of any Facility
Letters of Credit:
5.1. Corporate Existence and Standing. Each of the Borrower and each
--------------------------------
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and is
duly qualified and in good standing as a foreign corporation and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted or proposed to be conducted, except where the failure to
be so qualified or in good standing would not result in a Material Adverse
Effect.
5.2. Authorization and Validity. The Borrower has all requisite power and
--------------------------
authority (corporate and otherwise) and legal right to execute and deliver (or
file, as the case may be) each of the Loan Documents and to perform its
obligations thereunder. The execution and delivery (or filing, as the case may
be) by the Borrower of the Loan Documents and the performance of its obligations
thereunder have been duly authorized by proper corporate proceedings and the
Loan Documents constitute legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
5.3. Compliance with Laws and Contracts. The Borrower and its
----------------------------------
Subsidiaries have complied in all material respects with all applicable
statutes, rules, regulations, orders and restrictions of any domestic or foreign
government or any instrumentality or agency thereof, having jurisdiction over
the conduct of their respective businesses or the ownership of their respective
properties, except where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect. Neither the execution and delivery
by the Borrower of the Loan Documents, the application of the proceeds of the
Loans and the Facility Letters of Credit or any other transaction contemplated
in the Loan Documents, nor compliance with the provisions of the Loan Documents
will, or at the relevant time did, (a) violate any law, rule, regulation
(including Regulations T, U and
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<PAGE>
X), order, writ, judgment, injunction, decree or award binding on the Borrower
or any Subsidiary or the Borrower's or any Subsidiary's charter, articles or
certificate of incorporation or by-laws, (b) violate the provisions of or
require the approval or consent of any party to any indenture, instrument or
agreement to which the Borrower or any Subsidiary is a party or is subject, or
by which it, or its property, is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien (other than
Liens permitted by, and created under, the Loan Documents) in, of or on the
property of the Borrower or any Subsidiary pursuant to the terms of any such
indenture, instrument or agreement, or (c) require any consent of the
stockholders of any Person, except for approvals or consents which will be
obtained on or before the initial Advance and are disclosed on Schedule 5.3.
------------
5.4. Governmental Consents. Except for filings under the Hart-Scott-
---------------------
Rodino Antitrust Improvements Act of 1976 and certain foreign antitrust filings,
no order, consent, approval, qualification, license, authorization, or
validation of, or filing, recording or registration with, or exemption by, or
other action in respect of, any court, governmental or public body or authority,
or any subdivision thereof, any securities exchange or other Person is or at the
relevant time was required to authorize, or is or at the relevant time was
required in connection with the execution, delivery, consummation or performance
of, or the legality, validity, binding effect or enforceability of, any of the
Loan Documents, the application of the proceeds of the Loans or the Facility
Letters of Credit or any other transaction contemplated in the Loan Documents.
All waiting periods applicable to the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and similar statutes have expired or been
terminated. Neither the Borrower nor any Subsidiary is in default under or in
violation of any foreign, federal, state or local law, rule, regulation, order,
writ, judgment, injunction, decree or award binding upon or applicable to the
Borrower or such Subsidiary, in each case the consequences of which default or
violation could reasonably be expected to have a Material Adverse Effect.
5.5. Financial Statements. The Borrower has heretofore furnished to each
--------------------
of the Lenders (a) the December 31, 1997 audited consolidated financial
statements of the Borrower and its Subsidiaries, and (b) the unaudited
consolidated financial statements of the Borrower and its Subsidiaries through
March 31, 1998 (collectively, the "Financial Statements"). Each of the
--------------------
Financial Statements was prepared in accordance with Agreement Accounting
Principles and fairly presents the consolidated financial condition and
operations of the Borrower and its Subsidiaries at such dates and the
consolidated results of their operations for the respective periods then ended,
except, in the case of interim financial statements, for normal year-end
adjustments and the absence of footnotes.
5.6. Material Adverse Change. No material adverse change in the business,
-----------------------
Property, condition (financial or otherwise), performance or results of
operations of the Borrower and its Subsidiaries taken as a whole has occurred
since December 31, 1997.
5.7. Taxes. The Borrower and its Subsidiaries have filed or caused to be
-----
filed on a timely basis and in correct form all United States federal and
applicable material foreign, state and local tax returns and all other material
tax returns which are required to be filed and have paid all taxes due pursuant
to said returns or pursuant to any assessment received by the Borrower or any
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<PAGE>
Subsidiary, except such taxes, if any, as are being contested in good faith, or
as to which adequate reserves have been provided in accordance with Agreement
Accounting Principles, and as to which no Lien exists. As of the date hereof,
the United States income tax returns of the Borrower on a consolidated basis
have been audited by the Internal Revenue Service through Fiscal Year ending
December 31, 1992 and there are no pending audits or investigations regarding
the Borrower's or its Subsidiaries' federal, foreign, state or local tax returns
which could reasonably be expected to have a Material Adverse Effect. No tax
liens have been filed and no claims are being asserted with respect to any such
taxes which could reasonably be expected to have a Material Adverse Effect. The
charges, accruals and reserves on the books of the Borrower and its Subsidiaries
in respect of any taxes or other governmental charges are in accordance with
Agreement Accounting Principles.
5.8. Litigation and Contingent Obligations. There is no litigation,
-------------------------------------
arbitration, proceeding, inquiry or governmental investigation (including,
without limitation, by the Federal Trade Commission) pending or, to the
knowledge of any of their officers, threatened against or affecting the Borrower
or any Subsidiary or any of their respective Properties, which could reasonably
be expected to have a Material Adverse Effect or to prevent, enjoin or unduly
delay the making of the Loans or the issuance of Facility Letters of Credit
under this Agreement or the consummation of the Acquisition. Other than any
liability incident to any litigation, arbitration or proceeding which could not
reasonably be expected to have a Material Adverse Effect, the Borrower has no
material contingent obligations not provided for or disclosed in the Financial
Statements. The AcroMed Corporation Settlement Agreement dated January 8, 1997,
as amended and as approved in the Final Order and Judgment (Pretrial Order No.
1117) entered on October 17, 1997, in the United States District Court for the
Eastern District of Pennsylvania in the Multidistrict Proceeding entitled In re:
------
Orthopedic Bone Screw Liability Litigation, MDL Docket No. 1014, and the Final
- ------------------------------------------
Order and Judgment itself are final and non-appealable and are binding upon
AcroMed and the members of the "Settlement Class"as defined therein.
5.9. Subsidiaries. Schedule 5.9 contains an accurate list of all
------------ ------------
Subsidiaries of the Borrower as of the date of this Agreement, setting forth
their respective jurisdictions of organization and the percentage of their
respective capital stock or other ownership interests owned by the Borrower or
other Subsidiaries. All of the issued and outstanding shares of capital stock
or other ownership interests of such Subsidiaries have been (to the extent such
concepts are relevant with respect to such ownership interests) duly authorized
and issued and are fully paid and non-assessable.
5.10. ERISA. The Unfunded Liabilities of all Single Employer Plans do
-----
not in the aggregate exceed $5,000,000. Neither the Borrower nor any other
member of the Controlled Group has incurred, or is reasonably expected to incur,
any withdrawal liability to Multiemployer Plans in excess of $5,000,000 in the
aggregate. Each Plan complies in all material respects with all applicable
requirements of law and regulations, no Reportable Event has occurred with
respect to any Plan, neither the Borrower nor any other member of the Controlled
Group has withdrawn from any Plan or initiated steps to do so, and no steps have
been taken to reorganize or terminate any Plan.
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<PAGE>
5.11. Defaults. No Default or Unmatured Default has occurred and is
--------
continuing.
5.12. Federal Reserve Regulations. Neither the Borrower nor any
---------------------------
Subsidiary is engaged, directly or indirectly, principally, or as one of its
important activities, in the business of extending, or arranging for the
extension of, credit for the purpose of purchasing or carrying Margin Stock. No
part of the proceeds of any Loan will be used in a manner which would violate,
or result in a violation of, Regulation T, Regulation U or Regulation X.
Neither the making of any Advance or issuance of any Facility Letters of Credit
hereunder, the use of the proceeds thereof, nor any other aspect of the
financing of the Acquisition, will violate or be inconsistent with the
provisions of, Regulation T, Regulation U or Regulation X. Following the
application of the proceeds of the Loans, less than 25% of the value (as
determined by any reasonable method) of the assets of the Borrower and its
Subsidiaries which are subject to any limitation on sale, pledge, or other
restriction hereunder taken as a whole have been, and will continue to be,
represented by Margin Stock.
5.13. Investment Company; Public Utility Holding Company. Neither the
--------------------------------------------------
Borrower nor any Subsidiary is, or after giving effect to any Advance will be,
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under the Public Utility Holding Company
Act of 1935, as amended.
5.14. Plan Assets; Prohibited Transactions. The Borrower is not an
------------------------------------
entity deemed to hold "plan assets" within the meaning of 29 C.F.R. (S) 2510.3-
101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is
subject to Title I of ERISA or any plan (within the meaning of Section 4975 of
the Code), and neither the execution of this Agreement nor the making of Loans
hereunder gives rise to a prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code.
5.15. Ownership of Properties. Except as set forth on Schedule 5.15, on
----------------------- -------------
the date of this Agreement, the Borrower and its Subsidiaries have good title,
free of all Liens other than those permitted by Section 6.15, to all of the
Property and assets reflected in the Borrower's most recent consolidated
financial statements provided to the Agent as owned by the Borrower and its
Subsidiaries.
5.16. Material Agreements. Neither the Borrower nor any Subsidiary is a
-------------------
party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in (a) any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect or (b) any
agreement or instrument evidencing or governing Indebtedness.
5.17. Acquisition Documents. The Acquisition Documents as originally
---------------------
executed and delivered by the parties thereto have not been amended, waived,
supplemented or modified (other than by the supplemental disclosures made
pursuant to Section 5.5(a) of the Merger Agreement
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<PAGE>
which have been disclosed to the Lenders) without the consent of the Required
Lenders. Each of the representations and warranties given by the parties thereto
in the Acquisition Documents is accurate as of the date hereof, except to the
extent that any inaccurateness, individually or in the aggregate, does not
result in a Material Adverse Effect (as defined in the Merger Agreement).
Neither the Borrower nor, to the knowledge of the Borrower, any other party
thereto is in default in the performance of or compliance with any provisions
thereof.
5.18. Environmental Matters. In the ordinary course of its business, the
----------------------
Borrower considers the effect of Environmental Laws on the business of the
Borrower and its Subsidiaries, in the course of which they identify and evaluate
potential risks and liabilities accruing to the Borrower due to Environmental
Laws. On the basis of this consideration, the Borrower has concluded that
Environmental Laws cannot reasonably be expected to have a Material Adverse
Effect. Neither the Borrower nor any Subsidiary has received any notice to the
effect that its operations are not in material compliance with any of the
requirements of applicable Environmental Laws or are the subject of any federal
or state investigation evaluating whether any remedial action is needed to
respond to a release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could reasonably be
expected to have a Material Adverse Effect.
5.19. Insurance. The Borrower and its Subsidiaries maintain with
---------
financially sound and reputable insurance companies insurance on their Property
in such amounts and covering such risks as is consistent with sound business
practice.
5.20. Year 2000 Compliance. The Borrower has (a) initiated a review and
--------------------
assessment of all areas within its and each of its Subsidiaries' business and
operations that could reasonably be expected to be adversely affected by the
"Year 2000 Problem" (that is, the risk that computer applications used by the
Borrower or any of its Subsidiaries may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (b) developed a plan and timeline for addressing the
Year 2000 Problem on a timely basis, and (c) to date, implemented that plan in
accordance with that timetable. The Borrower reasonably believes that all
computer applications that are material to its or any of its Subsidiaries'
business and operations will on a timely basis be able to perform properly date-
sensitive functions for all dates before and after January 1, 2000 (that is, be
"Year 2000 compliant"), except to the extent that a failure to do so could not
reasonably be expected to have Material Adverse Effect.
5.21. Disclosure. None of the (a) information, exhibits or reports
----------
furnished or to be furnished by the Borrower or any Subsidiary to the Agent or
to any Lender in connection with the negotiation of the Loan Documents, or (b)
representations or warranties of the Borrower or any Subsidiary contained in
this Agreement, the other Loan Documents or any other document, certificate or
written statement furnished to the Agent or the Lenders by or on behalf of the
Borrower or any Subsidiary for use in connection with the transactions
contemplated by this Agreement contained, contains or will contain any untrue
statement of a material fact or omitted, omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made.
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<PAGE>
ARTICLE VI
COVENANTS
---------
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1. Financial Reporting. The Borrower will maintain, for itself and
-------------------
each Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, consistently applied,
and will furnish to the Lenders:
(a) As soon as practicable and in any event within ninety (90)
days after the close of each of its Fiscal Years, an unqualified audit report
certified by independent certified public accountants, acceptable to the
Lenders, prepared in accordance with Agreement Accounting Principles on a
consolidated basis for itself and its Subsidiaries, including balance sheets as
of the end of such period and related statements of income, retained earnings
and cash flows.
(b) As soon as practicable and in any event within forty-five (45)
days after the close of the first three Fiscal Quarters of each of its Fiscal
Years, for itself and its Subsidiaries, consolidated unaudited balance sheets as
at the close of each such period and consolidated statement of income, retained
earnings and cash flows for the period from the beginning of such Fiscal Year to
the end of such quarter, all certified by an Authorized Officer.
(c) Together with the financial statements required by clauses (a)
-----------
and (b) above, a compliance certificate in substantially the form of Exhibit B
--- ---------
hereto signed by an Authorized Officer showing the calculations necessary to
determine compliance with this Agreement and stating that no Default or
Unmatured Default exists, or if any Default or Unmatured Default exists, stating
the nature and status thereof.
(d) As soon as possible and in any event within ten (10) Business
Days after the Borrower knows that any Termination Event has occurred with
respect to any Plan, a statement, signed by the chief financial officer of the
Borrower, describing said Termination Event and the action which the Borrower
proposes to take with respect thereto.
(e) As soon as possible and in any event within ten (10) Business
Days after receipt by the Borrower, a copy of (i) any notice, claim, complaint
or order to the effect that the Borrower or any of its Subsidiaries is or may be
liable to any Person as a result of the release by the Borrower, any of its
Subsidiaries, or any other Person of any hazardous materials into the
environment or requiring that action be taken to respond to or clean up a
release of hazardous materials into the environment, and (ii) any notice,
complaint or citation alleging any violation of any Environmental Law by the
Borrower or any of its Subsidiaries, if such notice, claim, complaint or
citation could reasonably be expected to result in a Material Adverse Effect..
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<PAGE>
(f) As soon as possible and in any event within ten (10) days after
the Borrower learns thereof, notice of the assertion or commencement of any
claims, action, suit or proceeding against or affecting the Borrower or any
Subsidiary which may reasonably be expected to have a Material Adverse Effect.
(g) Promptly upon the execution thereof, a copy of any amendments
or modifications to the Merger Agreement.
(h) Promptly upon the furnishing thereof to the shareholders of the
Borrower, copies of all financial statements, reports and proxy statements so
furnished.
(i) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports which the
Borrower or any of its Subsidiaries files with the Securities and Exchange
Commission.
(j) Such other information (including non-financial information) as
the Agent or any Lender may from time to time reasonably request.
6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary
---------------
to, use the proceeds of the Advances to provide funds for the Acquisition, if
applicable, and the payment of related fees and expenses and to meet the working
capital needs of the Borrower and its Subsidiaries. The Borrower will not, nor
will it permit any Subsidiary to, use any of the proceeds of the Advances or any
Facility Letters of Credit in a manner which would result in the violation of
Regulation T, U or X.
6.3. Notice of Default. The Borrower will give prompt notice in writing
------------------
to the Lenders of the occurrence of (a) any Default or Unmatured Default and (b)
of any other event or development, financial or other, relating specifically to
the Borrower or any of its Subsidiaries (and not of a general economic or
political nature) which could reasonably be expected to have a Material Adverse
Effect.
6.4. Conduct of Business. The Borrower will, and will cause each
-------------------
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted and to do all things necessary to remain duly incorporated, validly
existing and in good standing as a domestic corporation in its jurisdiction of
incorporation and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted.
6.5. Taxes. The Borrower will, and will cause each Subsidiary to, timely
-----
file complete and correct United States federal and applicable material foreign,
state and local tax returns required by applicable law and pay when due all
material taxes, assessments and governmental charges and levies upon it or its
income, profits or Property, except those which are being contested in good
faith by appropriate proceedings or with respect to which adequate reserves have
been set aside in accordance with Agreement Accounting Principles.
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<PAGE>
6.6. Insurance. The Borrower will, and will cause each Subsidiary to,
---------
maintain with financially sound and reputable insurance companies insurance on
all their Property in such amounts and covering such risks as is consistent with
sound business practice, and the Borrower will furnish to the Agent and any
Lender upon request full information as to the insurance carried.
6.7. Compliance with Laws. The Borrower will, and will cause each
--------------------
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, the
failure to comply with which could reasonably be expected to have a Material
Adverse Effect.
6.8. Maintenance of Properties. The Borrower will, and will cause each
-------------------------
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times.
6.9. Inspection. The Borrower will, and will cause each Subsidiary to,
----------
permit the Agent and the Lenders, by their respective representatives and
agents, to inspect any of the Property, corporate books and financial records of
the Borrower and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Borrower and each Subsidiary, and to
discuss the affairs, finances and accounts of the Borrower and each Subsidiary
with, and to be advised as to the same by, their respective officers at such
reasonable times and intervals as the Lenders may designate. The Borrower will
keep or cause to be kept, and cause each Subsidiary to keep or cause to be kept,
appropriate records and books of account in which complete entries are to be
made reflecting its and their business and financial transactions, such entries
to be made in accordance with Agreement Accounting Principles consistently
applied.
6.10. Capital Stock and Dividends. The Borrower will not, nor will it
---------------------------
permit any Subsidiary to, (a) issue any preferred stock, other capital stock
(other than common stock) or any equity securities of any kind (other than
common stock), or (b) declare or pay any dividends or make any distributions on
its capital stock (other than dividends payable in its own capital stock) or
redeem, repurchase or otherwise acquire or retire any of its capital stock or
any options or other rights in respect thereof at any time outstanding, except
that (i) any Subsidiary may declare and pay dividends or make distributions to
the Borrower or to a Wholly-Owned Subsidiary of the Borrower, and (ii) so long
as no Default or Unmatured Default is pending before or after giving effect to
the declaration or payment of such dividends or repurchase or redemption,
retirement or other acquisition of such stock, the Borrower may declare and pay
dividends on, redeem, repurchase, retire or otherwise acquire its common stock
and options or other rights in respect thereof.
6.11. Indebtedness. The Borrower will not, nor will it permit any
------------
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:
(a) the Loans and Contingent Obligations in respect of the
Facility Letters of Credit;
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<PAGE>
(b) Indebtedness existing on the date hereof and described in
Schedule 6.11 hereto;
- -------------
(c) Rate Hedging Obligations related to the Loans; and
(d) other Indebtedness at no time exceeding $25,000,000 in
aggregate principal amount; provided that the maximum aggregate principal amount
of Indebtedness permitted by this Section 6.11(d) shall be increased by
$10,000,000 on each anniversary of the date hereof.
6.12. Merger. The Borrower will not, nor will it permit any Subsidiary
------
to, merge or consolidate with or into any other Person, except that (a) a
Wholly-Owned Subsidiary may merge into the Borrower or any Wholly-Owned
Subsidiary of the Borrower, (b) (i) the Borrower or any Subsidiary may merge or
consolidate with any other Person so long as the Borrower or such Subsidiary is
the continuing or surviving corporation and (ii) any Subsidiary may merge or
consolidate into another Person so long as the continuing or surviving Person of
such merger or consolidation is a Subsidiary and, in either case, prior to and
after giving effect to such merger or consolidation, no Default or Unmatured
Default shall exist, (c) the Acquisition may be consummated so long as prior to
and after giving effect thereto, no Default or Unmatured Default shall exist,
and (d) any Subsidiary may enter into a merger or consolidation as a means of
effecting a disposition permitted by Section 6.13.
6.13. Sale of Assets. The Borrower will not, nor will it permit any
--------------
Subsidiary to, lease, sell, transfer or otherwise dispose of its Property, to
any other Person except for (a) sales of inventory in the ordinary course of
business, and (b) leases, sales, transfers or other dispositions of its Property
that, together with all other Property of the Borrower and its Subsidiaries
previously leased, sold or disposed of (other than inventory sold in the
ordinary course of business) as permitted by this Section 6.13 since the date
hereof, do not constitute a Substantial Portion of the Property of the Borrower
and its Subsidiaries.
6.14. Investments and Purchases. The Borrower will not, nor will it
-------------------------
permit any Subsidiary to, make or suffer to exist any Investments (including,
without limitation, loans and advances to, and other Investments in,
Subsidiaries), or commitments therefor, or to create any Subsidiary or to become
or remain a partner in any partnership or joint venture, or to make any
Purchases, except:
(a) Cash Equivalent Investments;
(b) Existing Investments in Subsidiaries, Investments in Wholly-
Owned Subsidiaries and other Investments in existence on the date hereof and
described in Schedule 6.14 hereto;
-------------
(c) Investments to effect the Acquisition pursuant to the terms of
the Merger Agreement without waiver of any material condition thereof (including
without limitation the condition set forth in Section 7.1 of the Merger
Agreement in so far as it relates to Section 3.20 of the Merger Agreement);
provided that no Default or Unmatured Default shall exist immediately thereafter
- --------
as a result of the Acquisition;
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<PAGE>
(d) Investments incurred to acquire incremental ownership
interests in DePuy Motec, Inc. or its successor;
(e) Investments incurred in order to consummate other Purchases;
provided that (i) other than in the case of an acquiree which has no Margin
- --------
Stock outstanding and which is acquired through a stock purchase or similar
agreement executed by the selling shareholders, the prior, effective written
consent or approval to such Purchase of the board of directors or equivalent
governing body of the acquiree is obtained, (ii) the Borrower provides the Agent
with a certificate at least five (5) Business Days prior to the consummation of
such Purchase evidencing that, after giving effect to such Purchase, the
Leverage Ratio would be at least 3.0:1.0 as of such date (as determined on a pro
forma basis as of the last day of the preceding fiscal quarter) and (iii) the
Person or business which is the subject of such Purchase is in the same or
similar line of business as the Borrower and its Subsidiaries; and
(f) other Investments made after the date hereof not exceeding
$10,000,000 in aggregate principal amount (calculated on the basis of the amount
initially invested).
6.15. Liens. The Borrower will not, nor will it permit any Subsidiary
-----
to, create, incur, or suffer to exist any Lien in, of or on the Property of the
Borrower or any of its Subsidiaries, except:
(a) Liens for taxes, assessments or governmental charges or levies
on its Property if the same shall not at the time be delinquent or thereafter
can be paid without penalty, or are being contested in good faith and by
appropriate proceedings and for which adequate reserves in accordance with
generally accepted principles of accounting shall have been set aside on its
books;
(b) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business which secure the payment of obligations not more than ninety (90) days
past due or which are being contested in good faith by appropriate proceedings
and for which adequate reserves shall have been set aside on its books;
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation;
(d) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere with the use
thereof in the business of the Borrower or the Subsidiaries;
(e) Liens existing on the date hereof and described in Schedule
--------
6.15 hereto; and
- ----
(f) Other Liens securing aggregate principal indebtedness at no
time exceeding $25,000,000; provided that the maximum aggregate principal amount
of Indebtedness which may
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<PAGE>
be secured by Liens permitted by this Section 6.15(f) shall be increased by
$10,000,000 on each anniversary of the date hereof.
6.16. Affiliates. The Borrower will not, and will not permit any
----------
Subsidiary to, enter into any transaction (including, without limitation, the
purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate except (a) in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the Borrower or
such Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction, (b) transactions among the Borrower and
Wholly-Owned Subsidiaries of the Borrower or (c) the merger of DePuy Motec, Inc.
into AcroMed Corporation.
6.17. Change in Corporate Structure; Fiscal Year. The Borrower shall
------------------------------------------
not, nor shall it permit any Subsidiary to, (a) permit any amendment or
modification to be made to its certificate or articles of incorporation or by-
laws which is materially adverse to the interests of the Lenders (provided that
the Borrower shall notify the Agent of any other amendment or modification
thereto as soon as practicable thereafter) or (b) change its Fiscal Year to end
on any date other than December 31 of each year.
6.18. Inconsistent Agreements. The Borrower shall not, nor shall it
-----------------------
permit any Subsidiary to, enter into or be a party to any indenture, agreement,
instrument or other arrangement which, (a) directly or indirectly prohibits or
restrains, or has the effect of prohibiting or restraining, or imposes
materially adverse conditions upon, the incurrence of the Obligations, the
granting of Liens to secure the Obligations, the amending of the Loan Documents,
the amending of the Loan Documents or the ability of any Subsidiary to (i) pay
dividends or make other distributions on its capital stock, (ii) make loans or
advances to the Borrower or (iii) repay loans or advances from the Borrower or
(b) contains any provision which would be violated or breached by the making of
Advances, by the issuance of Facility Letters of Credit or by the performance by
the Borrower or any Subsidiary of any of its obligations under any Loan
Document; provided, however, that for a period of thirty (30) days after the
-------- -------
date hereof the existence of AcroMed Corporation's currently existing credit
facilities with KeyBank National Association (formerly known as Society National
Bank) shall not constitute a breach of this Section 6.18.
6.19. Financial Covenants. The Borrower on a consolidated basis with its
-------------------
Subsidiaries shall:
6.19.1. Minimum Tangible Net Worth. At all times after the date
--------------------------
hereof, maintain a minimum Tangible Net Worth at least equal to the sum of (a)
$118,378,400 plus (b) 50% of the Borrower's positive Net Income, if any, for
----
each Fiscal Quarter ending after the date hereof and prior to the time of
determination.
6.19.2. Leverage Ratio. Maintain a Leverage Ratio of not more than
--------------
3.0:1.0 as of the end of each Fiscal Quarter after the date hereof.
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6.20. Year 2000 Compliance. The Borrower will promptly notify the Agent
--------------------
in the event the Borrower discovers or determines that any computer application
that is material to its or any of its Subsidiaries' business and operations will
not be Year 2000 compliant on a timely basis, except to the extent that such
failure could not reasonably be expected to have a Material Adverse Effect.
ARTICLE VII
DEFAULTS
--------
The occurrence of any one or more of the following events shall constitute
a Default:
7.1. Any representation or warranty made or deemed made by or on behalf of
the Borrower to the Lenders or the Agent under or in connection with this
Agreement, any other Loan Document any Loan, any Facility Letter of Credit or
any certificate or information delivered in connection with this Agreement or
any other Loan Document shall be false in any material respect on the date as of
which made or deemed made.
7.2. Nonpayment of (a) any principal of any Loan or any Reimbursement
Obligation when due, or (b) any interest upon any Loan or any Facility Fee or
other fee or obligations under any of the Loan Documents within five (5)
Business Days after the same becomes due.
7.3. The breach by the Borrower of any of the terms or provisions of
Section 6.2, Section 6.3(a), Sections 6.10 through 6.19.
7.4. The breach by the Borrower (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3 hereof) of any of the terms or provisions
of the Loan Documents which is not remedied within thirty (30) days after
written notice from the Agent or any Lender.
7.5. Failure of the Borrower or any of its Subsidiaries to pay any
Indebtedness aggregating in excess of $10,000,000 when due; or the default by
the Borrower or any of its Subsidiaries in the performance of any term,
provision or condition contained in any agreement or agreements under which any
such Indebtedness was created or is governed, or the occurrence of any other
event or existence of any other condition, the effect of any of which is to
cause, or to permit the holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be
due and payable or required to be prepaid (other than by a regularly scheduled
payment) prior to the stated maturity thereof.
7.6. The Borrower or any of its Subsidiaries shall (a) have an order for
relief entered with respect to it under the Federal bankruptcy laws as now or
hereafter in effect, (b) make an assignment for the benefit of creditors, (c)
apply for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
Substantial Portion of its Property, (d) institute any proceeding seeking an
order for relief under the Federal bankruptcy laws as now or hereafter in effect
or seeking to adjudicate it a bankrupt or insolvent, or seeking
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dissolution, winding up, liquidation, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed against
it, (e) take any corporate action to authorize or effect any of the foregoing
actions set forth in this Section 7.6, (f) fail to contest in good faith any
appointment or proceeding described in Section 7.7 or (g) become unable to pay,
not pay, or admit in writing its inability to pay, its debts generally as they
become due.
7.7. Without the application, approval or consent of the Borrower or any
of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section 7.6(d)
shall be instituted against the Borrower or any of its Subsidiaries and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of sixty (60) consecutive days.
7.8. Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of (each a "Condemnation"),
------------
all or any portion of the Property of the Borrower and its Subsidiaries which,
when taken together with all other Property of the Borrower and its Subsidiaries
so condemned, seized, appropriated, or taken custody or control of, during the
twelve-month period ending with the month in which any such Condemnation occurs,
constitutes a Substantial Portion.
7.9. The Borrower or any of its Subsidiaries shall fail within forty-five
(45) days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $5,000,000 (or multiple judgments or orders for
the payment of an aggregate amount in excess of $10,000,000), which is not
stayed on appeal or otherwise being appropriately contested in good faith and as
to which no enforcement actions have been commenced.
7.10. The Unfunded Liabilities of all Single Employer Plans shall exceed
in the aggregate $5,000,000 or any Reportable Event shall occur in connection
with any Plan.
7.11. The Borrower or any other member of the Controlled Group shall have
been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer Plans by
the Borrower or any other member of the Controlled Group as withdrawal liability
(determined as of the date of such notification), exceeds $5,000,000 or requires
payments exceeding $5,000,000 per annum.
7.12. The Borrower or any other member of the Controlled Group shall have
been notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of Title IV
of ERISA, if as a result of such reorganization or termination the aggregate
annual contributions of the Borrower and the other members of the Controlled
Group (taken as a whole) to all Multiemployer Plans which are then in
reorganization or being terminated have been or will be increased over the
amounts contributed to such Multiemployer
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<PAGE>
Plans for the respective plan years of each such Multiemployer Plan immediately
preceding the plan year in which the reorganization or termination occurs by an
amount exceeding $5,000,000.
7.13. Any Change in Control shall occur.
7.14. The representations and warranties set forth in Section 5.14 shall
at any time not be true and correct.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
----------------------------------------------
8.1. Acceleration. If any Default described in Section 7.6 or 7.7 occurs
------------
with respect to the Borrower, the obligations of the Lenders to make Loans or
issue Facility Letters of Credit hereunder shall automatically terminate and the
Obligations shall immediately become due and payable without any election or
action on the part of the Agent or any Lender. If any other Default occurs, the
Required Lenders (or the Agent with the consent of the Required Lenders) may
terminate or suspend the obligations of the Lenders to make Loans or issue
Facility Letters of Credit hereunder, or declare the Obligations to be due and
payable, or both, whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which the Borrower hereby expressly waives. In addition to the foregoing,
following the occurrence and during the continuance of a Default, so long as any
Facility Letter of Credit has not been fully drawn and has not been cancelled or
expired by its terms, upon demand by the Agent, the Borrower shall deposit in an
account (the "Letter of Credit Cash Collateral Account") maintained with First
----------------------------------------
Chicago in the name of the Agent, for the ratable benefit of the Lenders and the
Agent, cash in an amount equal to the aggregate undrawn face amount of all
outstanding Facility Letters of Credit and all fees, expenses and other amounts
due or which may become due with respect thereto. The Borrower shall have no
control over funds in the Letter of Credit Cash Collateral Account, which funds
shall be invested by the Agent from time to time in its discretion in
certificates of deposit of First Chicago having a maturity not exceeding thirty
(30) days. Such funds shall be promptly applied by the Agent to reimburse the
Issuer for drafts drawn from time to time under the Facility Letters of Credit.
Such funds, if any, remaining in the Letter of Credit Cash Collateral Account
following the payment of all Obligations in full or the earlier termination of
all Defaults shall, unless the Agent is otherwise directed by a court of
competent jurisdiction, be promptly paid over to the Borrower.
If, within ten (10) Business Days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.
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8.2. Amendments. Subject to the provisions of this Article VIII, the
----------
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that this document may be modified as
-------- -------
contemplated by Section 2.4(c) in a writing signed by the Borrower, the Agent
and the existing or new Lender(s) extending incremental commitments; and
provided, further, that no such supplemental agreement shall, without the
- --------
consent of each Lender:
(a) Extend the final maturity of any Loan or Note or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest or fees thereon;
(b) Reduce the percentage specified in the definition of Required
Lenders;
(c) Reduce the amount of or extend the date for the mandatory
payments required under Section 2.1(b);
(d) Extend the Facility Termination Date, permit any Facility Letter
of Credit to have an expiry date beyond May 28, 2003;
(e) Amend this Section 8.2; or
(f) Permit any assignment by the Borrower of its Obligations or its
rights hereunder.
No supplemental agreement or amendment hereto shall increase the amount of the
Commitment of any Lender without the consent of such Lender. No amendment of
any provision of this Agreement relating to the Agent shall be effective without
the written consent of the Agent. The Agent may waive payment of the fee
required under Section 12.3.2 without obtaining the consent of any other party
to this Agreement.
8.3. Preservation of Rights. No delay or omission of the Lenders or the
----------------------
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full.
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ARTICLE IX
GENERAL PROVISIONS
------------------
9.1. Survival of Representations. All representations and warranties of
---------------------------
the Borrower contained in this Agreement shall survive the making of the Loans
herein contemplated.
9.2. Governmental Regulation. Anything contained in this Agreement to
-----------------------
the contrary notwithstanding, no Lender shall be obligated to extend credit to
the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3. Headings. Section headings in the Loan Documents are for
--------
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
9.4. Entire Agreement. The Loan Documents embody the entire agreement
----------------
and understanding among the Borrower, the Agent and the Lenders and supersede
all prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof other than the fee letter
described in Section 10.13.
9.5. Several Obligations; Benefits of this Agreement. The respective
-----------------------------------------------
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any
of its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns, provided, however, that the parties
-------- -------
hereto expressly agree that the Arranger shall enjoy the benefits of the
provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth
therein and shall have the right to enforce such provisions on its own behalf
and in its own name to the same extent as if it were a party to this Agreement.
9.6. Expenses; Indemnification. (a) The Borrower shall reimburse the
-------------------------
Agent and the Arranger for any reasonable costs, internal charges and out-of-
pocket expenses (including attorneys' fees and time charges of attorneys for the
Agent, which attorneys may be employees of the Agent) paid or incurred by the
Agent or the Arranger in connection with the preparation, negotiation,
execution, delivery, syndication, review, amendment, modification, and
administration of the Loan Documents. The Borrower also agrees to reimburse the
Agent, the Arranger and the Lenders for any reasonable costs, internal charges
and out-of-pocket expenses (including attorneys' fees and time charges of
attorneys for the Agent, the Arranger and the Lenders, which attorneys may be
employees of the Agent, the Arranger or the Lenders) paid or incurred by the
Agent, the Arranger or any Lender in connection with the collection and
enforcement of the Loan Documents. Expenses being reimbursed by the Borrower
under this Section include, without limitation, costs and expenses incurred in
connection with the Reports described in the following sentence. The Borrower
acknowledges that from time to time First
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<PAGE>
Chicago may prepare and may distribute to the Lenders (but shall have no
obligation or duty to prepare or to distribute to the Lenders) certain audit
reports (the "Reports") pertaining to the Borrower's assets for internal use by
First Chicago from information furnished to it by or on behalf of the Borrower,
after First Chicago has exercised its rights of inspection pursuant to this
Agreement.
(b) The Borrower hereby further agrees to indemnify the Agent, the
Arranger and each Lender, its directors, officers and employees against all
losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all expenses of litigation or preparation
therefor whether or not the Agent, the Arranger or any Lender is a party
thereto) which any of them may pay or incur arising out of or relating to this
Agreement, the other Loan Documents, the transactions contemplated hereby or the
direct or indirect application or proposed application of the proceeds of any
Loan hereunder except to the extent that they are determined in a final non-
appealable judgment by a court of competent jurisdiction to have resulted from
the gross negligence or willful misconduct of the party seeking indemnification.
The obligations of the Borrower under this Section 9.6 shall survive the
termination of this Agreement.
9.7. Numbers of Documents. All statements, notices, closing documents,
--------------------
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
9.8. Accounting. Except as provided to the contrary herein, all
----------
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles, except that any calculation or determination which is to be made on
a consolidated basis shall be made for the Borrower and all its Subsidiaries,
including those Subsidiaries, if any, which are unconsolidated on the Borrower's
audited financial statements.
9.9. Severability of Provisions. Any provision in any Loan Document that
--------------------------
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
9.10. Nonliability of Lenders. The relationship between the Borrower on
-----------------------
the one hand and the Lenders and the Agent on the other hand shall be solely
that of borrower and lender. Neither the Agent, the Arranger nor any Lender
shall have any fiduciary responsibilities to the Borrower. Neither the Agent,
the Arranger nor any Lender undertakes any responsibility to the Borrower to
review or inform the Borrower of any matter in connection with any phase of the
Borrower's business or operations. The Borrower agrees that neither the Agent,
the Arranger nor any Lender shall have liability to the Borrower (whether
sounding in tort, contract or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to, the transactions
contemplated and the relationship established by the Loan Documents, or any act,
omission or event occurring in connection therewith, unless it is determined in
a final non-
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<PAGE>
appealable judgment by a court of competent jurisdiction that such losses
resulted from the gross negligence or willful misconduct of the party from which
recovery is sought. Neither the Agent, the Arranger nor any Lender shall have
any liability with respect to, and the Borrower hereby waives, releases and
agrees not to sue for, any special, indirect or consequential damages suffered
by the Borrower in connection with, arising out of, or in any way related to the
Loan Documents or the transactions contemplated thereby.
9.11. Confidentiality. Each Lender agrees to hold any confidential
---------------
information which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (a) to its Affiliates and to other Lenders and
their respective Affiliates, (b) to legal counsel, accountants, and other
professional advisors to that Lender or to a Transferee, (c) to regulatory
officials, (d) to any Person as requested pursuant to or as required by law,
regulation, or legal process, (e) to any Person as deemed reasonably necessary
by the Lender to prosecute or defend any legal proceeding to which that Lender
is a party, and (f) permitted by Section 12.4.
9.12. Nonreliance. Each Lender hereby represents that it is not relying
-----------
on or looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Loans provided
for herein.
9.13. Disclosure. The Borrower and each Lender hereby (a) acknowledge
----------
and agree that First Chicago and/or its Affiliates from time to time may hold
other investments in, make other loans to or have other relationships with the
Borrower and its Affiliates, and (b) waive any liability of First Chicago or
such Affiliate to the Borrower or any Lender, respectively, arising out of or
resulting from such investments, loans or relationships other than liabilities
arising out of the gross negligence or willful misconduct of First Chicago or
its Affiliates.
ARTICLE X
THE AGENT
---------
10.1. Appointment; Nature of Relationship. The First National Bank of
-----------------------------------
Chicago is hereby appointed by each of the Lenders as its contractual
representative (herein referred to as the"Agent") hereunder and under each other
Loan Document, and each of the Lenders irrevocably authorizes the Agent to act
as the contractual representative of such Lender with the rights and duties
expressly set forth herein and in the other Loan Documents. The Agent agrees to
act as such contractual representative upon the express conditions contained in
this Article X. Notwithstanding the use of the defined term "Agent," it is
expressly understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the contractual representative
of the Lenders with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders'
contractual representative, the Agent (a) does not hereby assume any fiduciary
duties to any of the Lenders, (b) is a "representative" of the
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<PAGE>
Lenders within the meaning of Section 9-105 of the Uniform Commercial Code and
(c) is acting as an independent contractor, the rights and duties of which are
limited to those expressly set forth in this Agreement and the other Loan
Documents. Each of the Lenders hereby agrees to assert no claim against the
Agent on any agency theory or any other theory of liability for breach of
fiduciary duty, all of which claims each Lender hereby waives.
10.2. Powers. The Agent shall have and may exercise such powers under
------
the Loan Documents as are specifically delegated to the Agent by the terms of
each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its directors,
----------------
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is determined in a final non-appealable
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.
10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor
-------------------------------------------
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (a) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered solely to the Agent; (d) the existence
or possible existence of any Default or Unmatured Default; (e) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith; (f) the
value, sufficiency, creation, perfection or priority of any Lien in any
collateral security; or (g) the financial condition of the Borrower or any
guarantor of any of the Obligations or of any of the Borrower's or any such
guarantor's respective Subsidiaries. The Agent shall have no duty to disclose
to the Lenders information that is not required to be furnished by the Borrower
to the Agent at such time, but is voluntarily furnished by the Borrower to the
Agent (either in its capacity as Agent or in its individual capacity).
10.5. Action on Instructions of Lenders. The Agent shall in all cases be
---------------------------------
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders. The Lenders hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Loan Document unless it shall be requested in writing to do so by
the Required Lenders. The Agent shall be fully justified in failing or refusing
to take any action hereunder and under any other Loan
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<PAGE>
Document unless it shall first be indemnified to its satisfaction by the Lenders
pro rata against any and all liability, cost and expense that it may incur by
reason of taking or continuing to take any such action.
10.6. Employment of Agents and Counsel. The Agent may execute any of its
--------------------------------
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled to
------------------------------
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
-----------------------------------------
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (a) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (b) for any other expenses incurred by
the Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents
(including, without limitation, for any expenses incurred by the Agent in
connection with any dispute between the Agent and any Lender or between two or
more of the Lenders) and (c) for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of the Loan Documents or
any other document delivered in connection therewith or the transactions
contemplated thereby (including, without limitation, for any such amounts
incurred by or asserted against the Agent in connection with any dispute between
the Agent and any Lender or between two or more of the Lenders), or the
enforcement of any of the terms of the Loan Documents or of any such other
documents, provided that no Lender shall be liable for any of the foregoing to
the extent any of the foregoing is found in a final non-appealable judgment by a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Agent. The obligations of the Lenders under this
Section 10.8 shall survive payment of the Obligations and termination of this
Agreement.
10.9. Notice of Default. The Agent shall not be deemed to have knowledge
-----------------
or notice of the occurrence of any Default or Unmatured Default hereunder unless
the Agent has received written notice from a Lender or the Borrower referring to
this Agreement describing such Default or Unmatured Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders.
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10.10. Rights as a Lender. In the event the Agent is a Lender, the Agent
------------------
shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Loans as any Lender and may
exercise the same as though it were not the Agent, and the term "Lender" or
"Lenders" shall, at any time when the Agent is a Lender, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent
and its Affiliates may accept deposits from, lend money to, and generally engage
in any kind of trust, debt, equity or other transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Borrower or
any of its Subsidiaries in which the Borrower or such Subsidiary is not
restricted hereby from engaging with any other Person.
10.11. Lender Credit Decision. Each Lender acknowledges that it has,
----------------------
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent, the Arranger or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents.
10.12. Successor Agent. The Agent may resign at any time by giving
---------------
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five (45) days after the retiring Agent gives notice
of its intention to resign. The Agent may be removed at any time with or without
cause by written notice received by the Agent from the Required Lenders, such
removal to be effective on the date specified by the Required Lenders. Upon any
such resignation or removal, the Required Lenders shall have the right to
appoint, on behalf of the Borrower and the Lenders, a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders within
thirty (30) days after the resigning Agent's giving notice of its intention to
resign, then the resigning Agent may appoint, on behalf of the Borrower and the
Lenders, a successor Agent. Notwithstanding the previous sentence, the Agent may
at any time without the consent of the Borrower or any Lender, appoint any of
its Affiliates which is a commercial bank as a successor Agent hereunder. If the
Agent has resigned or been removed and no successor Agent has been appointed,
the Lenders may perform all the duties of the Agent hereunder and the Borrower
shall make all payments in respect of the Obligations to the applicable Lender
and for all other purposes shall deal directly with the Lenders. No successor
Agent shall be deemed to be appointed hereunder until such successor Agent has
accepted the appointment. Any such successor Agent shall be a commercial bank
having capital and retained earnings of at least $100,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the resigning or removed Agent. Upon
the effectiveness of the resignation or removal of the Agent, the resigning or
removed Agent shall be discharged from its duties and obligations hereunder and
under the Loan Documents. After the effectiveness of the resignation or removal
of an Agent, the provisions of this Article X shall continue in effect for the
benefit of such Agent in respect of any actions taken or omitted to be taken by
it while it was
-49-
<PAGE>
acting as the Agent hereunder and under the other Loan Documents. In the event
that there is a successor to the Agent by merger, or the Agent assigns its
duties and obligations to an Affiliate pursuant to this Section 10.12, then the
term "Corporate Base Rate" as used in this Agreement shall mean the prime rate,
base rate or other analogous rate of the new Agent.
10.13. Agent's Fee. The Borrower agrees to pay to the Agent, for its own
-----------
account, the fees agreed to by the Borrower and the Agent pursuant to that
certain letter agreement dated March 15, 1998, or as otherwise agreed from time
to time.
10.14. Delegation to Affiliates. The Borrower and the Lenders agree that
------------------------
the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate's directors, officers,
agents and employees) which performs duties in connection with this Agreement
shall be entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles IX and X.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
------------------------
11.1. Setoff. In addition to, and without limitation of, any rights of
------
the Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender or
any Affiliate of any Lender to or for the credit or account of the Borrower may
be offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or otherwise,
----------------
has payment made to it upon its Loans (other than payments received pursuant to
Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in proportion to their Loans. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made. If an
amount to be setoff is to be applied to Indebtedness of the Borrower to a Lender
other than Indebtedness comprised of Loans made by such Lender, such amount
shall be applied ratably to such other Indebtedness and to the Indebtedness
comprised of such Loans.
-50-
<PAGE>
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
-------------------------------------------------
12.1. Successors and Assigns. The terms and provisions of the Loan
----------------------
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that (a) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (b) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (b) of this Section, any Lender may
at any time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and any Note to a Federal Reserve
Bank; provided, however, that no such assignment to a Federal Reserve Bank shall
-------- -------
release the transferor Lender from its obligations hereunder. The Agent may
treat the Person which made any Loan or which holds any Note as the owner
thereof for all purposes hereof unless and until such Person complies with
Section 12.3 in the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with the Agent. Any
assignee or transferee of the rights to any Loan or any Note agrees by
acceptance of such transfer or assignment to be bound by all the terms and
provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the owner of the rights to any Loan (whether or not a Note has been
issued in evidence thereof), shall be conclusive and binding on any subsequent
holder, transferee or assignee of the rights to such Loan.
12.2. Participations.
--------------
12.2.1 Permitted Participants; Effect. Any Lender may, in the
------------------------------
ordinary course of its business and in accordance with applicable law, at
any time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held by
such Lender, any Commitment of such Lender or any other interest of such
Lender under the Loan Documents. In the event of any such sale by a Lender
of participating interests to a Participant, such Lender's obligations
under the Loan Documents shall remain unchanged, such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the owner of its Loans and the
holder of any Note issued to it in evidence thereof for all purposes under
the Loan Documents, all amounts payable by the Borrower under this
Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrower and the Agent shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right to
-------------
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than
any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees payable
with respect to any
-51-
<PAGE>
such Loan or Commitment, extends the Facility Termination Date, postpones
any date fixed for any regularly-scheduled payment of principal of, or
interest or fees on, any such Loan or Commitment, releases any guarantor of
any such Loan or releases all or substantially all of the collateral, if
any, securing any such Loan.
12.2.3. Benefit of Setoff. The Borrower agrees that each
-----------------
Participant shall be deemed to have the right of setoff provided in Section
11.1 in respect of its participating interest in amounts owing under the
Loan Documents to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under the Loan Documents;
provided that each Lender shall retain the right of setoff provided in
--------
Section 11.1 with respect to the amount of participating interests sold to
each Participant. The Lenders agree to share with each Participant, and
each Participant, by exercising the right of setoff provided in Section
11.1, agrees to share with each Lender, any amount received pursuant to the
exercise of its right of setoff, such amounts to be shared in accordance
with Section 11.2 as if each Participant were a Lender.
12.3. Assignments.
-----------
12.3.1. Permitted Assignments. Any Lender may, in the ordinary
---------------------
course of its business and in accordance with applicable law, at any time
assign to one or more banks or other entities ("Purchasers") all or any
part of its rights and obligations under the Loan Documents. Such
assignment shall be substantially in the form of Exhibit C or in such other
---------
form as may be agreed to by the parties thereto. The consent of the
Borrower and the Agent shall be required prior to an assignment becoming
effective with respect to a Purchaser which is not a Lender or an Affiliate
thereof; provided, however, that if a Default has occurred and is
-------- -------
continuing, the consent of the Borrower shall not be required. Such
consent shall not be unreasonably withheld or delayed. Each such
assignment shall (unless each of the Borrower and the Agent otherwise
consents) be in an amount not less than the lesser of (a) $5,000,000 or (b)
the remaining amount of the assigning Lender's Commitment (calculated as at
the date of such assignment); provided that assignments of Loans pursuant
--------
to Section 2.4(c) shall be permitted.
12.3.2. Effect; Effective Date. Upon (a) delivery to the Agent of a
----------------------
notice of assignment, substantially in the form attached as Exhibit I to
---------
Exhibit C (a "Notice of Assignment"), together with any consents required
---------
by Section 12.3.1, and (b) payment of a $3,500 fee to the Agent for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. The Notice of
Assignment shall contain a representation by the Purchaser to the effect
that none of the consideration used to make the purchase of the Commitment
and Loans under the applicable assignment agreement are "plan assets" as
defined under ERISA and that the rights and interests of the Purchaser in
and under the Loan Documents will not be "plan assets" under ERISA. On and
after the effective date of such assignment, such Purchaser shall for all
purposes be a Lender party to this Agreement and any other Loan Document
executed by or on behalf of the Lenders and shall have all the rights and
obligations of a
-52-
<PAGE>
Lender under the Loan Documents, to the same extent as if it were an
original party hereto, and no further consent or action by the Borrower,
the Lenders or the Agent shall be required to release the transferor Lender
with respect to the percentage of the Aggregate Commitment and Loans
assigned to such Purchaser. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Agent
and the Borrower shall, if the transferor Lender or the Purchaser desires
that its Loans be evidenced by Notes, make appropriate arrangements so that
new Notes or, as appropriate, replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes, are
issued to such Purchaser, in each case in principal amounts reflecting
their respective Commitments, as adjusted pursuant to such assignment.
12.4. Dissemination of Information. The Borrower authorizes each
----------------------------
Lender to disclose to any Participant or Purchaser or any other Person acquiring
an interest in the Loan Documents by operation of law (each a "Transferee") and
any prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries, including
without limitation any information contained in any Reports; provided that each
--------
Transferee and prospective Transferee agrees to be bound by Section 9.11 of this
Agreement.
12.5. Tax Treatment. If any interest in any Loan Document is
-------------
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 3.5(d).
ARTICLE XIII
NOTICES
-------
13.1. Notices. Except as otherwise permitted by Section 2.13 with
-------
respect to borrowing notices, all notices, requests and other communications to
any party hereunder shall be in writing (including electronic transmission,
facsimile transmission or similar writing) and shall be given to such party: (a)
in the case of the Borrower or the Agent, at its address or facsimile number set
forth on the signature pages hereof, (b) in the case of any Lender, at its
address or facsimile number set forth below its signature hereto or (c) in the
case of any party, at such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the Agent and the Borrower in
accordance with the provisions of this Section 13.1. Each such notice, request
or other communication shall be effective (i) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (ii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (iii) if given by any other means, when delivered
(or, in the case of electronic transmission, received) at the address specified
in this Section; provided that notices to the Agent under Article II shall not
--------
be effective until received.
-53-
<PAGE>
13.2. Change of Address. The Borrower, the Agent and any Lender may
-----------------
each change the address for service of notice upon it by a notice in writing to
the other parties hereto.
ARTICLE XIV
COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower, the Agent and the Lenders
and each party has notified the Agent by facsimile transmission or telephone
that it has taken such action.
ARTICLE XV
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
------------------------------------------------------------
15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
-------------
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
-----------------------
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT
THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE
BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY
LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT
IN CHICAGO, ILLINOIS.
-54-
<PAGE>
15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER
--------------------
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
-55-
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.
DEPUY, INC.
By: /s/ Thomas J. Oberhausen
-----------------------------------------------
Print Name: Thomas J. Oberhausen
Title: Senior Vice President - Finance
Address: 700 Orthopaedic Drive
Warsaw, Indiana 46581-0988
Attn: Thomas J. Oberhausen
--------------------
Telecopy: (219) 267-8089
--------------
Telephone: (219) 267-8143
--------------
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
Commitment $300,000,000 Individually and as Agent
By: /s/ Frank L. Grossman
-----------------------------------------------
Frank L. Grossman
Authorized Agent
Address: One First National Plaza
Suite 0318
Chicago, Illinois 60670-0318
Attn: John F. Orofino
Telephone: (312) 732-5246
Telecopy: (312) 732-1158
With Copy to: Agency Compliance Division
One First National Plaza
Suite 0353
Chicago, Illinois 60670-0353
Attn: Thomas E. Both
Vice President
Telephone: (312) 732-7268
Telecopy: (312) 732-2038
-57-
<PAGE>
PRICING SCHEDULE
----------------
<TABLE>
<CAPTION>
=================================================================================
APPLICABLE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI
MARGIN STATUS STATUS STATUS STATUS STATUS STATUS
=================================================================================
<S> <C> <C> <C> <C> <C> <C>
Eurodollar Rate .175% .20% .225% .30% .3625% .45%
- ---------------------------------------------------------------------------------
Alternate Base
Rate 0% 0% 0% 0% 0% 0%
================================================================================
</TABLE>
<TABLE>
<CAPTION>
==================================================================================
APPLICABLE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI
FEE RATE STATUS STATUS STATUS STATUS STATUS STATUS
==================================================================================
<S> <C> <C> <C> <C> <C> <C>
Facility Fee .075% .10% .125% .15% .1875% .20%
- ----------------------------------------------------------------------------------
Total Drawn Cost .25% .30% .35% .45% .55% .65%
==================================================================================
</TABLE>
For the purposes of this Schedule, the following terms have the following
meanings, subject to the final paragraph of this Schedule:
LEVERAGE-BASED PRICING
"Financials" means the annual or quarterly financial statements of the
Borrower delivered pursuant to Section 6.1(a) or (b).
"Level I Status" exists at any date if, as of the last day of the fiscal
quarter of the Borrower referred to in the most recent Financials, the Leverage
Ratio is less than or equal to .50.
"Level II Status" exists at any date if, as of the last day of the fiscal
quarter of the Borrower referred to in the most recent Financials, the Leverage
Ratio is greater than .50, but less than or equal to 1.00.
"Level III Status" exists at any date if, as of the last day of the fiscal
quarter of the Borrower referred to in the most recent Financials, the Leverage
Ratio is greater than 1.00, but less than or equal to 1.50.
"Level IV Status" exists at any date if, as of the last day of the fiscal
quarter of the Borrower referred to in the most recent Financials, (a) the
Leverage Ratio is greater than 1.50, but less than or equal to 2.00.
"Level V Status" exists at any date if, as of the last day of the fiscal
quarter of the Borrower referred to in the most recent Financials, the Leverage
Ratio is greater than 2.00, but less than or equal to 2.50.
"Level VI Status" exists at any date if the Borrower has not qualified for
Level I Status, Level II Status or Level III Status, Level IV Status or Level V
Status on such date.
"Status" means either Level I Status, Level II Status, Level III Status,
Level IV Status, Level V Status or Level VI Status.
<PAGE>
The Applicable Margin and Applicable Fee Rate shall be determined in
accordance with the foregoing table based on the Borrower's Status as reflected
in the then most recent Financials. Adjustments, if any, to the Applicable
Margin or Applicable Fee Rate shall be effective five Business Days after the
Agent has received the applicable Financials. If the Borrower fails to deliver
the Financials to the Agent at the time required pursuant to Section 6.1, then
the Applicable Margin and Applicable Fee Rate shall be the highest Applicable
Margin and Applicable Fee Rate set forth in the foregoing table until five (5)
days after such Financials are so delivered. Notwithstanding the foregoing, (a)
until adjusted as described above after June 30, 1998, the Applicable Margin and
Applicable Fee Rate shall be predicated on Level IV Status and (b) during the
six month period following the date hereof, the Applicable Margin shall in no
event be less than .30% and the Applicable Fee Rate shall in no event be less
than .15%.
-2-
<PAGE>
EXHIBIT A
---------
REVOLVING CREDIT NOTE
$_____________ Dated: _______________
FOR VALUE RECEIVED, DEPUY, INC. (the "Borrower") HEREBY PROMISES TO
PAY to the order of ___________________________________________ (the "Lender")
the principal sum of __________________________ United States Dollars
($__________) or, if less, the aggregate unpaid principal amount of the Loans
made by the Lender to the Borrower pursuant to Section 2.1 of the Credit
-----------
Agreement (as hereinafter defined), on or before the Facility Termination Date;
together, in each case, with interest on any and all principal amounts remaining
unpaid hereunder from time to time. Interest upon the unpaid principal amount
hereof shall accrue at the rates, shall be calculated in the manner and shall be
payable on the dates set forth in the Credit Agreement. After maturity, whether
by acceleration or otherwise, accrued interest shall be payable upon demand.
Both principal and interest shall be payable in accordance with the Credit
Agreement to The First National Bank of Chicago, as Agent (the "Agent") on
behalf of the Lender, at its main office in Chicago, Illinois in immediately
available funds. The Loans made by the Lender to the Borrower pursuant to the
Credit Agreement and all payments on account of principal hereof shall be
recorded by the Lender and, prior to any transfer thereof, endorsed on Schedule
--------
A attached hereto which is part of this Revolving Credit Note or otherwise in
- -
accordance with its usual practices; provided, however, that the failure to so
-------- -------
record shall not affect the Borrower's obligations under this Revolving Credit
Note.
This Revolving Credit Note is a Note referred to in, and is entitled
to the benefits of, the Credit Agreement dated as of May ____, 1998 by and
among the Borrower, the financial institutions signatory thereto (including the
Lender) and the Agent (as amended, modified or supplemented from time to time,
the "Credit Agreement") and the other Loan Documents. Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed thereto
in the Credit Agreement. The Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Revolving Credit Note.
Exhibit A-1
<PAGE>
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS
PROVISIONS, OF THE STATE OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
DEPUY, INC.
By:______________________________
Title:___________________________
Exhibit A-2
<PAGE>
Schedule A
----------
Revolving Credit Note
dated __________________________, 199____
payable to the order of
[Lender]
--------------------------------
___________________________________________________________________________
PRINCIPAL PAYMENTS
___________________________________________________________________________
Amount of
Principal Amount of Unpaid Principal Notation
Date Borrowed Principal Repaid Balance Made By
---- -------- ---------------- ------- -------
Exhibit A-3
<PAGE>
EXHIBIT B
---------
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain Credit
Agreement dated as of May 29, 1998 (as amended, modified, renewed or extended
from time to time, the "Agreement") among DePuy, Inc. (the "Borrower"), the
lenders named therein (the "Lenders") and The First National Bank of Chicago, as
agent for the Lenders (the "Agent"). Unless otherwise defined herein,
capitalized terms used in this Compliance Certificate have the meanings ascribed
thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected Authorized Officer of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes a
Default or an Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the Borrower's compliance with certain covenants of the Agreement,
all of which data and computations are true, complete and correct.
5. Schedule II hereto sets forth the determination of the interest rates
to be paid for Advances and the facility fee rates commencing on the fifth day
following the delivery hereof.
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower and its Subsidiaries have taken, are
taking, or propose to take with respect to each such condition or event:
Exhibit B-1
<PAGE>
The foregoing certifications, together with the computations set forth in
Schedule I and determination set forth in Schedule II hereto and the financial
statements delivered with this Certificate in support hereof, are made and
delivered this ____ day of ______________, _______.
DEPUY, INC.
By:___________________________
Its:
Exhibit B-2
<PAGE>
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of _________, ____
<TABLE>
<CAPTION>
SECTION 6.11(D) -- INDEBTEDNESS
- --------------- ------------
<S> <C>
(a) Indebtedness permitted under Section 6.11(d) $___________
(b) Actual Indebtedness:
(i) Borrowed money obligations $___________
(ii) Deferred purchase price of Property or services obligations $___________
(iii) Obligations secured by Liens $___________
(iv) Obligations evidenced by instruments $___________
(v) Obligations related to securities $___________
(vi) Capitalized Lease Obligations $___________
(vii) Contingent obligations $___________
(viii) Obligations related to Letters of Credit $___________
(ix) Rate Hedging Obligations $___________
(x) Other obligations described in part (j) of the definition of $___________
Indebtedness
(xi) "Synthetic lease" obligations $___________
(xii) Other obligations described in part (l) of the definition of
Indebtedness
TOTAL $___________
</TABLE>
Exhibit B-3
<PAGE>
<TABLE>
<S> <C>
SECTION 6.13 -- SALE OF ASSETS
- ------------ --------------
Asset dispositions for period from closing date to date of determination:
(a) Permitted asset dispositions:
10% of consolidated assets of the Borrower and its Subsidiaries as of
the last day of preceding Fiscal Quarter* $___________
(b) Actual asset dispositions for such period $___________
*Note: must also demonstrate (to the extent calculable) that total asset
dispositions for such period do not involve Property which is
responsible for more than 10 % of the consolidated net sales or Net
Income of the Borrower and its Subsidiaries for the twelve (12) month
period ending as of the last day of the Fiscal Quarter next preceding
the date of determination.
SECTION 6.14 -- INVESTMENTS AND PURCHASES
- ------------ -------------------------
(a) Additional Investments and Purchases permitted under 6.14(f) $10,000,000
(b) Actual aggregate additional Investments and Purchases $___________
SECTION 6.15 -- LIENS
- ------------ -----
(a) Principal amount of indebtedness permitted to be secured by liens under
Section 6.15(f) $___________
(b) Actual secured indebtedness $___________
SECTION 6.19.1 -- MINIMUM TANGIBLE NET WORTH LEVERAGE RATIO
- -------------- -----------------------------------------
1. Required Minimum Tangible Net Worth:
(a) $_________________
(b) 50% times positive Net Income of Borrower for quarter ending
-----
_________, ____ $___________
(c) 50% times positive Net Income of Borrower for all prior fiscal quarters
-----
ending after the closing date $___________
(d) (a) plus (b) plus (c) $___________
---- ----
</TABLE>
Exhibit B-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
2. Actual Tangible Net Worth:
(a) Consolidated common stockholders' equity of Borrower and its
Subsidiaries as of date of determination $___________
(b) Consolidated Intangible Assets of Borrower and its Subsidiaries $___________
(c) (a) less (b) $___________
----
SECTION 6.19.2 -- LEVERAGE RATIO
- -------------- --------------
1. Maximum permitted Leverage Ratio 3.0 to 1.0
----------
2. Actual Leverage Ratio:
(a) Indebtedness of Borrower and its Subsidiaries $___________
(b) Rate Hedging Obligations $___________
(c) Contingent Obligations $___________
(d) EBITDA for the four consecutive Fiscal Quarters immediately
preceeding the date of determination $___________
(e) Actual Leverage Ratio {(a) less {(b) plus (c)} to (d)} ______ to 1.0
---- ----
</TABLE>
SCHEDULE II TO COMPLIANCE CERTIFICATE
Borrower's Applicable Margin Calculation
The Leverage Ratio as of the date of determination equals ____:1.00,
which results in Level ___ Status (i.e. Applicable Margin for Eurodollar Loans
is ___% and Applicable Fee Rate is _____%).
Exhibit B-5
<PAGE>
EXHIBIT C
---------
FORM OF
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
__________________________ (the "Assignor") and __________________ (the
"Assignee") is dated as of _________________, 19__. The parties hereto agree as
follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
---------------------
(which, as it may be amended, modified, renewed or extended from time to time is
herein called the "Credit Agreement") described in Item 1 of Schedule 1 attached
hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
-------------------------
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3(b) of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 3(a) of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if
the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
--------------
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period agreed to by the Agent) after a
Notice of Assignment substantially in the form of Exhibit "I" attached hereto
has been delivered to the Agent. Such Notice of Assignment must include any
consents required to be delivered to the Agent by Section 12.3.1 of the Credit
Agreement. In no event will the Effective Date occur if the payments required
to be made by the Assignee to the Assignor on the Effective Date under Sections
4 and 5 hereof are not made on or before the proposed Effective Date. The
Assignor will notify the Assignee of the proposed Effective Date no later than
the Business Day prior to the proposed Effective Date. As of the Effective
Date, (i) the Assignee shall have the rights and obligations of a Lender under
the Loan Documents with respect to the rights and obligations assigned to the
Assignee hereunder and (ii) the Assignor shall relinquish its rights and be
released from its corresponding obligations under the Loan Documents with
respect to the rights and obligations assigned to the Assignee hereunder.
4. PAYMENT OBLIGATIONS. On and after the Effective Date, the Assignee
-------------------
shall be entitled to receive from the Agent all payments of principal, interest
and fees with respect to the interest assigned hereby. The Assignee shall
advance funds directly to the Agent with respect to all Loans and reimbursement
payments made on or after the Effective Date with respect to the interest
assigned hereby. **[In consideration for the sale and assignment of Loans
hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date, an
amount equal to the principal
Exhibit C-1
<PAGE>
amount of the portion of all Alternate Base Rate Loans assigned to the Assignee
hereunder and (ii) with respect to each Eurodollar Loan made by the Assignor and
assigned to the Assignee hereunder which is outstanding on the Effective Date,
(a) on the last day of the Interest Period therefor or (b) on such earlier date
agreed to by the Assignor and the Assignee or (c) on the date on which any such
Eurodollar Loan becomes due (by acceleration or otherwise)(the date as described
in the foregoing clauses (a), (b) or (c) being hereinafter referred to as the
"Payment Date"), the Assignee shall pay the Assignor an amount equal to the
principal amount of the portion of such Eurodollar Loan assigned to the Assignee
which is outstanding on the Payment Date. If the Assignor and the Assignee agree
that the Payment Date for such Eurodollar Loan shall be the Effective Date, they
shall agree to the interest rate applicable to the portion of such Loan assigned
hereunder for the period from the Effective Date to the end of the existing
Interest Period applicable to such Eurodollar Loan (the "Agreed Interest Rate")
and any interest received by the Assignee in excess of the Agreed Interest Rate
shall be remitted to the Assignor. In the event interest for the period from the
Effective Date to but not including the Payment Date is not paid by the Borrower
with respect to any Eurodollar Loan sold by the Assignor to the Assignee
hereunder, the Assignee shall pay to the Assignor interest for such period on
the portion of such Eurodollar Loan sold by the Assignor to the Assignee
hereunder at the applicable rate provided by the Credit Agreement. In the event
a prepayment of any Eurodollar Loan which is existing on the Payment Date and
assigned by the Assignor to the Assignee hereunder occurs after the Payment Date
but before the end of the Interest Period applicable to such Eurodollar Loan,
the Assignee shall remit to the Assignor the excess of the prepayment penalty
paid with respect to the portion of such Eurodollar Loan assigned to the
Assignee hereunder over the amount which would have been paid if such prepayment
penalty was calculated based on the Agreed Interest Rate. The Assignee will also
promptly remit to the Assignor (i) any principal payments received from the
Agent with respect to Eurodollar Loans prior to the Payment Date and (ii) any
amounts of interest on Loans and fees received from the Agent which relate to
the portion of the Loans assigned to the Assignee hereunder for periods prior to
the Effective Date, in the case of Alternate Base Rate Loans or fees, or the
Payment Date, in the case of Eurodollar Loans, and not previously paid by the
Assignee to the Assignor.] In the event that either party hereto receives any
payment to which the other party hereto is entitled under this Assignment
Agreement, then the party receiving such amount shall promptly remit it to the
other party hereto.
**Each Assignor may insert its standard payment provisions in lieu of the
payment terms included in this Exhibit.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor a
----------------------------
fee on each day on which a payment of interest or facility fees is made under
the Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or facility fees for the period
prior to the Effective Date or, in the case of Eurodollar Loans, the Payment
Date, which the Assignee is obligated to deliver to the Assignor pursuant to
Section 4 hereof). The amount of such fee shall be the difference between (i)
the interest or fee, as applicable, paid with respect to the amounts assigned to
the Assignee hereunder and (ii) the interest or fee, as applicable, which would
have been paid with respect to the amounts assigned to the Assignee hereunder if
each interest rate was ___ of 1% less than the interest rate paid by the
Exhibit C-2
<PAGE>
Borrower or if the facility fee was ___ of 1% less than the facility fee paid by
the Borrower, as applicable. In addition, the Assignee agrees to pay ___% of the
recordation fee required to be paid to the Agent in connection with this
Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
--------------------------------------------------------------
LIABILITY. The Assignor represents and warrants that it is the legal and
- ---------
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor
nor any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
Property, books or records of the Borrower, (vi) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral securing
or purporting to secure the Loans or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the Loan
Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it has
-------------------------------
received a copy of the Credit Agreement, together with copies of the financial
statements requested by the Assignee and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment Agreement, (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information at it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents, (iii) appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under the Loan Documents as
are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto, (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender, (v) agrees that
its payment instructions and notice instructions are as set forth in the
attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are "plan assets" as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be "plan assets" under ERISA,
**[and (vii) attaches the forms prescribed by the Internal Revenue Service of
the United States certifying that the Assignee is entitled to receive payments
under the Loan Documents without deduction or withholding of any United States
federal income taxes]**.**
**to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
Exhibit C-3
<PAGE>
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
---------
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's non-performance
of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
----------------------
have the right pursuant to Section 12.3.1 of the Credit Agreement to assign the
rights which are assigned to the Assignee hereunder to any entity or person,
provided that (i) any such subsequent assignment does not violate any of the
- --------
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under Sections 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Aggregate
----------------------------------
Commitment occurs between the date of this Assignment Agreement and the
Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall
remain the same, but the dollar amount purchased shall be recalculated based on
the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice
----------------
of Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
-------------
internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment Agreement in
-------
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
Exhibit C-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By: _____________________________
Title: _____________________________
_____________________________
_____________________________
[NAME OF ASSIGNEE]
By: _____________________________
Title: _____________________________
_____________________________
_____________________________
Exhibit C-5
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: _____________, 19__
3. Amounts (As of Date of Item 2 above):
a. Total of Commitments
(Loans)** under
Credit Agreement $_____________________
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement _____________________%
c. Amount of Assigned Share in
each Facility purchased under
the Assignment
Agreement $______________________
4. Assignee's Aggregate (Loan
Amount)** Commitment Amount
Purchased Hereunder: $______________________
5. Proposed Effective Date: ____________
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: _____________________________ By: ___________________________
Title: __________________________ Title: ________________________
** If a Commitment has been terminated, insert outstanding Loans in place of
Commitment
*** Percentage taken to 10 decimal places
Exhibit C-6
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
ADMINISTRATIVE INFORMATION SHEET
--------------------------------
Attach Assignor's Administrative Information Sheet, which must
include notice addresses for the Assignor and the Assignee
(Sample form shown below)
ASSIGNOR INFORMATION
--------------------
CONTACT:
- -------
Name:_____________________________ Telephone No.:_______________________
Fax No.:__________________________ Telex No.:___________________________
Answerback:__________________________
PAYMENT INFORMATION:
- --------------------
Name & ABA # of Destination Bank:____________________________________________
____________________________________________
Account Name & Number for Wire Transfer:_____________________________________
_____________________________________
Other Instructions:__________________________________________________________
_____________________________________________________________________________
ADDRESS FOR NOTICES FOR ASSIGNOR: __________________________________________
- -------------------------------- __________________________________________
__________________________________________
ASSIGNEE INFORMATION
--------------------
CREDIT CONTACT:
- --------------
Name:_____________________________ Telephone No.:_______________________
Fax No.:__________________________ Telex No.:___________________________
Answerback:__________________________
KEY OPERATIONS CONTACTS:
- -----------------------
Booking Installation:_____________ Booking Installation:________________
Name:_____________________________ Name:________________________________
Telephone No.:____________________ Telephone No.:_______________________
Fax No.:__________________________ Fax No.:_____________________________
Telex No.:________________________ Telex No.:___________________________
Answerback:_______________________ Answerback:__________________________
Exhibit C-7
<PAGE>
PAYMENT INFORMATION:
- --------------------
Name & ABA # of Destination Bank:____________________________________________
____________________________________________
Account Name & Number for Wire Transfer:_____________________________________
_____________________________________
Other Instructions:__________________________________________________________
_____________________________________________________________________________
ADDRESS FOR NOTICES FOR ASSIGNEE: __________________________________________
- -------------------------------- __________________________________________
__________________________________________
Exhibit C-8
<PAGE>
FNBC INFORMATION
----------------
Assignee will be called promptly upon receipt of the signed agreement.
INITIAL FUNDING CONTACT: SUBSEQUENT OPERATIONS CONTACT:
- ----------------------- -----------------------------
Name: John Loizzo Name:_________________________
--------------------------
Telephone No.: (312) 732-4118 Telephone No.: (312)
------------------ ----------------
Fax No.: (312) 732-7455 Fax No.: (312)
------------------------ ----------------------
FNBC Telex No.: 190201 (Answerback: FNBC UT)
------------------------------
INITIAL FUNDING STANDARDS:
- -------------------------
Libor - Fund 2 days after rates are set.
FNBC WIRE INSTRUCTIONS: The First National Bank of Chicago, ABA #
- ----------------------
071000013 BNF = 7521-7653/DES, Ref:
ADDRESS FOR NOTICES FOR FNBC: One First National Plaza, Chicago, IL 60670
- ----------------------------
Attn: Agency/Compliance Division, Suite 0353
Fax No. (312) 732-2038 or (312) 732-4339
Exhibit C-9
<PAGE>
EXHIBIT "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
-------------
_________, 19__
To: DePuy, Inc.
700 Orthopaedic Drive
Warsaw, Indiana 46581-0988
The First National Bank of Chicago,
as Agent
One First National Plaza
Chicago, Illinois 60670
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement")
described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered
to the Borrower and the Agent pursuant to Section 12.3.2 of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of __________, 19__ (the "Assignment"), pursuant to which,
among other things, the Assignor has sold, assigned, delegated and transferred
to the Assignee, and the Assignee has purchased, accepted and assumed from the
Assignor the percentage interest specified in Item 3(b) of Schedule 1 of all
outstandings, rights and obligations under the Credit Agreement relating to the
facilities listed in Item 3(a) of Schedule 1. The Effective Date of the
Assignment shall be the later of the date specified in Item 5 of Schedule 1 or
two Business Days (or such shorter period as agreed to by the Agent) after this
Notice of Assignment and any consents and fees required by Sections 12.3.1 and
12.3.2 of the Credit Agreement have been delivered to the Agent, provided that
--------
the Effective Date shall not occur if any condition precedent agreed to by the
Assignor and the Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to the Borrower and the
Agent notice of the assignment and delegation referred to herein. The Assignor
will confer with the Agent before the date specified
Exhibit C-10
<PAGE>
in Item 5 of Schedule 1 to determine if the Assignment Agreement will become
effective on such date pursuant to Section 3 hereof, and will confer with the
Agent to determine the Effective Date pursuant to Section 3 hereof if it occurs
thereafter. The Assignor shall notify the Agent if the Assignment Agreement does
not become effective on any proposed Effective Date as a result of the failure
to satisfy the conditions precedent agreed to by the Assignor and the Assignee.
At the request of the Agent, the Assignor will give the Agent written
confirmation of the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or before
the Effective Date the processing fee of $3,500 required by Section 12.3.2 of
the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Agent prepare and cause the Borrower to
execute and deliver new Notes or, as appropriate, replacement notes, to the
Assignor and the Assignee. The Assignor and, if applicable, the Assignee each
agree to deliver to the Agent the original Note received by it from the Borrower
upon its receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the
funds, monies, assets or other consideration being used to make the purchase
pursuant to the Assignment are "plan assets" as defined under ERISA and that its
rights, benefits, and interests in and under the Loan Documents will not be
"plan assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the
Loan Documents in accordance with the terms thereof. The Assignee acknowledges
that the Agent has no duty to supply information with respect to the Borrower or
the Loan Documents to the Assignee until the Assignee becomes a party to the
Credit Agreement.*
*May be eliminated if Assignee is a party to the Credit Agreement prior to the
Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By:_____________________________ By:______________________________
Title:__________________________ Title:___________________________
Exhibit C-11
<PAGE>
ACKNOWLEDGED AND CONSENTED TO ACKNOWLEDGED [AND CONSENTED TO]
BY THE FIRST NATIONAL BANK OF BY DePUY, INC.
CHICAGO
By:____________________________ By:____________________________
Title:_________________________ Title:_________________________
**[Attach photocopy of Schedule 1 to Assignment]**
Exhibit C-12
<PAGE>
DISCLOSURE SCHEDULES
DEPUY, INC. REVOLVING CREDIT AGREEMENT
MAY 29, 1998
EXPLANATORY NOTE: Capitalized terms used but not otherwise defined herein have
the meanings ascribed to them in the Revolving Credit Agreement among DePuy,
Inc., various lenders and The First National Bank of Chicago, as Agent, dated as
of May 29, 1998.
Matters on the following Schedules relating to AcroMed Corporation ("AcroMed")
shall be deemed included thereon only from and after the time the Acquisition is
consummated.
<PAGE>
DISCLOSURE SCHEDULES
DEPUY, INC. REVOLVING CREDIT AGREEMENT
MAY 29, 1998
SCHEDULE 5.3
------------
APPROVALS AND CONSENTS
DEPUY, INC. AND SUBSIDIARIES
- ----------------------------
1. The waiting period for the Acquisition pursuant to the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, has expired without comment or request for
additional information.
2. The Borrower has made appropriate filings with the Italian and German
competition authorities related to the Acquisition, and the waiting
periods, clearances and/or notifications related to such filings have
either expired or been received, as the case may be.
3. The consummation of the merger of AcroMed with the DP Merger Sub, Inc., the
Borrower's wholly-owned acquisition subsidiary, is subject to approval by
the shareholders of AcroMed, which approval was obtained at a meeting held
at the offices of AcroMed on April 22, 1998.
-2-
<PAGE>
DISCLOSURE SCHEDULES
DEPUY, INC. REVOLVING CREDIT AGREEMENT
MAY 29, 1998
SCHEDULE 5.9
------------
SUBSIDIARIES
Subsidiaries Prior to Acquisition (including jurisdiction of organization and
percentage of interest owned by Borrower or Subsidiaries):
DePuy Finance LLC (United States, 100%*) Corange U.K. Holdings Ltd. (United
Kingdom, 100%*)
DePuy Orthopadie GmbH (Germany, 100%) DePuy International (Holdings)
Ltd. (United Kingdom, 100%*)
De Puy A.G. (Switzerland, 100%) DePuy International Ltd. (United
Kingdom, 100%)
DePuy Orthopedie SA (France, 100%) DePuy Joints S.A. (Argentina, 90%)
DePuy Italia S.r.L. (Italy, 73%) DePuy Taiwan (Taiwan, 100%)
DePuy Iberica, S.A (Spain, 100%) DePuy Australia Pty Limited
(Australia, 100%)
Medical Trivest SL (Spain, 100%) DePuy Mexico S.A. De C.V. (Mexico,
100%)
DePuy Japan Incorporated (Japan, 100%) DePuy Canada Ltd. (Canada, 100%)
DePuy Korea, Inc. (Korea, 100%) DePuy Orthopaedics, Inc. (United
States, 100%)
DePuy Far East Pte Ltd (Singapore, 100%) DePuy Orthopaedic Technologies, Inc.
(United States, 100%)
DePuy GmbH (Austria, 100%) DePuy ACE Medical Company (United
States, 100%)
DePuy Olmed AB (Sweden, 77%) DePuy Motech, Ltd. (United Kingdom,
100%)
DePuy Hungary (Hungary, 100%) Pamerland SCI (France, 100%*)
DePuy CZ s.r.o. (Czech Republic, 100%) Bioland SA (France, 98%)
DePuy New Zealand Ltd. (New Zealand, Mikroland (France, 100%*)
100%)
DePuy Sanatmetal (Hungary, 50.1%) Memo Implants (France, 100%*)
DePuy Hong Kong Ltd. (Hong Kong, 100%)
-3-
<PAGE>
DISCLOSURE SCHEDULES
DEPUY, INC. REVOLVING CREDIT AGREEMENT
MAY 29, 1998
SCHEDULE 5.9
------------
SUBSIDIARIES (CONTINUED)
DePuy Medical Pte Ltd. (India, 100%) Landos Nederland (The Netherlands,
100%*)
DePuy, S.A. (Belgium, 100%) DePuy Motech, Inc. (United States,
80%)
Matrix Biotech, Inc. (United States, Expanded Optics, Inc. (United
20%) States, 62%)
DePuy France/CFT France (France, Medinov Distribution (France, 97%*)
100%*)
GAM SCI (France 100%*) Landochine (China, 100%*)
Orthotim (France 100%*) AM SCI (France, 90%*)
Bioland Pharma (France 99.8%) Landos Int. (Switzerland, 100%*)
Landos Biomechique (Switzerland, 96%*) Landos Italia (Italy, 100%*)
Landos Espana (Spain, 100%*) Landos Inc. (United States, 100%*)
DePuy Overseas Trading Ltd. Landos Orthopaedic Allemagne
(Bermuda, 100%*) (United States, 100%*)
DePuy Development, Inc. (United
States, 100%*)
Tweedbank (Scotland, 100%)
DePuy Portugal Lta. (Portugal, 100%)
-4-
<PAGE>
DISCLOSURE SCHEDULES
DEPUY, INC. REVOLVING CREDIT AGREEMENT
MAY 29, 1998
SCHEDULE 5.9
------------
SUBSIDIARIES (CONTINUED)
Subsidiaries to be Acquired through Acquisition:
AcroMed Corporation (Ohio, 100%)
AcroMed Holding B.V. (The Netherlands, 100%)
AcroMed B.V. (The Netherlands, 100%)
AcroMed Export, Inc. (United States Virgin Islands, 100%)
AcroMed UK Ltd. (United Kingdom, 100%)
AcroMed, Inc.
-d/b/a Bremer Medical, Inc. (Florida, 100%)
AcroBase Corporation (Ohio, 100%*)
AcroMed Holding Corporation (Ohio, 100%*)
AcroMed Inc. (Ohio, 100%*)
AcroMed Incorporated (Ohio, 100%*)
AcroMed Asia Limited (Japan, 100%*)
*Denotes a Subsidiary that (i) is a real estate company, holding company or
similar company, or (ii) may be in the process of being liquidated or merged
with another Subsidiary.
-5-
<PAGE>
DISCLOSURE SCHEDULES
DEPUY, INC. REVOLVING CREDIT AGREEMENT
MAY 29, 1998
SCHEDULE 5.15
-------------
OWNERSHIP OF PROPERTIES
See Liens listed on Schedule 6.15.
-6-
<PAGE>
DISCLOSURE SCHEDULES
DEPUY, INC. REVOLVING CREDIT AGREEMENT
MAY 29, 1998
SCHEDULE 6.11
-------------
INDEBTEDNESS
<TABLE>
<CAPTION>
(b) Actual Indebtedness:
<S> <C> <C>
(i) Borrowed money obligations $81,400,000*
(ii) Deferred Purchase obligations $ 2,300,000
(iii) Obligations secured by liens $70,000,000*
(iv) Obligations evidenced by instruments none
(v) Obligations related to securities $ 4,200,000
(vi) Capitalized Lease obligations $ 5,700,000
(vii) Contingent obligations $ none
(viii) Obligations related to Letters of Credit $ 100,000
(ix) Rate Hedging obligations none
(x) Other obligations described in part (j) of the none
definition of Indebtedness
(xi) "Synthetic" lease obligations (related to certain aircraft) $10,800,000
(xii) Currency commitment obligations $10,200,000
(xiii) Other obligations described in part (l) of the none
definition of Indebtedness
Total $184,700,000**
</TABLE>
* Of these borrowed money obligations, $7.5 million consists of amounts
outstanding as of May 22, 1998 under AcroMed's line of credit with Key
Bank. (See footnote ** below). The Borrower intends to terminate
this line of credit following the Acquisition.
** Obligations of AcroMed arising under the "Settlement Agreement and
Order" (as defined in the Merger Agreement) and secured by the assets
of AcroMed. Of AcroMed's $90 million settlement, $20 million was paid
during April 1998 from AcroMed's existing cash and its line of credit
with Key Bank ($7.5 million outstanding as of May 22, 1998). The
remaining $70 million, plus interest, is due within one year.
-7-
<PAGE>
DISCLOSURE SCHEDULES
DEPUY, INC. REVOLVING CREDIT AGREEMENT
MAY 29, 1998
SCHEDULE 6.11
-------------
INDEBTEDNESS (CONTINUED)
AcroMed B.V. has a demand line of credit with a bank that permits
borrowings of up to 1,675,000 Dutch Guilders (approximately $852,810). The
agreement has no stated expiration date. Interest on outstanding balances is
payable monthly at the prime rate of the Dutch National Bank plus 1.50 percent.
The borrowings would be collateralized by accounts receivable of AcroMed B.V.
At May 22, 1998, there were no outstanding borrowings under this line of credit.
The Borrower intends to keep this line of credit open in accordance with its
terms until alternative financing arrangements have been made.
-8-
<PAGE>
DISCLOSURE SCHEDULES
DEPUY, INC. REVOLVING CREDIT AGREEMENT
MAY 29, 1998
SCHEDULE 6.14
-------------
INVESTMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1. Subsidiaries identified on Schedule 5.9.
2. Short-term Investments $10,300,000
3. Investments in unconsolidated affiliated companies $ 2,100,000
4. Supplier Advances $ 300,000
5. Grantor trusts related to funding of certain
supplemental executive retirement plans $21,200,000
</TABLE>
-9-
<PAGE>
DISCLOSURE SCHEDULES
DEPUY, INC. REVOLVING CREDIT AGREEMENT
MAY 29, 1998
SCHEDULE 6.15
-------------
LIENS
Security Agreement--Accounts Receivable, Inventory, and Equipment between
AcroMed Corporation and Society National Bank, dated as of July 2, 1991
Patent and Trademark Collateral Assignment by and between AcroMed Corporation
and Society National Bank, entered into as of July 2, 1991
First Amendment to Amended and Restated Revolving Credit and Term Loan Agreement
between AcroMed Corporation and KeyBank National Association (formerly known as
Society National Bank), dated December 31, 1996
Second Amendment to Patent and Trademark Collateral Agreement by and between
AcroMed Corporation and Key Corporate Capital Inc., dated September 3, 1997, and
Assignment of even date between these two parties
Assignment between AcroMed Corporation and Key Corporate Capital, Inc.,
September 3, 1997
Assignment of Life Insurance Policy between AcroMed Corporation and Society
National Bank, dated as of June 8, 1984
Conditional Assignment of Patents by and between AcroMed Corporation and John W.
Brantigan, made as of February 21, 1996
Security Interest Agreement by and between AcroMed Corporation and John T. [sic]
Brantigan, made as of April 9, 1996
Security and Subordination Agreement, by and between AcroMed Corporation and
AcroMed Settlement Fund Trust, to be entered into as part of Bone Screw
Litigation Settlement, whereby all of the assets of AcroMed are to be pledged to
secure AcroMed's obligations under that certain AcroMed Corporation Settlement
Agreement entered into on January 8, 1997 by and between Plaintiff's Legal
Committee and AcroMed, as amended, in connection with the litigation entitled In
re: Orthopedic Bone Screw Products Liability Litigation.
Borrower and its Subsidiaries are parties to various equipment leases, some of
which may be Capitalized Leases, for which financing statements have been filed
by the respective lessors. These leases are reflected on the list of recorded
liens attached hereto as Addendum 1 and incorporated herein by this reference.
----------
-10-
<PAGE>
ADDENDUM 1
TO SCHEDULE 6.15
----------------
RECORDED LIENS*
--------------
DEPUY, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Location of
-----------
Filing Lien Holder File Number File Date Collateral
- ----------------- ------------------- ------------- --------- --------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Indiana Mellon US Leasing 1800453-A 9-2-92 Specific Tele-
Secretary of (formerly U.S. 2113060 3-24-97 communications
State Leasing Corp.)/+/ 2113061 3-24-97 system
- ----------------------------------------------------------------------------------------------------------
Indiana United States 1871107 10-4-93 Specific computer
Secretary of Leasing hardware and
State International/+/ software and related
equipment subject to
lease #121561
- ----------------------------------------------------------------------------------------------------------
Indiana Pitney Bowes 1878911 11-15-93 All equipment
Secretary of Credit distributed by Pitney
State Corporation/+/ Bowes and affiliates
and subject to
specific lease #
4068052-004, and all
proceeds of foregoing
- ----------------------------------------------------------------------------------------------------------
Indiana USL Capital 1897868 3-1-94 Specific computer
Secretary of Corporation/+/ 1960533 1-11-95 software and
State hardware, with all
accessions and
attachments, and all
replacements or
substitutions, subject
to lease # 121630
----------------------------------------------------------------------------------------------------------
Indiana USL Capital 1908676 4-19-94 Specific computer
Secretary of Corporation/+/ hardware and
State software and related
equipment subject to
lease #121631
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Indiana Pitney Bowes 2174667 2-24-98 All equipment,
Secretary of Credit Corp./+/ manufactured, sold or
State distributed by Pitney
Bowes and affiliates
and subject to
specific lease #
4068052-005, and all
proceeds of foregoing
- ----------------------------------------------------------------------------------------------------------
</TABLE>
ACROMED
CORPORATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Location of
- -----------
Filing Lien Holder File Number File Date Collateral
------ ------------------- ------------ --------- -----------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Ohio Secretary Hewlett-Packard AM874745 7-11-96 All equipment leased
of State Company/+/ from Hewlett-Packard
pursuant to Financing
Agreement No.
414493583
- ----------------------------------------------------------------------------------------------------------
Ohio Secretary Key Corporate AE0087669 8-9-91 Accounts receivable,
of State Capital, Inc. 04089626102 4-8-96 accounts, general
(successor-in- 09089708501 9-8-97 intangibles,
interest to inventory, goods,
Society merchandise,
National Bank machinery,
(n/k/a Keybank equipment, fixtures,
National tangible personal
Association)) property, whether
existing now acquired
later, and all
proceeds and
replacements of the
foregoing
- ----------------------------------------------------------------------------------------------------------
Ohio Secretary Quality AK82119 3-7-94 Specific equipment
of State Measurement
Center(/+/)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Ohio Secretary Xerox Corp AH64744 8-31-92 Specific Xerox
of State Equipment and
proceeds; business
machinery and
equipment and
proceeds
- ----------------------------------------------------------------------------------------------------------
</TABLE>
ACROMED,
INC./BREMER
MEDICAL, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Location of
- -----------
Filing Lien Holder File Number File Date Collateral
------ ------------------- ------------ --------- -----------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Florida Bennett's Leasing 950000090220 5-5-95 Specific business
Secretary of Incorporated/+/ machinery,
State equipment and
proceeds
- ----------------------------------------------------------------------------------------------------------
Florida Bennett's Leasing 950000090219 5-5-95 Specific
Secretary of Incorporated/+/ communications
State equipment and
proceeds
- ----------------------------------------------------------------------------------------------------------
Florida Minnesota Mining 940000156948 8-2-94 Donaldson Abator,
Secretary of and Manufacturing with negative exhaust
State
- ----------------------------------------------------------------------------------------------------------
</TABLE>
DEPUY ORTHOPAEDICS, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Location of
- -----------
Filing Lien Holder File Number File Date Collateral
------ ------------------- ------------ --------- -----------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Indiana IBM Credit 2091835 12-06-96 Specific equipment
Secretary of Corporation/+/ leased from IBM
State
- ----------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Indiana NationsBanc Leasing 2133752 6-30-97 Airframe and engines
Secretary of Corporation of North 2135900-A 7-11-97 of certain aircraft;
State Carolina rights under Aircraft
Purchase Agreement
dated 3/4/97, and all
other contracts or
agreements relating to
specific aircraft
- ----------------------------------------------------------------------------------------------------------
</TABLE>
DEPUY ACE
MEDICAL
COMPANY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Location of
- -----------
Filing Lien Holder File Number File Date Collateral
------ ------------------- ------------ --------- -----------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
California General 9810660583 4-16-98 -- 1 Toshiba BD 9060
Secretary of Electric Copier
State Capital -- 1 Paper Slot Cover
Corporation/+/ -- 20 Bin Stapler
Sorter
-- 2 Toshiba BD 5560
Copiers
-- 2 20 Bin Staple
Sorters
- ----------------------------------------------------------------------------------------------------------
</TABLE>
_______________________________
*In addition to the Liens identified in the foregoing table, Liens permitted
pursuant to Section 6.15(e) shall include such other Liens as the Agent may
approve based on additional UCC search results.
/+/Subject to lease arrangement.
-4-
<PAGE>
AMENDMENT NO. 1 TO CREDIT AGREEMENT
-----------------------------------
This Amendment (this "Amendment") is entered into as of June 5, 1998 by and
among DePuy, Inc., a Delaware corporation (the "Borrower"), The First National
Bank of Chicago, individually and as agent ("Agent"), and the other financial
institutions signatory hereto.
RECITALS
--------
A. The Borrower, the Agent and the financial institution so designated on
Schedule 1 hereto (the "Existing Lender" ) are party to that certain
$300,000,000 revolving credit agreement dated as of May 29, 1998 ( the "Credit
Agreement"). Unless otherwise specified herein, capitalized terms used in this
Amendment shall have the meanings ascribed to them by the Credit Agreement.
B. The Borrower, the Agent and the Existing Lender wish to amend the
Credit Agreement on the terms and conditions set forth below to add new Lenders
and to reallocate the Aggregate Commitment. As of the date hereof the Aggregate
Commitment is $300,000,000, $200,000,000 of Loans are outstanding and there are
no Facility Letters of Credit outstanding.
C. The undersigned financial institutions which are not Existing Lenders
("New Lenders") wish to join in this Amendment and in the Credit Agreement and
become "Lenders" thereunder.
Now, therefore, in consideration of the mutual execution hereof and other
good and valuable consideration, the parties hereto agree as follows:
1. Amendment to Credit Agreement. Upon the effectiveness of this
-----------------------------
Amendment pursuant to Section 3, the Credit Agreement shall be amended as
follows:
(i) The definition of "Commitment" in Article I is amended in its
---------
entirety to read as follows:
"Commitment" means, for each Lender, the obligation of such
----------
Lender to make Loans and participate in Facility Letters of Credit not
exceeding the amount set forth opposite its name on Schedule 1 hereto,
and as set forth in any Notice of Assignment relating to any
assignment which has become effective pursuant to Section 12.3.2, as
--------------
such amount may be modified from time to time pursuant to the terms
hereof."
(ii) The definition of "Lenders" in Article I is amended in its
---------
entirety to read as follows:
"Lenders" means the lending institutions listed on the signature
-------
pages of Amendment No. 1 to this Agreement dated as of June 5, 1998
and their respective successors and assigns.
<PAGE>
(iii) Section 6.14(e)(ii) of the Credit Agreement is amended by
deleting therefrom the words "at least" and substituting therefor the words
"no greater than".
(iv) Section 13.1(b) of the Credit Agreement is amended in its
entirety to read as follows:
"(b) in the case of any Lender, at its address or facsimile
number set forth on the signature pages of Amendment No. 1 to this
Agreement dated as of June 5, 1998,"
(v) A new Schedule 1 is added to the Credit Agreement in the
----------
form of Schedule 1 hereto.
(vi) The Pricing Schedule of the Credit Agreement is amended by
adding the following as the last sentence thereof:
"The Applicable Margin for purposes of computing Facility Letter
of Credit fees shall be the Applicable Margin amount set forth in the grid
above opposite the heading of "Eurodollar Rate"."
2. Representations and Warranties of the Borrower. The Borrower
----------------------------------------------
represents and warrants to the New Lenders and the Existing Lender
(collectively, the "Lenders") that:
(a) The execution, delivery and performance by the Borrower of
this Amendment have been duly authorized by proper corporate proceedings
and this Amendment is a legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally; and
(b) Each of the representations and warranties contained in
the Credit Agreement is true and correct in all material respects on and as
of the date hereof as if made on the date hereof.
3. Effective Date. Except as set forth in Section 4, this Amendment
--------------
shall become effective on June 10, 1998 (the "Effective Date"), subject to:
(a) the execution and delivery hereof by the Borrower, the
Agent and each of the financial institutions for which there is a signature
block on this Amendment;
(b) the execution and delivery by the Borrower to the Agent of
a Note dated as of the Effective Date for each New Lender and Existing
Lender in the commitment amount set forth for such New Lender or Existing
Lender on Schedule 1 hereto;
-2-
<PAGE>
(c) the Borrower's payment to the Agent for the benefit of the
Existing Lender of all accrued and unpaid Facility Fees (which payment the
Borrower agrees to make on the Effective Date); and
(d) All Loans made by the Existing Lender and outstanding
immediately prior to the effectiveness of this Amendment shall,
substantially contemporaneously with the effectiveness hereof, be repaid in
full out of the proceeds of new Loans made by the Lenders on the Effective
Date as contemplated by Section 4 and set forth on Schedule 2 hereto (which
repayment the Borrower agrees to make on the Effective Date to the extent
of such proceeds).
4. Borrowing Notice; New Loans. The Lenders and the Borrowers agree
---------------------------
that the execution and delivery hereof by the Borrower shall be deemed a
Borrowing Notice to the Lenders for a $200,000,000 Eurodollar Advance with a
three (3) month Interest Period to be made by the Lenders in accordance with and
subject to the terms of the Credit Agreement on the Effective Date substantially
contemporaneously with the effectiveness of this Amendment. The Borrower agrees
that if for any reason (other than a breach by a Lender of its obligations to
fund its Loan) the Advance referenced above is not made on such date in such
amount, the Borrower shall be liable to the Lenders in accordance with Section
3.4 of the Credit Agreement with respect to such proposed Advance. The Borrower
further agrees that from the date hereof to and including June 10, 1998 (a) it
shall not request the issuance of any Facility Letters of Credit, (b) it shall
neither borrow nor voluntarily repay Loans except as contemplated by Section
3(d) and 4 and (c) the Aggregate Commitment may not be voluntarily reduced. The
Borrower's agreements in this Section 4 shall become binding upon the Borrower,
and inure to the benefit of the Existing Lenders and New Lenders, upon the
Borrower's execution and delivery of this Amendment to the Agent without respect
to whether the conditions to effectiveness of this Amendment set forth in
Section 3 are satisfied, it being intended that the Existing Lenders and New
Lenders will act in reliance hereon.
5. Reference to and Effect Upon the Credit Agreement.
-------------------------------------------------
(a) Except as specifically amended above, the Credit Agreement
and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
(b) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the Agent or
any Lender under the Credit Agreement or any Loan Document, nor constitute
a waiver of any provision of the Credit Agreement or any Loan Document.
Upon the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of
similar import shall mean and be a reference to the Credit Agreement as
amended hereby and each "Lender" (as defined herein) shall be a "Lender"
(as defined in the Credit Agreement) under the Credit Agreement with all of
the rights and obligations of a Lender thereunder.
-3-
<PAGE>
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS
PROVISIONS) OF THE STATE OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
7. Headings. Section headings in this Amendment are included herein
--------
for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes. References herein to Sections are, unless
otherwise indicated, references to Sections hereof.
8. Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed an original but all
such counterparts shall constitute one and the same instrument.
[signature pages to follow]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date and year first above written.
DEPUY, INC.
By: /s/ Thomas J. Oberhausen
-------------------------------------
Thomas J. Oberhausen
Senior Vice President - Finance
Address: 700 Orthopaedic Drive
Warsaw, Indiana 46581-0988
Attn: Thomas J. Oberhausen
Telephone: (219) 372-7458
Telecopy: (219) 269-5675
S-1
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ Frank L. Grossman
--------------------------------------
Frank L. Grossman
Authorized Agent
Address: One First National Plaza
Suite 0318
Chicago, Illinois 60670-0318
Attn: John F. Orofino
Telephone: (312) 732-5246
Telecopy: (312) 732-1158
With Copy to: Agency Compliance Division
One First National Plaza
Suite 0353
Chicago, Illinois 60670-0353
Attn: Thomas E. Both
Vice President
Telephone: (312) 732-7268
Telecopy: (312) 732-2038
S-2
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By: /s/ Hajime Watanabe
----------------------------------------
Print Name: Hajime Watanabe
--------------------------------
Title: Deputy General Manager
-------------------------------------
Address: 227 West Monroe
Suite 2300
Chicago, IL 60606
Attn: Christopher Jones
Telephone: (312) 696-4656
Telecopy: (312) 696-4535
BARCLAYS BANK PLC
By: /s/ Terance Bullock
----------------------------------------
Terance Bullock
Vice President
Address: 222 Broadway
11th Floor
New York, NY 10038
Attn: Terance Bullock
Telephone: (212) 412-2554
Telecopy: (212) 412-7590
S-3
<PAGE>
BANQUE NATIONALE DE PARIS
By: /s/ Arnaud Collin du Bocage
----------------------------------------------
Arnaud Collin du Bocage
Executive Vice President and General Manager
By: /s/ William J. Krummen
----------------------------------------------
William J. Krummen
Vice President and Manager
Address: 209 South LaSalle Street
Suite 500
Chicago, IL 60604
Attn: William J. Krummen
Telephone: (312) 977-2248
Telecopy: (312) 977-1380
KEYBANK NATIONAL ASSOCIATION
By: /s/ Richard A. Pohle
----------------------------------------------
Richard A. Pohle
Senior Vice President
Address: 127 Public Square
Cleveland, OH 44114
Attn: Mark LoSchiavo
Telephone: (216) 689-0598
Telecopy: (216) 689-4981
S-4
<PAGE>
NATIONSBANK, N.A.
By: /s/ Larry J. Gordon
---------------------------------------------
Larry J. Gordon
Vice President
Address: 700 Louisiana Street
8th Floor
Houston, TX 77002
Attn: Larry J. Gordon
Telephone (713) 247-6619
Telecopy: (713) 247-6719
THE NORTHERN TRUST COMPANY
By: /s/ Lisa M. Taylor
---------------------------------------------
Print Name: Lisa M. Taylor
-------------------------------------
Title: Second Vice President
------------------------------------------
Address: 50 South LaSalle Street
Chicago, IL 60675
Attn: Lisa Taylor
Telephone: (312) 444-4196
Telecopy: (312) 444-5055
S-5
<PAGE>
BANK AUSTRIA AG
By: /s/ Christopher P. Miller /s/ J. Anthony Seay
-------------------------------------------------
Print Name: Christopher P. Miller J.Anthony Seay
-----------------------------------------
Title: Assistant Vice President First Vice President
----------------------------------------------
Address: 565 Fifth Avenue
New York, NY 10017
Attn: Chris Miller
Telephone: (212) 880-1179
Telecopy: (212) 880-1080
THE BANK OF NEW YORK
By: /s/ Mark T. Familo
-------------------------------------------------
Mark T. Familo
Assistant Vice President
Address: One Wall Street
19th Floor - Central Division
New York, NY 10286
Attn: Mark T. Familo
Telephone: (212) 635-1165
Telecopy: (212) 635-1208
S-6
<PAGE>
BANCA COMMERCIALE ITALIANA
By: /s/ Diana Lamb
---------------------------------------------
Diana Lamb
Vice President
By: /s/ Matthew V. Trujillo
---------------------------------------------
Print Name: Matthew V. Trujillo
-------------------------------------
Title: Vice President
------------------------------------------
Address: 150 North Michigan Avenue
Suite 1500
Chicago, IL 60601
Attn: Diana Lamb
Telephone: (312) 456-2502
Telecopy: (312) 346-5758
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Walter Wolff
---------------------------------------------
Walter Wolff
Senior Vice President and General Manager
Address: 227 West Monroe
Suite 2600
Chicago, IL 60606
Attn: Timothy Avendt
Telephone: (312) 855-8499
Telecopy: (312) 855-8200
S-7
<PAGE>
SCHEDULE 1
----------
COMMITMENTS
-----------
<TABLE>
<CAPTION>
LENDER COMMITMENT**
------ ----------
<S> <C>
The First National Bank of Chicago* $ 35,000,000
The Bank of Tokyo-Mitsubishi, Ltd., $ 31,000,000
Chicago Branch
Barclays Bank $ 31,000,000
Banque Nationale de Paris $ 31,000,000
KeyBank National Association $ 31,000,000
NationsBank, N.A. $ 31,000,000
The Northern Trust Company $ 31,000,000
Bank Austria AG $ 22,000,000
The Bank of New York $ 19,000,000
Banca Commerciale Italiana $ 19,000,000
The Industrial Bank of Japan, Limited $ 19,000,000
TOTAL $300,000,000
============
</TABLE>
* Designates Existing Lenders
** Commitments subject to pro-rata reduction in the event of any reduction in
the Aggregate Commitment prior to the effectiveness of this Amendment.
<PAGE>
SCHEDULE 2
----------
EFFECTIVE DATE LOANS
--------------------
<TABLE>
<CAPTION>
New Loan Outstanding Loans
Lender Amount** Being Repaid**
------ ------ -----------------
<S> <C> <C>
- -------------------------------------------------------------------------
The First National Bank of Chicago* $ 23,333,333.30 $200,000,000.00
- -------------------------------------------------------------------------
The Bank of Tokyo-Mitsubishi, Ltd.,
Chicago Branch 20,666,666.67 0
- -------------------------------------------------------------------------
Barclays Bank 20,666,666.67 0
- -------------------------------------------------------------------------
Banque Nationale de Paris 20,666,666.67 0
- -------------------------------------------------------------------------
KeyBank National Association 20,666,666.67 0
- -------------------------------------------------------------------------
NationsBank, N.A. 20,666,666.67 0
- -------------------------------------------------------------------------
The Northern Trust Company 20,666,666.67 0
- -------------------------------------------------------------------------
Bank Austria AG 14,666,666.67 0
- -------------------------------------------------------------------------
The Bank of New York 12,666,666.67 0
- -------------------------------------------------------------------------
Banca Commerciale Italiana 12,666,666.67 0
- -------------------------------------------------------------------------
The Industrial Bank of Japan,
Limited 12,666,666.67 0
- -------------------------------------------------------------------------
$200,000,000.00 $200,000,000.00
=============== ===============
- -------------------------------------------------------------------------
</TABLE>
* Designates Existing Lender. Existing Lender may net its new Loan amount
against the corresponding amount of outstanding Loans being repaid to it on the
Effective Date.
** Amount of new Loans and repayment of outstanding Loans subject to pro-rata
reduction in the event of any repayment of outstanding Loans prior to the
effectiveness of this Amendment.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 1998, FOR THE THREE MONTHS IN
THE PERIOD ENDED JUNE 30, 1998 AND FOR THE SIX MONTHS IN THE PERIOD ENDED JUNE
30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 94,177
<SECURITIES> 5,027
<RECEIVABLES> 192,046
<ALLOWANCES> 16,247
<INVENTORY> 213,898
<CURRENT-ASSETS> 633,192
<PP&E> 247,797
<DEPRECIATION> 134,414
<TOTAL-ASSETS> 1,362,017
<CURRENT-LIABILITIES> 287,037
<BONDS> 263,398
0
0
<COMMON> 988
<OTHER-SE> 695,390
<TOTAL-LIABILITY-AND-EQUITY> 1,362,017
<SALES> 426,509
<TOTAL-REVENUES> 426,509
<CGS> 126,370
<TOTAL-COSTS> 461,897
<OTHER-EXPENSES> 4,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,298
<INCOME-PRETAX> (35,526)
<INCOME-TAX> 40,500
<INCOME-CONTINUING> (77,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (77,200)
<EPS-PRIMARY> (0.78)
<EPS-DILUTED> (0.78)
</TABLE>
